How token utility can drive growth and marketing 🪙

Hello!

Welcome to "note to self" #3 focused on marketing in web3 💻

If you haven't already, join other readers who are understanding how web3 is changing marketing by subscribing below:

Today we're discussing how token utility can drive growth and marketing. Let's dig in 🍽

Token utility - an overview

Tokenization is a fantastic innovation for web3. Anyone can create a token of value and swap it for other assets. Utility tokens have a specific use case and are utilised on a platform or in an ecosystem. Brave's BAT ( Basic Attention Token ) is an example, where you can trade BAT for other assets on both centralised and decentralised exchanges like Coinbase and Uniswap respectively.

The bear market allows for less speculation and more function, and tokenomics can be a powerful force to drive business growth. Equity tokens are different, they represent ownership of an asset.

How utility tokens can drive growth

Tokenisation brings liquidation to values and allows them to be traded. The following are some ways, among many, tokens can be used for growth.

1. Growth without affecting cashflow

Think about Revolut's "invite a friend and earn €50 when they sign up using your referral link", or Paypal's "refer a friend, get $20, and your friend also gets $20". In Paypal's case, this viral growth technique brought them from 1 million users to 5 million users in 6 months and was hugely successful in creating a great network effect, but in the process, they spent millions of dollars of company cash. A growth marketing campaign like this is not realistic for most companies, particularly earlier-stage startups.

If the referral or signup reward is in the token form then that company's current cash is not affected, and users can redeem these tokens for the company's product. Depending on the market price of your product and your token you can change the reward in monetary value based on this.

2. Loyalty / Referral Programs bringing more liquidity

Loyalty programs are not new. Users of a product can earn loyalty points, or in this case tokens, as they continue to use the product. Tokens can then be redeemed for more of the product.

Tokenisation of a loyalty program means the opportunity for a secondary market opens up. Tokens can be sold or traded on secondary markets in return for cash. This gives users larger incentives to earn rewards, and in a time when customer acquisition is more difficult, customer retention becomes pivotal. Utility tokens are endowed by smart contracts to implement transactions when certain conditions are met.

3. Increasing stakeholders/user reach

Building long-term trust in your product is key with a goal of price stability. You don't want to create an ecosystem of speculators where you're community only cares about the appreciation of your token. Your user/community should be incentivized to earn more tokens, not incentivized by pricing speculation of your token.

On secondary markets, your token can interact with further stakeholders and potential users, and increase your reach from your direct user base.

PayPal's referral program began with $20, eventually dropping to $5 ( seen above ) without hindering growth substantially. PayPal spent $60-$70 million of their cash on referral rewards. Using tokens would have meant that PayPal's current cash would not have been affected as seriously.

In other news: 📰

-> The Ethereum merge gets closer, with the first upgrade of the transition confirmed to go live on Sept. 6.

-> SEC chair Gary Gensler's stance on crypto is questioned.

-> Blog/Pod/Video of the week: Unbundling Digital Identity Unlocks New Ways to Play and Build.

Spotlight💡: Ontropy

What: Ontropy gives web3 games the power of cheap, verifiably fair randomness.

Why: Current infrastructure in web3 is expensive and lacks the capacity to support elements like private randomness and fault tolerance, which makes playing 2+ player games impossible.

Who: Ontropy is headed by José Betancourt with the Yale-based team having over 6 international Math, Physics, and CS medals.

Check them out!

Thank you José Betancourt of Ontropy for his contribution this week.

Next time: ⏭️

Next week I will discuss the web3 marketing stack. See you then!

Have a great weekend!

Harry Arkwright