Constructing the µniverse (Part 8)

Written from a future viewpoint…

DAO vs Duo

With the attention problem solved, it was time to move on to two other challenges faced by brands – repeat purchases (loyalty) and the rapidly increasing cost of new customer acquisition. MuDAO’s tokens offered the answer, and in doing so, upended the adtech world.

A bit of history is in order to better understand loyalty and adtech. Brands came up with loyalty programs for the twin purposes of collecting data and driving repeat purchases. The airline frequent flyer programs were the most successful among loyalty programs – because the differential between cost and value was very high. (A free ticket based on miles that we treasure costs the airline practically nothing.) The flip side of the proliferation of loyalty programs was that it became impossible for customers to track their points, and in many cases, the points earned were too small to be meaningfully redeemed. What was needed was a pan-brand loyalty program, but one which could not be used by any single entity to its advantage. For a brief period, airline loyalty programs played the role very well.

In the adtech world, Google and Facebook had established a powerful duopoly. Any new digital customer acquisition had to be driven via these two platforms. Their auction-based system ensured that bidding for popular keywords or targeting desirable customer segments drove prices higher. The “cost of a click” increasingly hurt profits as brands were forced to compete in a war that most could not win. Half of the adtech spends were wasted because of reacquisition and wrong acquisition, but brands had no alternative but to keep the spends going. The answer lay not in trying to optimise adtech spending but in solving the martech problem – deepening relationships with existing customers.

The solution to both the loyalty and adtech problems lay in the martech world. If a brand’s existing customers could pay attention to incoming messages, it would be much easier to drive repeat transactions thus solving the loyalty problems. If a brand’s most loyal customers (“Best Customers”) could refer their family and friends, the cost of new customer acquisition could be sharply reduced. What was needed was an incentive mechanism to enable brands to persuade customers for their time and network. This is where MuDAO with its tokens came in.

The attention and engagement tokens had no reason to be limited to just that; brands could incentivise transactions with them. The advantage of µ was that it worked across brands already, and there was an exchange where it could easily be purchased by brands. Consumers loved the tokens – the marketplace gave them spending options, and it also served as an investment that appreciated steadily.

The same hotline that brands had crafted for the upstream of transactions (attention and engagement) could now work to fast-track transactions with the tokens serving as the replacement for a brand’s own loyalty program. Customers were also selectively incentivised for referrals – a zero-cost method for new customer acquisition. The key for both these programs was switching budgets from adtech to martech. The 10% marketing budget spend on existing customers (martech) rapidly rose as the wasteful adtech spending was eliminated. In this switch, brands also discovered their path to profitability as the RoI for martech spending was much greater than that of adtech.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.