When we talk to brands, the first question we get asked is:

How is a web3-powered membership program different from a typical membership program?

At Hang, we see two core unlocks that are otherwise nearly impossible without the use of NFTs for loyalty: composability and interoperability.

What are composability and interoperability?

Composability is the ability to combine distinct software components to create new applications or outputs. Composable components are often referred to as Lego blocks, as they can be stacked together to create new systems or applications.

Interoperability is the ability for software to exchange and make use of information. In some respects, this means that the software speaks the same language — that it can communicate with programs outside of its own ecosystem. Composability is key to interoperability, as components of the software need to be composable to enable interoperability.

The concepts of composability and interoperability have been around since the dawn of the web, as the early internet was built on open-source ideals. Composable systems and components are built such that developers can create software that they can utilize in their products without having to reinvent the wheel with each new application.

As the internet evolved, though, open-source ideals and building composability were eroded through hefty patent protection. Individual software providers deliberately engineer their products using incompatible tech stacks.

How does interoperability apply to loyalty?

Think about all of the loyalty programs that you are a part of across your favorite brands — like Bloomingdales, Nordstrom, Sephora, or Starbucks. Your loyalty account is locked within the individual site or platform, incompatible with anything outside of it. Starbucks Rewards program is bigger than many banks, yet all you can do with your stars is buy coffee. You can’t use your Nordstrom account at Sephora, let alone share points or rewards — even though the information stored about you in each of those accounts is nearly identical.

Loyalty programs of today are siloed, non-composable systems. Each platform has created its own system of collecting, storing, and managing users. Since these systems have all been engineered independently, it would be difficult for these platforms to be composable, even if they wanted to.

NFTs (composable components) can be used as a customer’s loyalty status within a brand. Through their loyalty NFT (their “account membership”), customers now verifiably own their loyalty status. These loyalty NFTs can be seamlessly used to provide membership credentials to apps and websites across an infinite number of brands and platforms.

You may be wondering — why should I care about interoperability? Brands can understand interoperability on two distinct axes: horizontal and vertical interoperability.

Horizontal Interoperability

Horizontal interoperability is the ability for community and status to be utilized cross-brand to create powerful partnerships and collaborations. With an NFT-powered loyalty program, not only do customers own their membership, but they now carry their status across their favorite brands. Since NFTs use blockchain technology (an open system), brands can verify a customer’s status with each brand loyalty program they are a part of, which enables brands to seamlessly offer special perks & benefits to members of partner brands.

These perks & benefits can range from exclusive access to products, discounts, and unique experiences, which can be used to encourage new customers to join their loyalty program and interact with their community.

Brand collabs are an incredible strategy for customer acquisition and attention, as well as strong ways to align brand identity and mission. Many times, the whole of a brand collab can be greater than the sum of its parts, meaning it garners more customers than just the two brand communities. Lower CAC, higher LTV.

Let’s use a specific example: Imagine that a local coffee shop, LA Grind, collaborates with an LA-native streetwear brand, Hype Sweats. Let’s assume both of these businesses have an NFT-based loyalty program. To encourage the Hype Sweats community to visit the café, LA Grind might offer 10% off on coffees for all Hype Sweats loyalty members. To encourage more purchases on their site, Hype Sweats can offer an exclusive Latte Patch that only LA Grind loyalty members can order to be sewn on to their Hype Sweats sweatshirt. Now loyalty members feel aligned and valued by these two brands. And the best part? These two businesses can create this exciting partnership without having to build a custom integration between their systems (because the programs were built with composable parts).

Collaborating brands can also reward members who are in both loyalty programs with extra points, special gifts, and more. Now that loyalty doesn’t have to be a siloed experience, brands have more opportunities to collaborate, grow their community, and reward their most loyal customers. With NFT architecture, brands can seamlessly work with as many partners as they would like and provide bespoke rewards.

In the past, only industry leading giants were able to build custom collaborations like this (see our article on the loyalty partnership between Starbucks and Delta), as building a custom integration is expensive, time-intensive, and difficult. Now, any size business can launch programs like this and benefit from the power of collaboration.

Vertical Interoperability

Vertical interoperability is the connection throughout a single business’ tech stack and distribution channels. With an NFT-powered loyalty program, brands can now verify, track, and reward customers across all customer touchpoints. Loyalty can act as the connecting fabric between all of these touchpoints for a brand to aggregate information and follow the customer journey.

Tracking customers can be difficult if a brand uses multiple distribution channels or multiple different customer facing software platforms. Additionally, it has been entirely impossible for brands to reward customers across different channels. A simple example of this challenge is a customer not being able to earn Starbucks Stars if ordering their Starbucks through the UberEats app.

NFT loyalty enables brands to track customers across their ecosystem far more easily. A loyalty NFT represents a unique customer account, which can log a customer’s interactions with the brand and reward the customer for those interactions. Moreover, a brand can incentivize specific types of interactions, like coming into the store versus ordering on a third party app.

Imagine a fashion brand called Denim Friends that sells their product through a few different distribution channels: (1) on their eCommerce website (2) online retailers like Revolve (3) IRL retailers like Nordstrom (4) their own pop-up stores. It’s nearly impossible to track Denim Friends customers across all of these outlets, let alone accurately reward them for interacting with the brand. With Web3-powered loyalty programs, Denim Friends can now verify, track, and reward loyalty members across all of their outlets. Denim Friends can now understand the complete customer profile and therefore tailor their offerings more effectively, even going so far as offering personalized rewards to each customer. Maybe they learn that during a fall sale at Nordstrom, they can expect more of their customer-base to shop in-store at Nordstrom rather than online.

NFT loyalty enables the brand to both better understand their customers and incentivize them to take the actions that they desire through more tailored rewards. The brand benefits from higher customer engagement & retention, while the customers benefit from more personalized rewards and a better overall experience.

Interoperability creates a whole new dimension of possibilities for brands. In an interoperable ecosystem, brands can extend reach, build endless creative collaborations, deepen customer relationships, and personalize their offerings.

Hang enables brands to create composable NFT-based loyalty programs without having to write a single line of code.

Build a bespoke loyalty program that takes your customer experience to the next level. Ready to get started?