Metaverse and NFT Myopia: 3 Common Mistakes of Luxury Brands

Recently I was pulled into a complex global metaverse project for a European luxury brand that involved, among other elements, NFTs and games. It took only a brief audit of the project to recommend canceling every single aspect of it and doing a complete reboot. The reason taps into three of the most common mistakes of metaverse projects I observe many times: First, the project was entirely self-centered. It was about offering brand assets as NFTs, and the game was about aspects of the brand. There was, upon close inspection, no reason why a customer should buy or even interact with it. There was no unique story. Hence, there was no value creation, which is key for luxury. Luxury is extreme value creation for clients, and digital projects must undergo the same scrutiny regarding if and how they create extreme value as any other project. Just launching a metaverse-related project for the sake of being there and experimenting is one of the biggest mistakes many luxury brands are making right now. Second, the project had no intentionality. It was a collection of metaverse-related initiatives, but they were not connected and there was no clear “endgame.” The reason to launch the project and the role this project has for the future of the brand were not defined precisely enough. The consensus among the team that had to execute the project was that: it’s dead on arrival, but the CEO wants it. Third, the games were created on stand-alone platforms, not as part of already existing games. This means that it will be a miracle if a significant number of the target audience will be willing to interact with it. In the metaverse, brands need to be where the clients are, and stand-alone solutions can hardly compete with established games. Balenciaga had to learn this when its Fall 2021-22 collection launched as a video game. While it created some buzz, very few users were attracted to the game. Luxury brands need to be where the audience is, and their proposition needs to be relevant to those who they want to attract. Projects like the one I describe at the beginning of this column have almost become the norm. Similar to the endless attempts to create viral videos in the early days of Facebook or YouTube, seemingly every brand is now working on an NFT, driven by FOMO or vanity, but seldom by strategy. While many brands think that it’s just an experiment and the ramifications will be limited, I am convinced that many will pay a high price for many of these off-strategy initiatives. When clients who invest in an NFT see the value dissipate over time because the initiative per se has no value other than being a branded NFT, they will attribute the value loss to the brand. This will cost many brands significant trust and equity. Many luxury brands are creating time bombs and they don’t even know it. On top of this, when projects are off-brand and not exciting enough, the reaction of their — mostly — Gen Z audience will be significant. If a digitally native and NFT-savvy Gen Z does not see the value of an initiative, they may question the brand as a whole. This is not to say that luxury brands should not engage in metaverse projects. However, if they do, there needs to be a clear strategic playbook. A go-ahead for any project should only be given under the following conditions: There is a clear client-centric value creation approach. Launching an NFT for the sake of having one — often using brand assets without a clear story — does not meet this requirement. There is a clear intentionality. Brands need to have full clarity about what the role is of the metaverse initiative among all other initiatives and how it will benefit the brand in the long run. The initiative is where the audience is. Importantly, there must be desirability for the target audience. Otherwise, the project will fail, even if it creates a short-term buzz and brands use it internally to showcase their metaverse ambition. The stakes are simply too high, because when metaverse projects are done wrong, clients (current and potential) will shake their heads in disbelief, move on, and let the value of the initiative collapse. It’s better to pull the plug on many existing projects in the pipeline and recalibrate them to create tangible customer value. This is an op-ed article that reflects the views of the author and does not necessarily represent the views of Jing Daily. Named one of the “Global Top Five Luxury Key Opinion Leaders to Watch,” Daniel Langer is the CEO of the luxury, lifestyle and consumer brand strategy firm Équité, and the executive professor of luxury strategy and pricing at Pepperdine University in Malibu, California. He consults many of the leading luxury brands in the world, is the author of several best-selling luxury management books, a global keynote speaker, and holds luxury masterclasses on the future of luxury, disruption, and the luxury metaverse in Europe, the USA, and Asia. Follow @drlanger

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Metaverse and NFT Myopia: 3 Common Mistakes of Luxury Brands