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2022 was an interesting year for NFTs (non-fungible tokens) to say the least. This was the year that public knowledge of NFTs surpassed Bitcoin and other cryptocurrencies in the realm of digital collectibles such as art and photographs.
But while buying art and other collectibles may get most of the attention of the general public, they tend to overlook some of the more practical (and profitable) business applications. In reality, NFTs can have a variety of practical applications that help organizations achieve their existing business goals.
First things first: How do NFTs work?
NFTs are cryptographic assets that are based on blockchain technology. The non-fungible aspect is important because it gives NFTs distinctive properties, meaning they cannot be replaced or replicated. They are unique and cannot be manipulated or forged. We most often see NFTs in relation to digital assets, such as art, sports cards, games and other collectibles, where the blockchain provides a certificate of authenticity.
NFTs can be bought and sold on the market, with prices based on market demand, just like a physical product. However, the unique data that is part of the NFT makes it easier to validate the ownership and verify the authenticity of the token.
NFTs are also used to represent details of ownership, membership, and more—and these diverse use cases have proven key to business applications.
Related: Here’s A Beginner’s Guide To Crypto, NFTs And The Metaverse
Connecting digital tokens to physical benefits
One of the keys to generating business growth through NFTs is connecting the tokens to a physical product or real-world experience. As highlighted in the Brands in Web3 Q3 2022 report by NFT Tech, fashion brand Tiffany & Co. managed to turn NFTs into a set of exclusive physical commodities. The company has partnered with CryptoPunks to create an exclusive line of 250 “NFTiffs” pendants. Priced at 30 ETH (roughly $50,000 at the time), the unique pendants sold out in 22 minutes.
Another example comes from the Australian Open. In 2022, the Australian Open launched a highly successful metauniverse initiative to mine AO Art Ball NFTs that link to live match data. This was combined with a virtual hosting of the Australian Open in a 3D virtual reality platform to provide an unprecedented level of access to one of the biggest events in tennis.
While the initial launch was successful in its own right, the Australian Open’s commitment to this NFT initiative is set to be even greater in 2023, with the announcement that holders of each Art Ball NFT will receive two free seven-day Ground passes for AO23 week finals. Art Ball holders also get access to additional exclusive experiences such as streams and viewing suites through the “SuperSight” fan experience and access to other United Cup matches.
With both Tiffany & Co. and the Australian Open, linking NFTs to real-world products or experiences has proven to be a highly successful method of deepening relationships with their target audience.
Additionally, when NFTs are used in this way, they invite participation in the mass market, turning fans into financially incentivized brand ambassadors who enjoy a high level of utility — and of course, can seamlessly trade their digital assets for money in the real world.
Related: Putting the Intangible in Your NFT Project
Reach new demographics
NFTs don’t just help brands strengthen relationships with their existing customers—quite often, they can be key to reaching entirely new audiences.
Case in point: For quite some time, clothing brand Polo Ralph Lauren has seen its core customer base largely among older adults, while younger demographics such as millennials and Gen Z are less interested in the clothing brand.
In 2021 and 2022, however, Ralph Lauren made a full commitment to digital initiatives such as NFTs and the metaverse. These include the launch of a “phygital” fashion collection in Fortnite, as well as an exclusive digital apparel tie-in via the Roblox game.
These digitally focused efforts have been a big success for the brand. As reported by Vogue Business, Polo Ralph Lauren saw its third quarter revenue increase by 27% following the launch of the Roblox collection – with this growth largely driven by a 58% increase in new digital customer acquisition.
In this case, the strategic deployment of digital assets allowed Ralph Lauren to reach a younger target demographic in meta-universe-style spaces where they would have the greatest appeal and potential impact.
When done right, NFT initiatives can help revive sales and reinvigorate a brand’s image, making it more relevant and attractive in today’s competitive market.
Using NFTs wisely for your business purposes
As these examples illustrate, the potential use cases for NFTs go beyond selling digital art. With a strategic approach, businesses can use NFTs to find new ways to engage with younger, more tech-savvy demographics. NFT-based projects can help position your company as an innovator at the forefront of market disruption.
That being said, any business investment in NFTs should be done strategically. The big NFT failures of 2022 have attracted a lot of media attention and should serve as a strong reminder to businesses as they enter this space. All investments in NFTs should be made with the best interests of the end customer in mind.
When you focus on how your target audience can realistically benefit from using NFT, you’ll be able to identify strategies that have real staying power and that will build a greater connection between your brand and its most tech-savvy customers.