Building Brand Loyalty in Web3 — Where Consumers Become Brand Owners
Authored with inputs from Avium advisor Jeffrey Seah, Partner at Quest Ventures, ex-regional CEO at Starcom MediaVest Group (international advertisement & brand experience agency), where he spearheaded Starcom’s digital strategy in Asia
The 3 traditional types of customer loyalties
Loyalty matters a great deal to brands. It is well known that the cost of acquiring new customers far exceeds the cost of retaining existing customers, and by building brand loyalty, brands have an easier time retaining their existing customer base, which can continue to contribute to the growth of the brand.
In the past decades, brands have employed an array of loyalty programs to retain their customer, including points-for-purchase and membership systems. For example, Starbucks loyalty program (Starbucks Rewards) introduced in 2009 continue to be one of the most popular loyalty programs globally and is wildly successful, so much so that it was mentioned eight times in a quarterly earnings call a few years back (typically an individual program is referred to once or twice only).
Generally, there are 3 kinds of customer loyalty that brands seek to build:
- Rational loyalty: Customers are attracted to quantitative metrics such as points and incentives
- Behavioral loyalty: Customers purchases the same products based on their past purchasing behavior and convenience (e.g. buying from a nearby convenience store)
- Emotional loyalty: Customers resonate with its brand, through its excellent customer service, vision and storytelling, trust, etc.
Successful loyalty programs look to instill all three types of loyalty in their customers—especially emotional loyalty, which is more subtle and require understanding of customers’ emotional needs. E.g. infant formula companies use premium images (e.g. via premium/specialty milk) and brand advertisement to instill emotional loyalty among parents of babies. “This brand serves the most premium ingredients, and truly wants my child to grow up strong and healthy. I trust this brand”.
“In my 20-year time in branding and advertisement space, at our core, we want to create emotional connections with the viewers. We want to build brands that are trusted and loved by the consumers, and encourage strong brand loyalty.”
— Jeffrey Seah, ex-regional CEO at Starcom MediaVest Group
The fourth kind — brand ownership loyalty
In addition to the 3 kind of loyalty described above (i.e. rational, behavioral and emotional), there is a fourth kind which is less commonly utilised by brands today — “ownership loyalty” i.e. giving ownership of a brand to consumers.
If you were a part-owner of a brand, would you be more incentivised to support it, knowing that your contributions would play a part in the brand’s success?
An empirical study from Colombian Business School in 2021 (“Bumped: The Effects of Stock Ownership on Individual Spending”) showed that consumers are moved to financially support brands they have a stake in, even if it’s only a few shares. It put forth the thesis that therefore brands should consider getting their shares (especially publicly traded ones) into the hands of as many consumers as possible.
Following such theories, there are actual companies which have tried to apply this concept of “consumer ownership” — for example in the fintech world, “Bumped” is an app which rewards consumer with brand stocks through purchases from certain retailers. In a different form (and sometimes era), trade collectives, which set up cooperatives which owned supermarkets in order to protect the purchasing powers of its members, were also an example of membership-owned organisations.
The point is that the concept of consumer ownership is not new, but it remains a concept which is not easy to implement, especially given the business model and structure of businesses today where there is a linear chain of value between the end-customer, and the brand. Every dollar less from the end-customer, is a dollar less for the brand, and there is little incentive for a brand to divest ownership to its customers.
But what if Web3 offered the chance to build things differently?
Web3 brand loyalty and ownership
Web3 brings ownership to the next level. Web3 itself has the idea of collective ownership built-in, e.g. users/owners of Ether are the collectively the owners of the Ethereum blockchain, and major decisions on the blockchain requires voting participation from all the users/owners.
In Web3, by default, users = owners.
Given that ownership encourages higher brand loyalty, it is little wonder that the space breeds community of “Web3 Brand Ultras” — passionate fans who see their brand as part of their identity, within a few weeks/months of joining a brand! Typically, a Web2 brand would take years to build this kind of brand loyalty!
Taking Bored Apes Yacht Club (BAYC) or Azuki as Web3 brand examples, their communities are perceived as incredibly brand-loyal, almost cultish (not in a bad way, most successful brands have cult-like elements, such as Apple). Everywhere they go, these communities champion their brands and are the biggest loudspeakers for their brand. Even when the founder of Azuki was called out for shirking responsibility of multiple Web3 projects prior to founding Azuki, many among its community still wholeheartedly accepted his apologies and put faith in him to continue executing on his brand vision. Textbook definition of cult-like brand loyalty.
Why? Apart from leveraging on the more common forms of brand loyalty, these brands have in addition, the benefit of ownership loyalty, where fans and customers are also incentivised to see these brands succeed.
The other ingredients for brand loyalty in Web3
So we know Web3 fosters brand ownership which encourages loyalty, but not all Web3 brands have a loyal fanbase. What are the other key factors to build loyalty in Web3? In our view, there are 3 other ingredients (apart from empowering consumers with brand ownership), which all serve to strengthen “emotional loyalty”:
- Fostering a community around a brand, e.g. via Discord, Twitter, Telegram
- Association with an identity connected to the brand, e.g. profile picture (PFP) collection for digital avatars
- New form of brand experience and content, rewarding and enjoyed by the consumers, e.g. exclusive reveal, subsequent collection airdrops, in-real-life events; This results in the brand loyalty flywheel effect (see below)
High brand loyalty results in the ability to accelerate and create high brand valuation and equity in a short period of time for many Web3 projects, even with the current market downturn. This is the unfair advantage vs traditional brand building methods.
“The thesis that Web3 tools can enable new forms of brand relationship building with its community, ultimately resulting in enhanced brand loyalty is something worth paying attention. Indeed, many Web2 brands are starting to experiment with their own NFT collection already, including Adidas, Puma, Gucci etc, although they may not fully appreciate how to use these tools yet. Sooner of later, Web3 tools will be widely adopted everywhere to enhance brand loyalty”
— Jeffrey Seah, ex-regional CEO at Starcom MediaVest Group
The flywheel effect is especially apparent in the Web3 space, perhaps due to a strong sense of brand ownership. When consumer purchases into a Web3 brand, they purchases into part of the brand IP, making them brand owners. The brand IP is used to distribute various content, including storytelling, artwork, animation and comic strips etc. These content are experienced by the consumers themselves, strengthening their brand association, resulting in this brand loyalty flywheel effect, supercharging brand loyalty among the consumers.
Avium’s building of brand loyalty
At Avium, we are proud to have fostered a strong core community of followers, at the very early days of our journey. Currently, we are in our first phase of community building strategy, i.e. gathering 1,000 true believers, before our second phase where we expand to 10,000 fans.
We aim to reward our first 1,000 true believers, thanking them for being us so early on, and we invest time and effort to build strong “emotional loyalty” and “ownership loyalty” with them.
We speak to every single one of these 1,000 true believers, either via in-real-life meetup, or video call. We dedicate hours every day, speaking to them on Avium Discord where our community hangs out and interact with each other on Twitter. Our first group of true believers have the right to mint the “Founders Pass”, our first series of NFTs which are “priceless”, and gives access to the other NFT series in the Avium metaverse, including our PFP series coming out soon.
We are dedicated to provide the most unique Web3-enabled brand experience to our community, as we continue to build out a common experience of Avium (through comics, animation, esports, launchpad etc), to enable the brand loyalty flywheel effect.
Summary
Ultimately, Web3 offers new tools to enhance customer loyalty, building a tribe of “superfans”. The addition of “ownership loyalty” into the brand loyalty toolkit can be powerful, complementing the traditional types of loyalties such as rational, behavioral, and emotional loyalty, and amplify the effect of brand loyalty flywheel.
At Avium, we want to empower our community to truly own the Avium brand and community, and we’re excited and grateful to have experts like Jeffrey Seah onboard in building this together with us.
For Avium, For All.
