James Glasscock, a founder of both a blockchain consultancy and a crypto venture fund, describes a vision for a new balance of power. “In the current system, the incentives are not properly aligned for the good of the community. The incentives are aligned for shareholders. But isn’t this backwards since the count of the community members that use these services far outnumber[s] the count of shareholders? Think about it, Netflix subscribers outnumber Netflix shareholders, Facebook users outnumber Facebook shareholders. Blockchain can help switch this paradigm and better align the interests of the shareholder and the customer.”132
Implications: Program the Incentives, Program the Behavior
Clearly, blockchain-driven tokens are in their infancy. Today we can only speculate how we will behave with broad exposure to multiple token economies, when tokens become more easily exchangeable for traditional currency, and when they become integrated into a greater share of our digital lives. It is also uncertain whether we will become confused or develop “token fatigue,” overwhelmed by all the tokens that are thrown our way.
It is, however, likely that we will go through several phases as we learn about tokens, and figure out what role we want them to play in our lives. We may start by discovering them, experimenting with them, and then eventually simplifying—curating a portfolio of tokens we care about and to which we are willing to dedicate mindshare. It is this select set, perhaps, with which we create habits and loyalty, eventually incorporating them into our daily lives. Perhaps the order changes, or the cycle repeats continually. Perhaps communities gravitate to favorite tokens or suites of tokens. But in some way our relationship with tokens will settle into some kind of cadence over the years to come.
Regardless of how this evolves, it is clear that tokens have the potential to trigger and interact with our psychology at a chemical level. It is clear they hold power. It is clear they could shape behavior at many levels. There is no doubt: this is an area to watch closely. Watch carefully how it develops, and conduct your own research to understand your customers’ mindset around tokens, and how that changes over time. Experiment yourself with using token economies, and experiment—thoughtfully—as a business. But for now, let’s unpack some of the areas in which tokens could have impact.
Driving Escalating Commitment
It’s a fact of every business: different segments of customers want different levels of engagement. Some just want a transactional relationship, to make a purchase and move on. Some want to believe in a business, and may spend great time and effort giving product feedback, making suggestions, evangelizing, and otherwise contributing to its success. And some fall in between. Blockchains and tokens in combination are flexible multi-tools capable of delivering tight-fit incentives for all. Token-based incentives will be versatile, easily scaling from rewarding a micro-behavior to incenting business-changing contributions.
They could also be used to cultivate a committed relationship from something that started much more casual. As tokens accumulate, users will likely take notice—suddenly, a balance earned through small, barely noticeable actions is worth something of value to that individual. This can offer a pivotal moment for the relationship between a business and a customer. It presents the opportunity for nurturing customers from casual users to more devoted customers and even promoters of the business. And this effect could escalate quickly. Because the value of the token theoretically rises with the value of the network, the more tokens a particular individual holds, the more vested they are in the success of the business, and the more they want it to increase in size and vibrancy. A simple reward could thus evolve into a currency that individuals actually personally care about.
They may care about it simply because they (eventually) could exchange their balances for goods and services they value, or convert it to local currency they can use at the grocery store. But there is also the possibility for something more. It’s been well documented that today’s consumer desires more “meaning.” Tokens or token campaigns could be tied to social causes or brand missions that help a consumer feel they get meaning from their interactions with that business. The more aligned a brand is with an individual’s values, and the more the individual sees the brand as helping them appear as the person they want to be, the more likely a business will be able to spark this effect. For this reason, it’s quite possible we see many businesses of the blockchain era flex very closely to the macro (and micro) values and desires of their customers.
Stoking Community through Tokens
These same principles can be applied at a community level, and in fact, it is at this level that tokens will reveal their true superpower. A business could use tokens to tap into an existing community and incent that community to move in a direction that helps the business. Or, it could use tokens to foster the growth of a new community. Regardless, with the right circumstances they could be used to unleash baking soda-and-vinegar–like reactions that make change happen quickly—whether they are small actions that add up to something big, or are used in the form of bounties to motivate large-scale actions that drive the business forward.
Using Tokens to Shape Individual Behavior
Highly versatile, tokens will likely be used by brands and businesses in creative new ways to incent awareness, drive engagement, and trigger action—areas that have been increasingly difficult for marketing departments to crack. While the rules governing the token and any changes are typically baked into its design at birth, the token itself can be used very flexibly. They could be used, theoretically, to reward ongoing behavior such as social sharing, going into a store, converting a friend, completing a profile, achieving a new level of mastery, interacting with ads, or just using the product. Or they could be used in sophisticated single-use campaigns that integrate other technologies—making a purchase of something specific, sharing an image that includes a certain product, or interacting with an augmented reality experience on a package or label.
Blockchains could help advertising carry more impact. As discussed in the previous section, before consumers can absorb advertising, they first need to be paying attention. Consumers could be paid to watch ads, or to interact with them—even be rewarded when they make an immediate purchase. As more consumer-ready applications gain traction, they will offer a platform for brands to launch creative, context-aware advertising campaigns that reward consumers on their terms. For example, a retail brand could reward students who complete a course in an online degree program, or give gamers a reward when they reach a certain status in a gaming application.
This new incentive model also holds interesting possibilities for marketers to experiment with honing the granularity of their campaigns, as the space evolves. For example, if a consumer or influencer has been willing to make additional data available and verifiable, it could be used to target very specific customer profiles to take an action. Imagine a futuristic scenario, for example, in which an automotive company hopes to convert recent university graduates to their brand just as they start the next phase of their lives. They could deliver a generous promotion with assurance that they were verifiably being offered and redeemed by only these graduates—without the brand having to obtain or verify the actual data themselves. Or perhaps a new meal delivery service is looking to optimize operations by increasing penetration of a specific neighborhood—they could offer significant bounties to those who refer verifiable neighbors that convert to long-term customers. One could also imagine a future in which there is barely a middleman at all—individuals share a profile of the kind of advertising they would like to consume, and brands can interact directly with them, with both parties receiving high value.
Incenting Not Just Action, but Impact
A key twist is that rewards could be tied to measures of quality. The definition—and measure—of quality will depend, of course, on what the business is trying to achieve. But the traceability of impact and results could influence the entire practice of measuring marketing ROI. One could imagine incenting th
e amount of time spent on an activity; how frequent the interaction, transaction, or share; or how many votes a response to a question receives from a community.
Over time, we are sure to see applications that help marketers make a direct correlation between amount of reward and the amount of value contributed to an application or platform—for example, a blog post that gets a high number of claps, likes, shares, and traffic could get a larger reward than one that doesn’t. Or brands could take this a step further—by rewarding “highly regarded” content (measured in a similar way) that makes positive mention of a particular product. B2B companies could incent customers who are also product experts to provide quality support to their community’s questions by highly rewarding answers that are completed in a certain timeframe or that receive a certain number of likes. A health insurance provider could tie rewards to the sustained maintenance of weight, and an auto insurance provider to the sustained adherence to speed limits.
The Next-Gen Influencer Strategy
Long before social, marketers used influencer strategies. For 20 years, the Milk Processor Education Program capitalized on the influence of celebrities, athletes, and social icons with the “Got Milk?” campaign. With the advent of social networks and platforms like Instagram, YouTube, and Twitter, people could go from relative obscurity to huge followings and influence from within the comfort of their own home. These influencers can command a lot of authority and trust with consumers. Seventy percent of teenage YouTube subscribers say they relate to YouTube creators (influencers who have met certain criteria on YouTube) more than traditional celebrities, and 40% of millennial subscribers say their favorite creator understands them better than their friends.133 A single nod to a product or service from a key influencer can trigger instant excitement. Brands are becoming more adept at building relationships with these valuable advocates, and better equipping them to tell brand and product stories on their behalf.
What happens if tokens become a tool for brands to incent influencers? You can imagine the same dynamics that could motivate consumer behavior being applied to influencer armies. Rewards could be targeted to specific activities, or the quality of content as measured by shares or likes. Already, blockchain entrepreneurs are launching projects that focus on incenting influencers, with token rewards for “proof of contribution.” Many of these early solutions feel experimental, although they already work to solve problems of verification, negotiation, micro-payments, and a currency that transcends borders. Larger social media companies are also getting involved and are sure to push the boundaries of how brands can incent influencers more efficiently, and with more transparency about results than ever before. When more evolved, they could provide a mechanism for truly leveraging even micro-influencers at massive scale.
The technology may also enable more creativity in influencer campaigns. Influencers by their very nature are masters of community engagement and viral tactics, and hold the potential to be a creative force supporting a brand’s objectives. Conceivably, tokens and blockchain-driven validation could enable brands to incent purposeful creativity—aligning influencers’ on-the-ground innovations with a brand’s mission by rewarding the achievement of certain metrics. In essence, blockchain functionality could boost influencers to influence with more impact.
Using Blockchains to Ensure Quality
But blockchains make it possible to go further than simply verifying and tracking metrics that indicate impact. They can go deeper, to verify the contributor is a real person. Since the dawn of digital marketing, marketers have long tolerated noise in their results from fakes, frauds, and now bots. Blockchains can certify that contribution is linked to a specific identity, and the reputation that identity has built over time. They even have the capability to verify additional data that a contributor has opted to add to their identity, such as locations, credentials, group affiliations, and other attributes. Because all of this data can be verified by a blockchain without divulging the real-world identity of the contributor, it can significantly prevent bad actors and fraudulent activity without compromising privacy.
Another way blockchain entrepreneurs drive the quality of an exchange or interaction is through a mechanism called, in crypto-speak, staking.
With staking, the individuals or parties involved put up tokens as a form of collateral. With this skin in the game, they are more incented to follow through to produce the promised outcome, whether that’s providing a good or a service. If everything goes well, these stakes are returned to the original contributors. If it doesn’t, they can be redistributed according to the rules of that protocol (and there are typically arbitration channels to deal with disputes). While there is still a lot to learn about this approach, it could evolve to be a powerful tool to incent behaviors that add value to a network.
Blockchains also have the potential to solve some of the advertising industry’s biggest challenges, and blockchain entrepreneurs are swarming to this space. They are developing decentralized ad platforms and consent-based ads, and pairing up with ad industry R&D groups in consortiums to prevent fraud. The level of innovation that we will see in the next few years is sure to change the shape of the market. Many of these innovators are focused on developing transparent and secure marketplaces in which advertisers can validate directly that they are getting what they are paying for; this would indeed be a breakthrough in “truth in advertising.” However, we will also see a range of new functionality that leverages token incentive models to garner attention and increase engagement from consumers—consumers that are verifiably real people, not bots.
But Where Do You Start?
Knowledge of cryptoassets among the general population is currently very low. But this will not stop businesses from experimenting with the use of tokens. It may take some time, but best practices will eventually emerge to match consumers’ readiness. The journey will likely start by framing tokens as something a consumer understands already, like a loyalty point or a reward. Consumers could accumulate and even use tokens without a need to understand the full extent of how they function or the richness of what they do—or even without knowing that these are cryptoassets at all. As more and more businesses incorporate tokens, and collectively invest resources in educating the general population, it is quite possible that one day in the near future we will see a rapid uptick in adoption of cryptoassets as a whole.
Agile Strategies, Smarter Marketing
Astute marketing teams may learn that tokens not only give their consumers feedback loops but also give the marketers themselves useful insights. With a proliferation of options for marketing spend, better clarity into what actually drives ROI is a highly attractive prospect. Marketers will be able to observe with higher fidelity and traceability how effectively a particular incentive triggers a specific action at a certain time or in a certain context. Tokens could be used very flexibly to tune behaviors, and the most effective teams will be those that have the unique skill sets to use agile strategies of rapid experimentation, measurement, and execution—and that have the skill sets to analyze and learn from the data these experiments produce. Over time, these teams could leverage these learnings to improve efficacy and even, one day, to optimize marketing budgets.
Reinvigorate the Loyalty Program
Another area that is receiving a great deal of attention from blockchain entrepreneurs is loyalty programs. One day, we could hold tokens as loyalty “points,” and combine those from a variety of brands into a single unified wallet. These rewards, even if multiple “currencies,” could move without friction on a single platform. Consumers would not have to manage a maze of different program restrictions and redemption policies, and could potentially be more actively engaged with these valuable wallets of cross-program loyalty points than they are with today’s fragmented and scattered programs.
Brands could gain visibility not only into how consumers earn loyalty points, but also into how they respond within the freedom of a larger redemption marketplace, potentially
driving new insight on customer behavior. Consumers could even be incented to make different choices within that marketplace at different times.
We can also expect structural changes to how loyalty programs work. Brands may strike partnerships or create coalitions to develop “loyalty networks” that both meet their business objectives and give consumers a form of points that they value more highly than what they have access to today. New partners could be rapidly added to these networks without today’s complexity, making it easier for loyalty programs to stay fresh and even to partner with complementary emerging brands that don’t have the infrastructure or resources to support a traditional loyalty program partnership.
In fact, the idea of a formal points “partner” may one day fade away, to be replaced by a vast ecosystem of merchants of all sizes. Marketplaces of granters, earners, sellers, and buyers may even emerge, as may consumer-to-consumer point exchanges. As the idea of a formal loyalty “program” begins to dissipate, we may see a replacement that looks more like a series or network of highly targeted, and increasingly tailored, ongoing loyalty campaigns.
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