Despite their popularity, non-fungible tokens (NFTs) have been the subject of hype, commotion, and drama as their utility and contribution to value creation have been heavily questioned. Perrine Desmichel, Isabella Maggioni and Saeid Vafainia argue that, like physical goods, NFTs satisfy key psychological needs and can be useful to marketers. They propose a typology of NFT products based on the type of value generated for customers.
Non-fungible tokens (NFTs) include a wide range of digital assets, from virtual real estate to collectible art pieces and other unique identifiers recorded in the blockchain. They became widespread in 2021 and the global NFT market is expected to grow at a rate of 34 per cent per annum to reach USD 212 billion by 2030.
There are numerous types of NFTs available in virtual marketplaces and they can be either associated with physical products or solely represent virtual assets. NFTs can be displayed in public (on social media, for instance) or just in private settings.
We identify four primary categories NFTs mainly fall into: collectibles, digital ornaments, digital twins, and digital free passes (illustrated below). However, a question remains: what is the type of consumer value generated by these NFTs?
“Like physical goods, NFTs satisfy key psychological needs”
We argue that, like physical goods, NFTs satisfy key psychological needs. Indeed, digital possessions can both serve as cues for others to form impressions and as markers for individual and collective memory. More precisely, previous studies have investigated how possessions can contribute to the definition of self-identity and the communication of one’s identity in social settings, proposing that consumption serves both self-development and self-enhancement goals.
In a similar vein, we propose that NFTs can act as transformational value propositions since they provide opportunities to alter consumers both in the digital and sometimes in the offline world. Therefore, NFTs mainly satisfy:
Self-enhancement motives: NFT consumption can serve as a motive for projecting a positive image of oneself to social groups, and to achieve a sense of social distinction and pre-eminence.
Self-development motives: NFTs are acquired to increase consumer self-efficacy and improve consumers’ skills and abilities.
By reviewing recent business cases in the light of academic research, we present a typology of NFTs which should help marketers decide which NFTs to develop and how to implement them so as to satisfy specific consumer goals.
Proposed typology of NFTs
- First, ‘collectibles’ refer to series of virtual items with certified ownership and uniqueness. They can serve self-enhancement motives by generating status value and projecting a positive self-image in virtual settings. Collectibles can also address self-development motives by providing the opportunity to acquire unique items that increase in value over time. CryptoKitties, Bored Ape Yacht Club, and the Limited Porsche NFTs illustrate this category.
- Second, ‘digital ornaments’ are incorporated by consumers into their virtual selves, such as virtual clothing or accessories for avatars in virtual worlds or online gaming environments. They serve self-enhancement motives by allowing individuals to craft a social image and act as status signals in virtual spaces. Digital ornaments also serve self-development motives by representing consumer achievements, such as game rewards in Axie Infinity. Other examples include Burberry’s collaboration with the Blankos Block party and the ownership of virtual real estate in blockchain-based virtual worlds like Decentraland and Sandbox.
- Third, ‘digital twins’ create identical digital versions of real-world objects, offering extra value for brand enthusiasts and collectors. They can be used for self-enhancement by allowing customers to showcase their purchases before receiving the physical items, fostering a perception of scarcity and rarity. Digital twins also provide practical benefits like authenticity certification and delivering exclusive information about the product. RTFKT Studios’ collaboration with Nike for Cryptokicks personalised sneakers and Bulgari’s NFTs for the Octo Finissimo Ultra watch are examples in this category.
- Fourth, ‘digital free passes’ are NFTs that act as digital loyalty cards, granting access to special events for loyal brand customers. They serve self-enhancement motives by offering access to exclusive brand communities and providing perks like air-dropped tickets. Digital free passes also fulfil self-development motives by providing access to events or discussions that offer exclusive knowledge and greater visibility and status. Starbucks Odyssea and Gary Vaynerchuk’s VeeFriends platform are examples in this category.
Overall, NFTs have the potential to enhance customer experience by satisfying self-enhancement and self-development goals. Marketers should assess which psychological goal they are trying to satisfy before designing any NFT-based offering, and be mindful of the different implications associated with different types of NFTs.
- This blog post is based on Non-Fungible Tokens: Are they really so futile?, part of ESCP Business School’s New technologies and the future of individuals, organisations, and society impact papers series.
- The post represents the views of its author(s), not the position of LSE Business Review or the London School of Economics.
- Featured image provided by Shutterstock
- When you leave a comment, you’re agreeing to our Comment Policy.