This post includes updates to the web3 for consumer brands/Open3 Collective knowledgebase and sent via email to members.
Feature image created using Lexica generative AI with prompt: a huge crowd of people in a modern stadium in high detail with rich colors.
The one takeaway for this week’s update
Customer retention is a fallacy for most consumer brands and leads to really inefficient marketing spend, but there are emerging concepts in web3 that may help solve this.
Customer retention is the holy grail for any consumer brand because it leads to lower marketing costs for the same unit of revenue, which leads to more profits. Common averages are that it costs 5-7x less in marketing to retain a customer than to find a new one.
sidenote: I ran the numbers once for one of my businesses and it came down to 5x for me.
But it’s an unattainable fallacy for most brands and instead, leads to lots of spend in attempts to retain customers, which increases marketing costs and lowers profits.
The problem is that in D2C, the retention efforts and costs are focused on the person by building data on them and remarketing and retargeting them to spend more. If the customer leaves and no longer buys, the brand does not necessarily know that but keeps spending on remarketing and retargeting. Further once the customer has left, all the data and efforts spent to retain the customer are sunk costs and cannot be recovered.
An emerging concept is to focus remarketing and retention efforts on the wallet in which the customer retains ownership of the products. That way, if the customer sells or transfers their ownership of the product away to another wallet (which could be a new owner or simply another wallet that the same owner possesses), the brands remarketing and retargeting can follow to the new wallet.
This is how web3 works in the context of wallets in which customers own NFTs that represent products, which are recorded on open, public blockchains that are searchable, but are anonymous in that we don’t know the identity of the person who owns the product(s).
Because public blockchains are open and searchable, a brand knows the wallets that own the products but if the owner is adding experiences associated with that item, then that would flag a brand that this is a wallet to retarget and remarket.
In this landscape, individuals and their identity becomes less important, which means privacy gets better and security improves because customer identifying data is not sitting in databases that are honeypots for hackers.
Is the above possible now. Yes and it is being done now, but it’s pretty rough and clunky, spam through wallet communication is an already unbearable problem, data attribution is hard and we can’t yet draw any meaningful best practices out of this.
To see all weekly takeaways published to one document, click here.
Key Tools Changes/Additions
- Published version 2 of the web3 strategy framework for consumer brands. This document maps web3 products/services ideas in context of the traditional marketing funnel and the value chain ascension framework for a consumer brand. This tool is where the rubber meets the road for deploying web3, how it works, how it helps the brand and customers and why it is better. This tool is a major cornerstone for the rest of the roadmap.
The above are key updates to consider. Go to the web3 market intelligence database to see all.
Notable Market Intelligence Updates
9dcc, a web3 native luxury apparel startup brand, is the leading web3 consumer brand innovator. Nike is a close second. Here’s is 9dcc’s innovation that I see, rolled up to date
9dcc is less about creating and selling luxury apparel, but more so about creating community and positive experiences for its product owners that not only ties them to the brand, but ties them to other brand owners.
While products solve problems and satisfy needs, it is better if that product can create an experience, because experiences create feelings which people remember. Positive feelings out of an experience creates greater emotional impact, which ends up tying the customer to the product and the brand behind it. There is a saying: “People will forget what you said, people will forget what you did but people will never forget how you made them feel”.
9dcc knows this but where the leverage happens is not just creating experiences between the brand and the owner, but facilitating experiences amongst the product owners that then creates an even greater emotional connection back to the brand. It is hard to scale personalized brand interaction between the brand and each owner (but AI is coming and will help here), but if you can leverage others to create their own experiences via interactions, that is where marketing compounds on itself.
I have no doubt from reading feedback that 9dcc’s products are high quality, but they are not innovative by themselves. The innovation is coming through the creation of experiences that tie back to the brand.
There is little enduring competitive advantage in product innovation or operational excellence because eventually everyone catches up. Enduring competitive advantage comes from distribution and brand, and you get these two when you can tie your customer to your brand via positive experiences that create the emotional connection, which reinforces brand and gets you distribution. Web3 is simply providing the tools to do this much better than web2. 9dcc clearly shows that they get this in spades.
The infrastructure and general process for #web3 enabling 9dcc’s products includes the following:
- take a physical product – their t-shirt for example;
- embed an #nfc chip in it so it now becomes #phygital , or becomes a “networked product” that 9dcc trademarked, a term I like better than phygital;
and, allow the product owner to mint an NFT tied to each t-shirt identified uniquely via the NFC chip, which gets deposited into the consumer’s #web3 wallet.
- This puts the product on-chain, which is a way to digitally represent the physical product and thereby opens up the ability for the product owners to do a multitude of things digitally that are limited with only the physical physical product, including:
- buy them;
- sell them;
- borrow them;
- lend them out;
- shared ownership with others;
- fractional ownership with others;
- social signaling: consumers use the NFT and the media that identifies it across different social platforms that indicates their ownership of the product;
- borrow against their value;
- lend out against their value;
- earn #royalties from;
- insure them;
- prove ownership of;
- guard against counterfeits;
- get specific benefits as an owner from another user or entity, like a loyalty program or entry to an event;
- The NFTs can be dynamic, and not static, and accumulate features, qualities, and/or histories that change their value, utility or their story, all of which can be used as signaling to which others (people, technology apps, systems, metaverses) react.
For the 9dcc brand, they have visibility into the wallets that own the NFTs and the actions that the owners engage in (see above) with respect to the NFT.
The brand can also communicate with the owners via future NFT #airdrops and wallet-to-wallet communications.
The brand can continue to consider the product it sold as a synthetic asset in which they have visibility into and where they can potentially influence what happens to that product and how it can continue to add value to the brand.
Side bar: 9dcc applied for a #trademark for “networked product”, a term I like much better than phygital. What if 9dcc open sources the licensing of this trademark so anyone can use it? Better yet, NFT it where full commercial rights to the term’s use is granted if users mint the free NFT, which as the NFT gets widely minted, would reflect back on the brand in a clever on-chain branding of 9dcc. Web3 opens up tremendous capabilities to do simple and impactful things with any kind of asset you can think of, including #trademarks
9dcc is pioneering the use of networking nfts where it airdrops a bunch of NFTs to each existing owner so that owner can then use them IRL at events to hand out to others.
This is a way for others to network in real life around a brand and its products.
9dcc also gamifies this capability, incentivizing product owners to hand out as many networking NFTs as possible, which is not just a clever way for the brand to help product owners network and connect with others, but also is a word of mouth marketing for the brand.
Sidenote: the handing out of NFTs actually happens where the recipient scans with their phone the NFC chip that is embedded on the front of the provider’s clothing item, which initiates the process for minting the NFT that ends up in the recipients wallet.
Further, because NFTs are on public blockchains the brand has visibility into how far and wide its networking NFTs travel.
Their next innovation just rolled out via personalized poap (proof of active participation) NFT’s, where their product owners can personalize the image of the networking NFTs that they can then use to hand out to people at events.
Another way where 9dcc is extending the capabilities for its owners to network and interact.
Web3 innovation is only limited by our creativity, and there is no doubt that 9dcc probably has a ton more ideas it will implement. Watch this brand and support them in their efforts to create models for the rest of us to potentially mimic.
- The traditional web2 community process between consumer brands and customers is via centralized platforms, whether its one operated by the brand or via social platforms web3 greatly enhances this because blockchains are open and anyone can see others and what they own and what they do, but in anonymous ways to protect privacy. This means brands and users can search for and find others to create their own communities around products owned and/or actions done on chain. A few apps that are harnessing the open blockchain to facilitate community and interactions in decentralized and ad hoc ways include Salsa (https://salsa.me/) and Fam. (https://site.gmfam.xyz/) Web3 is massively reducing the friction association with online community and interaction. Instead of being driven two-way between the brand and the consumer, which is web2, web3 and apps like these are letting the consumer drive the community function and take it where they want. Brands are still involved but I think their participation will evolve to be more as facilitators and participants rather than directors and organizers. This is really good because it lets consumers take things where they want rather than being restricted by web2 systems and norms.
- Is This the Trend Report of the Future? An AI Interprets the Fall 2023 Menswear Season. The output were fashion runway images with models showcasing fashion trends in clothing items created by the artificial intelligence. Rather than people interpreting trends, let AI do it, which will be able to process a lot more data than humans and therefore, do a better job.
- Outcome of the Hermès v Metabirkins #trial. This is an important case to watch for how to characterize a companies #intellectualproperty in #web3 Hermès, a #luxury #consumerbrands won this round and Metabirkins says it will appeal. This is a really good decision for web3 IP and hopefully will stand on appeal. This means that brands enjoy the same protections of their IP in web3 as they currently do everywhere else. Quoting from Vogue Business: “This decision is thus an endorsement of the value of digital goods and NFTs, suggesting that even digital representations of luxury goods have meaningful value even if they don’t perform the original function of, say, carrying one’s belongings or clothing one’s physical body. In this case, this communicates that a luxury handbag’s purpose is just as much about cultural status, whether that’s in the physical world or metaverse spaces.” Also quoting from Vogue Business, which I found interesting: “The trial was ultimately evaluated under the so-called “Rogers test”, which refers to a 1989 case between Hollywood star Ginger Rogers and producer Alberto Grimaldi. The test essentially says that a trademark protection stands if the trademark has no artistic relevance to the underlying work, or if the work explicitly misleads as to the source or content of the work. Hermès and Rothschild disagreed on whether there was consumer confusion; a survey commissioned by Hermès found that 18.7 per cent of the NFT audience were confused, while 3.6 per cent of luxury handbag consumers were confused.”
The above are key updates to consider. Go to the web3 market intelligence database to see all.
Here are some broad predictions with respect to the internet and its many enhancing exponential technologies with respect to consumer brands between now and the 2040s. As a brand owner and operator, here is how I think about the future so I can prepare for it
2008 to 2025-ish
We’re stuck in web2, which at present means we all use the same tools, do and say the same things in our marketing. There are few if any opportunity gaps from which to exploit in the current technology paradigm to give consumer brands differentiation to capture consumer’s attention.
2023 to 2035-ish
The emergence and mass market adoption of web3, which will breathe new life into consumer brand’s ability to create new products/services and enable new ways to market, distribute and sell that will give companies new ways to differentiate.
The web3 technology paradigm is a massive unification of people, places, things, events and experiences through technology exceeding anything we’ve seen in the past. It will be bigger than web1 and web2, and probably both combined.
We’ll see the most change to our connected lives than has ever happened before and will happen for the foreseeable future in this time frame. The reason is because while web3 is based on blockchain, is also interacting with, being impacted by and enhanced by other technologies, which include: (1) artificial intelligence, (2) augmented/virtual/extended realities (AR/VR/XR), (3)broadband connections, (4) computing chips and quantum computing, (5) data storage, (6) edge computing, (7) Internet of Things (Iot), (8) materials science, (9) robotics, (10) secure computing, (11) transportation and (12) 3D printing/additive manufacturing.
2027 to 2040-ish
Consumer product companies with strong brands will democratize their assets and products where consumers can be involved in co-creating, co-marketing and revenue-sharing off of products. THere will be smaller production runs for more customized and even fully customized products produced at scale in smaller local facilities close to consumers. Rather than the brand creating and producing, they will steward the brand, providing light touch leadership, and engage more in herding and massaging to let consumers do what they want.
Companies will use AI to manage customer interactions optimized for each person and do so at scale. Those companies with the data to train the AI will win out; it’s not the AI that is the differentiator, but the data used to train it.
Companies with no brand or weak brand will only exist if they can provide the cheapest product in their category. The middle gets fully hollowed out – you are either cheap and commoditized and no brand or you are ultra-brand with an engaged customer base that likes you and stakes their identities on who you are and what you stand for.
2040-ish and beyond
The metaverse comes to full fruition in its original intention, accessible via always on small, obscure, fashionable AR and VR glasses, contact lenses and brain implants, with full 3d renderings of not just fantasy metaverse networks, but the real world and all objects scanned and superimposed into duplicate universes. We’ll get such extreme detail of our physical world into the duplicate universes that it will offer consumers enhanced try-before-you-buy mechanisms.
Miniaturizing the tech for wearables and building out 6G will not be easy and will take decades from where we are now.
See all forward guidance published to one document here