Revolutionizing brand loyalty with NFTs

How NFT-based loyalty systems help with more sales, higher margins, and new customers.


Arne Wolfewicz


Co-Founder & CEO

February 28, 2023


In this article, we will be discussing loyalty and retention, and how NFTs (non-fungible tokens) or digital collectibles can positively affect loyalty in a scalable way.

We will start by defining loyalty and why it is essential for sellers of physical and digital goods. We will then look at how loyalty can be positively affected in a scalable way, and discuss the different levers discounts, exclusive and personalized experiences, sense of community, and a strong sense of ownership. Finally, we will explore how NFTs or digital collectibles can enhance these efforts, providing a cohesive model of loyalty. Throughout the article, we will focus on principles rather than technology, making it accessible to anyone interested in building a strong relationship with their customers.

There are myriads of tools to help with loyalty and retention. But since you are reading this, you might have heard of NFTs (aka digital collectibles) entering the scene and might be asking yourself in what way allow you to go beyond. If that’s the case, you came to the right place.We will go deep with this one and discuss:

  1. What loyalty is and why it matters for sellers of physical (and digital) goods

  2. How you can positively affect loyalty – in a scalable way

  3. What a high-end customer-merchant journey looks like

  4. Why NFTs / digital collectibles are a sane choice for all the above

We specifically focus on principles rather than technology. Our goal is to develop a cohesive model of loyalty  We then want to show how NFTs can enhance your efforts substantially.

Before we go into the weeds, there are a few basics we want to establish for the remainder of this article:

  1. Loyalty and customer retention require conscious choice and effort on your part. However, spending time and energy on thinking loyalty through pays high dividends.

  2. Loyalty can be gained (and lost) in many ways. If you screw up an order, your customer loyalty takes a big hit – regardless of what programs you dream up.

  3. If you are new to NFTs, you might have some reservations against them. We will discuss this in more detail later on but just to ease the atmosphere right off the start: The value of an NFT is largely determined by whoever issues it = you.

Finally, we need to point out that most of the below will seem esoteric if all you do is drop-ship inexpensive items for the highest possible margin. However, if you are ready to invest into a strong relationship with your customers for long-term success, this is for you.

What loyalty is and why it matters

According to the regularly quoted study by Frederick Reichelt of Bain & Company, the inventor of the net promoter score, gaining a new customer is five to 25 times more expensive than retaining one. Reason enough to give loyalty programs a thought.

Most people have an intuitive understanding of what loyalty is. As an experienced merchant you will know that loyalty isn’t about squeezing the lemon more. It is about catering to the needs of a person with the right product at the right time from a position of trust. You can choose to leave this job to your competitors or do it on your own.

For this transaction to happen on your grounds, two conditions need to be met:

  1. You are offering the desired product = meet expectations

  2. Your customer is willing to buy that product from you = something valuable on top

While the former is subject of your customer research and portfolio strategy, the second one is largely a matter of your standing with the customer. Loyalty isn’t the only factor in this but it is a strong one.

Once achieved, increased loyalty expresses itself in several ways. The two that are relevant across businesses are (1) more referrals = more customers and (2) lower price sensitivity = higher margins. In short, by increasing loyalty you increase customer lifetime value.

In addition to that, a change in customer loyalty also accelerates the virtuous cycle around branding (which again feeds back to referrals and price sensitivity!) but this isn’t the primary factor in this. Customers come for the brand and (ideally) stay because they enjoy being loyal.

Now that you are hyped about the what, it’s time to take a closer look at the how.

How you can positively affect loyalty – in a scalable way

As suggested above, there are lots of factors affecting customer loyalty. The “obvious” ones are all covered by the core pillars of your strategy – great customer service, high-quality products, a convenient shopping experience (hello Shopify!) and a strong brand.

Beyond these “obvious” ones, category leaders tend to go above and beyond when it comes to pleasing their customer base. Sorted from pragmatic to esoteric:

  1. Discounts

  2. Exclusive & personalized experiences

  3. Sense of community

As we learned through countless conversations with merchants, the magic formula is a combination of all three. And because we are bold, we’d like to add a fourth point:

  1. Strong sense of ownership

There are hardly any companies that manage to reach 10/10 on all scales but leaders tend to push the boundaries on all levels. Reason enough for you to make a serious effort.


If we had to take a guess, discounts are your least favourite in this list because they are transactional and they directly eat into your top line. Yuck 😖

And yet, little presents keep friendships alive and chances are that you already know how to use them effectively. Depending on your branding and product strategy, however, direct discounts might not be the best choice for your business.

That being said it is a known secret that even the biggest names in the business make concessions to get their product out of the door – albeit more subtle. Therefore, the occasional price cut is a valid tool for any business to drive volume and (re-) gain otherwise absent customers.

Exclusive & personalized experiences

Off-the-shelf e-commerce solutions are somewhat limited in how customized an experience can be for someone visiting your store. Segmented email newsletters alleviate some of that pain but ultimately, the store tends to look the same for everyone. This isn’t necessarily what you want – let alone your shoppers seeking extra treatment.

Your customers are used to personalized recommendations (this is doable through plugins too) but what adds that little extra spice is giving them a sense of exclusivity. Jenny wants what others want but only she can have because she is special in some way. What makes her special around your store is something you get to choose.

At the moment, there are two ways to get this done properly: Having them log in or token-gating your store (explanation further below). While they are somewhat similar in effect, they are dramatically different in philosophy and power.

While logins sound much simpler, your best hope is that you have collected enough data on that person to add them to the right segment. You will know how well this works for your business.

A modern alternative to this is to set up so-called token gates for your store. Simply put it means that only those shoppers who own a particular NFT can view and purchase products, or get a specific discount.

You might argue that you and your customers are too far away from NFTs and everything surrounding it. And indeed, token gating is still more prevalent in Web3-native brands and shops. However, an increasing number of traditional brands are jumping on the train and we expect this number to grow rapidly as general adoption grows.

On top of that, Web3 user experience has seen huge improvements over the past months and is improving further such that your customers can experience substantially more value than putting in effort.

As luck would have it, our Shopify extension comes with lots of token gating features for free and we are making great efforts to make all knowledge about NFTs optional.

Token gates are particularly interesting if used in combination with the other pieces. And they come in even more handy when your customers consider themselves as part of a community. Beyond the innovative realm surrounding it, it represents another potential source of revenue for your business if tokens are sold separately (also see section on ownership).

Strong sense of community

We get that many people think of “community” as a cult-like thing that only certain brands get working for them. And truth be told: Getting people to make friends on the basis of olive oil soap bars being dropshipped to them is a tall order. But then again, those aren’t exactly the businesses that read 10 minutes into customer loyalty strategies with NFTs.

Jokes aside, there is a rising number of brands that were built entirely on the back of communities so this concept cannot be ignored when discussing sustainable ways to win over your customers for good.

Communities can be loosely defined – i.e. the people who engage with (or about!) your brand and products on social media – or taken to the extreme with granular ranks, mutual friendships, joint challenges, and a particular place where they hang out. The better you can push a few individuals to the latter group, the better.

The core of it all is that there exists a sense of belonging together. After all, online communities are a substitute for the tribe gathering around the bonfire. What the bonfire is you gather around matters a lot less than the fact that you are gathering and meet like-minded people along the way.

Sense of ownership

We made it. The final frontier of running strong brands is to have customers be personally invested in their success. The first versions of that ideal manifest themselves in strong communities and acting on people’s feedback. However, true ownership is more than that.

Before we dive deeper into this, be warned: What follows may sound dramatically far-fetched to you at first. With this, we are discussing cutting-edge customer engagement which only a few brands are leading into as we speak – just to name a few: Starbucks with their loyalty program Odyssey, Warner Bros with their highly successful Lord of the Rings drop, Nike with dozens (?) of initiatives in parallel.

By placing part of what you do on the foundation of tokens (NFTs or fungible tokens aka coins), you can hand something valuable to your customers – for free, against payment, or along with purchases of other products.

As your token gets distributed, you slowly create a leaderboard of who your best customers are. Not that you don’t know this already through your dashboards. What’s more important is that your customers can know it too – without consulting their dashboard on your site but anywhere they wish to display it.

Going back to your business, you can tie certain decisions to a holder vote and you may decide to redistribute profits to them. For one, this is likely the closest you can pull people into your business without handing them shares or putting them on payroll. For another, this makes them the perfect advocate for your mission: Your success is theirs, too.

High-end customer-merchant journeys: Building a relationship

Everything we wrote about above can be summarized in one concept: You are building a relationship. This relationship is not just based on the occasional present (= discount) but an ongoing give and take where your customers don’t always need to transact in order to get something of value from you.

The best part is that all of this can be influenced by you:

Loyalty incentives don’t have to be expensive, let alone material – they need to leave your customers increasingly better off the more they engage with you.

This can be done in different ways and many people instinctively think of discounts or points that can ultimately be redeemed against a discount. Both are perfectly fine ways (and easy to set up) but they are more of a tight grab around your customer’s neck. While it feels like a position of power, it’s just another version of “if you leave me you will lose everything”. This isn’t the type of relationship many people fully commit to.

Instead, the healthiest relationships are based on mutual and repeated consent where both sides are happy to give. The pie increases. Put differently, the pie increases as they start a joint journey of give and take:

A few things are important to note here:

  • You give value without asking for anything in return. This is a sign of abundance and places you in the best possible light with your customers. By doing so, you offer your customers something beyond a newsletter – collecting a digital thing makes for a much better topic at the dinner table.

  • You can freely choose how and on what conditions tokens are distributed: Because of specific product purchases, because of x amount spent (think ”Club of 5k”), because it’s Tuesday, …

  • You can tie anything to collected tokens: Discounts, exclusive / early access to products, a raffle on social media, voting on product development / company direction, …

  • Because we are talking about NFTs, most of what you give can and should be tradeable on secondary markets. True ownership calls for it.

We hope that it is clear by now why NFTs are the only way to build something as elaborate and flexible as described.

Curious? We got you covered

We hope that you are as excited as we are. While token gating is freely available through our app already, we are testing a bunch of the above with selected customers. Sign up below to learn more.

If you liked this article, you'll love Narratic.

Narratic allows you to create a high-performing loyalty system customized for your brand. Create emotional rewards, memberships, and tiered point systems within minutes.