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Increasing consumer connect with physical-backed NFTs. Read on for industry lessons.

Physical-backed NFTs have the widespread relevance brands need to get the most out of their web3 initiatives. Ben Plomion, chief marketing officer at Dibbs, discusses how physical-backed NFTs can help connect with consumers and shares three key lessons from big brands in the field.
Brands’ interaction with consumers has evolved rapidly over the last few decades. The internet, mobile, and AI have all had a massive impact on the nature of this relationship — and there’s a good chance web3 will usher in yet another paradigm shift. This wholesale update of web tech could influence every aspect of the consumer-brand relationship, from payment processing to the products themselves. 
Although what web3 will become is still unknown, it would be a mistake to believe that the technology is only potential. Many premium brands already use web3 tech, like physical-backed NFTs, to create unique connections with their consumers. 

Before we dive into specific campaigns, let’s define what physical-backed NFTs are — and explore why brands find them powerful engagement tools.

A physical-backed NFT is a type of blockchain-based token connected to a real-world item. These items can be practically anything: collectible cards, high-end clothing, or even multi-million dollar real estate properties. Possession of the token establishes the holder’s ownership of the physical item, and the history of that ownership is secured via the blockchain.

While NFTs are relatively new, they’ve gone from the fringe to the front page at record speeds. In eight years, NFTs have climbed to a global market capitalization of $3B and are forecast to hit $13.6B within another five years. This rapid growth has caught the attention of numerous major brands, including Adidas, Toys “R” Us, Starbucks, and Paramount. But, as this trend has evolved, physical-backed NFTs have become an increasingly popular approach. 
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The reason is simple – they’re just more relevant to the average consumer.  
Although the most tech-forward among a brand’s audience might find any NFT campaign compelling, physical-backed NFT campaigns have a much broader appeal. For consumers new to the tech, connecting a digital token to a real-world thing can serve as a practical – and exciting – introduction to the web3 world. For the already initiated, adding a physical item sweetens an already good deal. In both cases, physical-backed NFTs prove more engaging than digital-only alternatives.
This advantage, coupled with other NFT features like guaranteed authenticity, perfect ownership history, and additional revenue potential, has prompted brands like Nike, Tiffany & Co, and Patrón to use physical-backed NFTs in high-profile initiatives. 
Nike has been one of the most enthusiastic (and successful) brands to implement an NFT strategy, even opting to purchase the NFT creative outfit RTFKT Studios to bolster their in-house web3 expertise. 
While the brand has used crypto-tokens in its campaigns before, Nike has recently moved toward physical-backed NFT initiatives. Under the banner of RTFKT Studios’ CloneX project, Nike enabled holders of Clone X NFTs to buy exclusive shoes and apparel linked to their token for a limited time through a process known as “forging.” The authenticity and ownership of each item are backed up by the associated NFT, with the brand taking a small cut of each future second-hand sale via the NFT’s smart contract functionality. 
This “phygital” approach enhances the brand’s consumer appeal across the spectrum. Those primarily interested in real-world Nike collectibles now have a bonus digital asset to explore that also serves as a fraud protection layer. Web3 enthusiasts, on the other hand, can bring their digital belongings to life in a new way, allowing them to share their interests with those outside the space more easily.  
In terms of web3 adoption, luxury brands like Balmain, Burberry, Givenchy, Gucci, Louis Vuitton, and Dolce and Gabbana have been at the tip of the spear. In the second half of 2022, Tiffany & Co joined this group with its own physical-backed NFT campaign: NFTiff. 
The NFTiff project allows holders of Cryptopunks NFTs to transform their digital art into matching gilded pendants. The jewelry comes with an additional NFT — called an “NFTiff” — connecting the item’s ownership record to the blockchain. While there are 10,000 Cryptopunk NFTs in existence, Tiffany & Co only offered 250 phygital packages for purchase at 30 ETH each. The campaign sold out in less than a half hour and generated the luxury jewelry a staggering $12.5M.   
Like Nike, Tiffany & Co’s decision to use physical-backed NFTs over purely digital NFTs helped bridge the gap between its products and the web3 world, fueling the campaign’s success. The pendants commemorated a well-established web3 project, adding traditional cultural cachet to the best of the NFT space. 
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Many top-shelf liquor brands use a sense of exclusivity to create demand. While partnerships with premium events and celebrities will always be part of that playbook, physical-backed NFTs give these companies another way of developing that mystique.
The Bacardi-owned brand Patrón is among the first of those in this space to explore this potential. In early 2022, Patrón ran an NFT drop offering 150 digital tokens at 1.5 ETH a piece (nearly $4000 at the time). The purchase of one of these tokens entitled the holder to redeem a matching, limited edition bottle of Chairman’s Reserve. The tokens also served as tradable assets on the BlockBar marketplace. As of this writing, the premium tequila brand has sold just under 90% of these NFTs and followed this campaign up with more success.
This approach enabled Patrón to elevate the experience of buying liquor. The use of physical-backed NFTs reinforced the feeling that purchasing this bottle was an investment. It also reinforced that doing so put you in rarified air: a powerful hook for the luxury liquor audience. 
Ultimately, the brands that chose to go the physical-backed NFT route are betting on the power of mass appeal. As compelling as web3 is to many, most consumers are as unfamiliar with this tech now as most consumers were with the internet in the 90s. If brands want the full benefit of incorporating NFTs and other web3 components into their strategy, they need to start with the elements most people can easily understand and care about.
Buying digital sneakers makes sense to someone who’s already sold on the metaverse. Buying a real pair of sneakers with a digital counterpart that adds value makes sense to just about everyone. 
Are you using NFTs to connect and engage with your niche audience? Tell us on Facebook, Twitter, and LinkedIn.
Image Source: Shutterstock

Chief Marketing Officer, Dibbs

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