Sharing brand ownership via DAOs
Beyond belonging: creating a true sense of ownership
Tokenised brand communities can become a formidable avenue for brands to forge meaningful and value creating connections with their most loyal fans. Through mutuality (aligned incentives) and agency (active participation) community members become active stakeholders, only to see their loyalty and effort being rewarded with additional privileges and benefits. Bound together by their loyalty for the brand, these fans share a sense of belonging around a common set of values, rituals and beliefs, supported by a strong brand story and distinct identifiable brand elements.
While it is still early days, brands across many different categories will be able to use tokens and NFTs to engage and empower their communities in many different ways. As such, tokens become a 2-way instrument to both reward participation and unlock new benefits.
Earning brand tokens through participation and co-creation >
TRANSACTIONAL REWARDS: earn tokens by purchasing a brand’s product or service
PROOF OF ATTENDANCE (POAP): verify and reward attendance at a particular IRL or URL event
ENGAGEMENT: recognise and reward active community engagement
CONTENT CREATION/SHARING: involve brand fans and creators in content creation and sharing
CONSUMER INSIGHTS: use the community for market research and product feedback
Using brand tokens as social capital or to unlock new benefits >
STATUS: accumulate brand tokens or NFTs to signal status and clout
ACCESS: unlock access to member-only content, experiences, events, merch, product drops, NFTs …
CONNECTION & BELONGING: token-gated membership to enable meaningful direct-to-brand and peer-to-peer connections
GOVERNANCE: vote on brand activity & initiatives, new product development, CSR initiatives etc.
PROFIT SHARING: share in token value appreciation or brand royalties
Think of brand tokens, NFTs or POAPs as a way for customers to prove their dedication to brands, and to provide a way to verify the journey they have been on throughout their brand relationship, as well as a reliable record of their activities within a brand community. Collectively, these tokens represent a member’s ‘proof-of-skin’: a reflection of a member’s skin in the brand’s game, based on the community’s recognition and appreciation of a member’s unique contributions and skills in adding value to the brand community and the brand itself.
Using brand tokens, it will be possible to incentivize customers to interact with the brand in ways that weren’t possible before. Tokens present an opportunity for brands to completely up their loyalty game (‘Loyalty 3.0’) by going beyond transaction focused programs, authentically extending the brand experience and building true brand affinity. “Loyalty programs that effectively bribe people into buying more of your products — are lazy. In the modern aspiration economy, people develop true brand affinity only when it gives them a sense of community.” Tokenised membership and loyalty programs are an effective way to create a real sense of mutuality, going well beyond single-dimensional point-based or mile-based programs.
The value proposition for loyal customers and brand fans changes from one of consumption and promotion to that of ownership. For consumers, this becomes not only a matter of spending, but also investing in brands. As such brand ownership is no longer the exclusive domain of the company, but one that is shared with all stakeholders. The concept of brand is, by design, a manifestation of the community which adopts it into their lifestyle. It means seeing the dissolution between brand and community, where “brand is community, and community is brand”.
When extending the notion of brand ownership to consumers and community members, it’s useful to think about the relationship between a consumer and a brand in ‘possessive’ terms: a state in which consumers have possessive feelings towards a brand, as well as having feelings of control over the brand. In other words, consumers consider the brand as “theirs” because they feel they own this brand through sentiments of belonging, possession, dependence and accountability.
BELONGING: being part of something bigger, through joining in shared consumption of a brand or identifying with like-minded community members POSSESSION: considering a brand as part of extended self, making it personal and claiming the brand as ‘my brand’ DEPENDENCE: relying on the brand to satisfy personal needs and trusting the brand to get ‘the job done’ ACCOUNTABILITY: being in a position to nurture, care for, and protect the brand
DAOs are a way for brands to formalise this ownership and sense of possession by mapping membership to governance rights and where applicable to real financial equity. DAOs offer brands an opportunity to turn groups of loyal customers into contributing brand agents and advocates. Through applying governance rights to DAO membership and tokens, members’ votes can steer the brand community’s mission and drive brand activities, with members actively partaking in the development of the brand. Like traditional stocks, DAO tokens can also represent a stake in the brand or company’s value and as such brand fans can earn and buy ‘stocks’ in brands they have an affinity for with the option to share in the upside or a cut of future earnings.
Unlike traditional stocks however, these tokens can unlock additional privileges and benefits for fans. As these tokens are programmable and composable, they can give access to holder-only exclusives and allow holders to participate in decision making. This is made possible with pre-defined rules that outline how the community can vote and how decisions will ultimately be made. Governance can range from deciding on the brand DAO’s mission and core activities, managing and curating the collective assets held by the DAO’s treasury, to specifying member reputation and reward mechanisms.
For brands, transitioning community engagement towards DAO governance can be complicated, raising challenging questions around ongoing development, voter participation, and incentive alignment between stakeholders. Hence many brands may consider a hybrid DAO model in which the brand retains control of high-stake or time-sensitive business decisions, with DAOs making decisions (through voting) regarding other aspects of the brand. In this way, companies would not delegate full control, but they would gain the best of both worlds, benefiting from member contributions while continuing to build community, brand loyalty and healthy returns.
Brands will need to rely on a set or stack of tools to build and operate their respective DAOs. They can approach this bottom-up and combine web2 and web3 solutions to support the various pieces of the DAO puzzle, from chat (eg. Discord) and forum (eg. Discourse) to project management (eg. Notion) and governance (eg. Colony). However, integration complexity and user experience challenges will likely push brands to consider all-in-one fit-for-purpose DAO stacks like upsideDAO. The upsideDAO is an on-chain, community collaboration platform that enables private companies to transform their brand communities into DAOs and reward individuals with tokenised ownership.
The DAO-ification of community facilitates meaningful collaborative work, continuous feedback, and a closer relationship between brands and communities. Distributing tokenised ownership and governance transforms community members into vested and passionate ambassadors and contributors. With some of the key levers of building and activating brands transitioning over to brand communities and DAOs, brand ownership becomes a collective asset, shared across all contributing stakeholders.
“There’s nothing more authentic and effective than helping sell something you genuinely love and own.”