Redeem NFTs: What It Means and Why Should Brands Leverage Redeemable NFTs?
Discover the potential of redeemable NFTs and learn how your business can use them for increased visibility, customer loyalty, and retention.
The interest in NFT utility is growing beyond just profile pictures (PFPs). We found that 73% of NFT trading volume is made up of NFTs that have two or more utilities. And the top three utilities for NFTs include redeeming them for a physical object, accessing events, and receiving exclusive merchandise.
Besides, 84% of NFT adopters said that they’d purchase an NFT if they were redeemable for physical items. That means brands can use redeemable NFTs to create new revenue streams, enhance customer engagement, and pave the way for innovative business models. But what exactly does “redeem NFT” mean? And how can redeemable NFTs benefit brands?In this article, we will explore what redeemable NFTs are, the benefits of using them, and how brands can overcome the challenges of creating redeemable NFTs.
What Does Redeeming an NFT Mean?
Redeeming an NFT means exchanging a non-fungible token for a good, service, or experience. This could be a physical item, access to exclusive digital content, or even a unique real-world experience.
The RTFKT X Nike Air Force 1 Genesis is a great example of a redeemable NFT collection. It consisted of 1776 pairs of sneakers and users could obtain the physical product only in exchange for their NFT counterpart. Once users exchange the NFT for the physical object, the NFT is burned, or removed from circulation. That means it can’t be reused to redeem objects from different campaigns or events.
While this is the case for most redeemable NFTs, some of them can even be redeemed multiple times for real-world and digital objects and experiences. These types of NFTs are called multi-redeemable NFTs. For example, a shopping center can create multi-redeemable NFTs that change their appearance when customers earn loyalty points and redeem a physical object during a campaign.
Whether brands use NFTs that can be renewed once or multiple times, they can open up new avenues for user acquisition and customer engagement.
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Why Businesses Should Start Creating Redeemable NFTs
Running paid ad campaigns and pushing customers to join loyalty programs is no longer effective in acquiring and retaining customers. As customers are spending most of their waking hours online, they’re becoming less receptive to digital ads. Research also backs this up — 43% of customers don’t watch ads anymore. And short-term performance marketing effectiveness has dropped by 62% in the last two years.
That means brands must proactively adapt new strategies and technologies to stay ahead of the curve. 60% of survey participants said that they’d love to purchase an NFT from a brand they love and the most common utility for NFTs is the redemption of physical objects. So, brands should tap into the redeemable NFT space to improve customer engagement.
But that’s not the only reason for adopting redeemable NFTs. Here are three other compelling ones:
Improved Brand Visibility
Redeemable NFTs can help your brand go beyond traditional e-commerce platforms and collaborate with different creators, thus increasing visibility. Take Adidas, for instance. The brand collaborated with the Bored Ape Yacht Club (BAYC), PUNKS Comic NFT creator Pixel Vault, and private NFT collector ‘gmoney’ for their first NFT drop in the Metaverse.
The brand released 30,000 NFTs in total which users could redeem for physical merchandise. The entire campaign netted $23 million and shot to the top of the charts.
Using redeemable NFTs enabled Adidas to advertise itself in the Metaverse where there’s less clutter and noise. It also got their customers hyped for the launch as the influencers and brands they participated with gave them a shout-out.
Additional Revenue Stream
Redeemable NFTs provide brands with an additional source of revenue through secondary market sales. This isn’t possible with physical apparel as there’s no mechanism in place to reliably charge a royalty on them.
Nike leveraged this benefit of redeemable NFTs and successfully monetized secondary sales of their CryptoKicks collection by charging a 5-10% royalty fee. As a result, they generated $92 million in revenue without any added infrastructure.
Increased Brand Loyalty
Redeemable NFTs offer unique experiences and rewards that are one of a kind and can’t be replicated. This creates a sense of exclusivity and prestige for customers which fosters a deep connection with the brand and increases brand loyalty.
For example, Soapy Joe’s, a car wash company in San Diego, used redeemable NFTs to drive up the demand for their services. It allowed customers to collect NFTs from each of its outlets once they got their car washed there and redeem them for rewards like physical keychains, amusement park tickets, and a free annual membership to the car wash.
During the two-month campaign, Soapy Joe’s customers minted more than 10,000 collectible NFTs. And the number of customers visiting more than four locations increased significantly, according to a Coin Desk article.
All in all, redeemable NFTs improve brand visibility and revenue and help improve customer retention rates. However, using redeemable NFTs comes with its own challenges.
Challenges Brands Face with Redeemable NFTs
While the concept of phygitals and redeemable NFTs is intriguing and comes with many use cases, it’s hard to implement. For starters, it’s hard to collect information like shipping details from users as transactions are primarily based on wallet addresses. This results in a poor communication process and lower rates of redemption, which leads to logistical expenses.
Wine marketplace Vinsent, faced these problems when they launched their private and public NFT drop. Although the campaign was successful, only 15% and 30% of NFT holders associated with private and public drop redeemed their bottles.
In his interview, Jacob Ner-David, the company CEO, attributed it to the poor communication process and explained that they can stay in touch with customers only through Discord and Telegram. He also added that storing the unclaimed bottles of wine became problematic.
Another concern that brands face with redeemable NFTs is the threat of ‘doxing’. The term refers to tying real-life identities with online identities and makes customers hesitant to redeem NFTs as it involves disclosing personal information.
How Brands Can Solve These Challenges with Dibbs
Dibbs is a leading tokenization platform that converts your brand’s items into digital collectibles. We help your business to create digital tokens of any physical objects easily and guide your customers through the process of redeeming NFTs for physical items.
As for logistics, we securely store physical items linked to NFTs in a secure vault equipped with the latest security protocols. When an NFT is redeemed, our team ensures that the associated physical item is safely delivered to the customer.
This provides a seamless bridge between the digital and physical worlds and ensures a positive experience for customers. Plus, you don’t have to worry about extra costs for roping in third-party storage service providers.
In addition to this, our comprehensive insurance policy ensures that all collectibles are protected both physically and financially. To learn how Dibbs can help your brand create redeemable NFTs and grow your revenue, get in touch with us right away.