Sharan Jhangiani

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NFTs as a loyalty mechanism

January 08, 2022

This post introduces the initial idea of Fealty, an NFT based e-commerce rewards system. I haven’t done much validation here, but this sums up the current state of my existing thesis that NFTs as a loyalty mechanism could be interesting…

Fealty 🧿

Fealty is a super simple Shopify App that allows e-commerce sellers to reward early buyers with NFTs as a way to express gratitude and build loyalty to the brand.

Problem Statement

E-commerce sellers are constantly looking for ways to build brand loyalty. This is why:

When customers are loyal to your business, 86% will recommend you to friends and family, 66% will write a positive review, and 46% will remain loyal despite a poor experience.

Customer loyalty fuels word-of-mouth marketing, user-generated content, and customer retention—not to mention increased sales and revenue.

Existing Solutions

There are many ways to develop brand loyalty, one of which is creating customer loyalty programs. Loyalty programs usually work decently well (think starbucks points, etc.), but usually require financial commitments on the sellers part, including but not limited to:

Intuitively this makes sense, as there must be some upfront cost to retaining a customer longer and increasing the LTV.

Proposed Solution

Fealty is a Shopify plugin that allows store owners to build an NFT based reward program.

Key benefits to using an NFT based reward program:

  1. Customers can get intrinsic social value by having “tokens” that verify they purchased said products at an early time. (i.e. validated early adopter)
  2. Customers can receive potential financial upside by being able to trade these NFTs on secondary markets.
  3. Store owners can create exclusive programs for NFT owners.
  4. Loyalty programs can be created across multiple stores, increasing the realm of possibilities of drops. (i.e. Seek Discomfort and 100Thieves both award seperate NFTs for a drop. 3 months later, they do an exclusive joint drop, only accessible to people with tokens from the previous drop 3 months ago.)

Brain Dump

The rest of this post will include a bunch of super raw ideas about how I could build something like this.

Okay so initial thoughts here are that this could be a great Shopify extension.

I want to offer the following capability for store owners:

  1. Design an NFT to be minted.
  2. Assign a set of rules in which this specific NFT will be distributed. a. This looks like: For these 5 products, the first 100 unique people to buy something will be given an NFT. (This idea of “given” an NFT will be returned to below.)
  3. Ability to monitor NFT ingestion rates. (i.e. 80% have accepted, 40% have minted and put NFT in wallet)
  4. Reward holders on store. a. This looks like: I want people who hold NFTs from drop 2 to be able to access drop 6 merch 2 days before anyone else. (This would include validating ownership of NFT and then also being able to notify the individuals with these tokens in their wallet that they have this early access.)

I want to offer the following capability for customers:

  1. Receive, mint and store an NFT.
  2. Be able to get notified of promotions associated with that NFT.
  3. Use token to get gated access to special drops, etc.

Implementing these workflows will include a few key components:

  1. Store owner dashboard. a. This will give the ability to:
    1. Design an NFT
    2. Assign set of rules on which NFT will be distributed.
    3. Monitor status of these NFTs. (i.e. how many ppl own these, who has minted them, who hasn’t, etc.)
    4. Assign rewards for NFT holders.

  2. Minting mechanism a. This will simply take the input from the store owners design, and set up a bunch of NFTs to be minted based on passed inputs.

  3. Delivery mechanism. a. This will probably start as a sendgrid api call + email with a unique link to go an mint their assigned NFT. This makes it easy to use existing infrastructure around minting and reduce complexity on our end. Hopefully we can route to OpenSea and just send some instructions on how to setup a wallet and how to get the token minted.

  4. Gating mechanism. a. This is probably the hardest part. This has two components:
    1. Validating the ownership of the NFT.
    2. Using the validation status as a temporary gateway to ensure that access to the store is limited by the contents of the wallet.

This is lowkey kinda a lot so lets see how far along i get into this… maybe i need to cut down for MVP…

Ok this is my list of “things” that I want to include in MVP:

  1. Store owner dashboard – this should def be included, a key component.
  2. Minting mechanism. This is also kinda important, although maybe for MVP i do this by hand and just save the links to mint the NFT somewhere.
  3. Delivery mechanism. I can also do this by hand for the first few beta users. No need to build this out yet as it is just an email.
  4. Gating mechanism – this is a key component, that may be a little hard… im going to do some research on this guy now.