Adam Brotman, co-founder of Forum3 and James Costa, founder of Clubhouse Archives, participated in The Mint Condition podcast on January 25, 2023.
It was a brilliant conversation around consumer loyalty and engagement, and how Web3 and NFC technology are going to revolutionize how brands interact with the community.
Here below we transcripted the highlights of that conversation:
Bunchu - The Mint Condition Host:
All right, let's get into it. Today. I wanna start with James because, um, you know, our audience, some, has some crossover with Coffee with Captain. So many of you may know James and Clubhouse Archives, but some of you do not. So I definitely want to start by having James introduce himself. James, tell us who you are, what your background is, and what Clubhouse Archives is doing in the space, and let's start there.
Awesome. James Costa here. I have been in apparel now for 23 years and that was designing, developing, and producing men's and women's collections primarily. A little bit of technology in there. I owned a trade show in apparel for a brief stint and then I got into Web3 about two years ago. I think the first week of February will actually be my two-year anniversary in crypto. Fortunately, I was able to benefit from that, but when I got on the web3, I saw an opportunity to extend my expertise and experience into the space, really to initially kind of provide a crypto native brand that I thought was missing from the space.
But I started to notice the need for kind of a B2B there, there was a B2B business in there that I was trying to uncover and understand better. So we, myself, and a couple of partners created Clubhouse Archives really with a crypto-native brand in mind.
We started to notice a lot of tech companies that didn't really have the experience or knowledge or network to create merch in the way that they wanted to for their communities. So that was kind of the initial basis for Clubhouse Archives. Now it's, it's evolved, um, really tremendously since then.
Awesome. So I just wanted to lay the groundwork with who you are, what you're doing here…And Adam, obviously you've been a guest on this show before, as James has. So you're a returning guest of the show, a friend of the show as we say, but for those who may not have heard of you before or what you're up to in the space, introduce yourself. Tell us who you are, and what we're doing at Forum3, and let's start from there.
Sure. I am somebody who's been in the loyalty and digital space in the Web1 and Web2 worlds for a long time.
I was the Chief Digital Officer at Starbucks for about a decade. Worked at J Crew and starting in the very beginning of 2021 my good friend Andy Sack got me red-pilled on blockchain and Web3. And I started going down that path. That's when I met you, Joe, not shortly thereafter, and then we, we formed Forum3, and I'm skipping a lot here, but the bottom line is like, we're pretty passionate about the concept of community, ownership, gamification, and storytelling that you see very prevalent in Web3, those are the core ingredients in our opinion to brands essentially making a successful transition into the next generation of loyalty.
And we think that consumers are itching for more of an emotional connection to their favorite brands and vice versa. So we've formed Forum3 you and me and Andy in the summer of 2021. We've been fortunate enough to have a combination of consulting services, we're building a platform and Starbucks is one of our primary customers or clients, I guess you'd say.
And we're really hoping that Odyssey can be a great case study for other brands that are out there. So that's me in a nutshell.
Awesome. James. I wanna go back to what Adam said, just about these thoughts on loyalty and web3 versus your initial insights that have shown you where this technology fits in bridging gaps between the real world and the digital.
Yeah, that's actually a great question and leads to building off of what Adam said.
So from day one, I was always enamored by the technology itself. And I mean that very sincerely Web 3 captivated me for what it is, what it was before, and, what it will be in the future for many industries, right? And I say that because as I started to understand smart contracts, as I started to peel back all of the onion layers on things like royalties and utility, I really started to understand that this was gonna fundamentally change, be a paradigm shift, if you will, in almost every industry that it touches.
It just needs the spark of interest from the individuals within that industry and whatever that vertical may be, to understand how it can benefit the end user, the consumer, to enhance the experience. So I started with that connection between the physical and the digital. And I always wanted that to be what we did. I was never a digital-only maxi, I guess because I spent 23 years in the physical world. So I think that that probably put me in the position to say “digital and physical”.
I'm not a big fan of the term “phygital” but that's what a lot of people seem to use, at Clubhouse Archives we call this merge between physical and digital “Garmints”, but the point is I wanted that connection. And when I learned about NFC chips, I started to realize that that was the bridge that would really create the opportunity for a true experience.
A lot of brands in the apparel industry for many years have been saying “buy into our brand because it's an experience” myself included and, I could even call BS on myself on that now because looking back you realize that that just wasn't the case.
The experience extended to the materials, there was tangible intimacy there, as I always like to say, because you could feel the quality and the craftsmanship. But within NSC chip, you can really provide an extended experience in a way that we've just never had the ability to do because you can allow the customer to immerse themselves in the brand. And I think that that's really cool because it's literally connected to the product. It allows us to have what we would call zero-party or one-party data. And you're gonna hear a lot of that in the future. Be prepared to hear less of second and third-party data and more about zero-party and first-party data because that is the connection directly to the consumer and the consumer's actions.
Two things to jump on there. I think one, for anybody who doesn't know what NFC chip technology does, if you could explain that quickly and then how it kind of ties into NFTs and like what the actual connection is there, how does it work and why is it important? And then two. Maybe explain a little bit more about the zero-party versus third-party data. Cause I think that's important as this conversation goes too.
When I say NFC chips, it's a Nearfield Communication Chip. It's been around for 20-plus years now. Dry cleaners have always used them. It's that R F I D technology that we all know about.
You've got credit cards in your wallet that use tech, very similar to this tap-to-go, tap-to-pay technology. But it's a chip that really just is a conduit to data, right? So if you create a digital asset, like an NFT and you program the chip to be connected to that through software, you can then scan that chip and pull up the data of the digital asset that it's connected to…in this case, an NFT, right? And where that becomes interesting is all of the metadata that's associated with that, including provenance data and origin data, right? So it's not just ownership or authenticity, but if you talk about a physical product, you can start to get supply chain data.
So, you know, sustainability is a big, big push in, in apparel. All of that data can be there all the way back to literally the cotton, and the fields that it came from. Right?
To your second question, second and third-party data are for example emails and phone numbers that get passed around from company to company, data that you can buy easily, and then market to individuals through things like social media platforms.
That's your typical second and third-party data. When we talk about zero and first-party data, it's a direct connection with the consumer. With this NFC chip, we know the consumer owns that product and you can create that direct relationship, not only with them but with their actions.
Right? And that gets really interesting because it's the actions of the product, not just my email that exists in a multitude of places, but literally down to the singular product and the consumer that owns it. And I think that's why I'm so bullish on this technology. It's because there's a massive decline in second and third-party data channels.
And marketers are finding a massive need now for zero and first-party data, as kind of a new frontier.
Totally. And it actually leads me into where I wanna go with Adam next, which is, Adam, we just heard James kind of talk about all these awesome things. We heard about immersion inside a brand. We heard zero-party data, we heard all of these things. How do you think about those things in terms of next-generation loyalty or what we talk about at Forum3, experiential loyalty, which I think is really kind of connected to what James is saying there.
I'm excited about Forum3 and Clubhouse working together now on different cool ideas that we can't get into publicly. But the reason why it's so relevant to loyalty is that, if we're gonna change the game and improve the loyalty experience to be centered on things like ownership and collecting and storytelling, then you could essentially merge a physical item that's programmable to what James was saying with digital collectibles, with storytelling and ownership.
I think collecting is interesting and storytelling is interesting across physical and digital. So why not allow a direct connection between physical items, digital storytelling, and digital ownership combined with physical ownership. So when I look at the future, some of the things that James was just talking about remind me of a story about how at Starbucks, we used to have all these incredible collectible limited edition Starbucks cards. People would activate them at the stores, they might connect them to their account, or they might not, but ultimately they were just sitting in drawers somewhere in somebody's wallet or something like that.
I love this idea of taking something that's physically a collectible that also has some storytelling and sort of digital connectivity to the original point of why you even created it and what story you want to tell. And I think that's, that is the future of loyalty.
I think the future of loyalty is about those things, not just about spending on coupons. So if you're gonna start playing with those concepts, I don't think you should exclude physical. I love the idea of the NFC chip and I love the idea of connecting the physical to the digital. So that's why we're excited about what James is doing and how he sees the world and frankly, I am learning from him. Because I do think it ties into experiential loyalty and the things that we're excited about at Forum3.
James, what are the loyalty use cases here for you when you are talking about rewards and how NFC chips work, what are the best things that you've seen so far, and what you can think about?
I'm not sure what to say and what not to say. So I will say, I think there's a really interesting set of use cases when you start to think about what brands can do with an en engagement-enabled or loyalty-enabled product. Right? Think about the interaction of scanning an NFT chip and having that activate content that provides either an immersive experience, or provides product knowledge, or for instance, can drive traffic to locations, for example.
Whereas then if you can provide proof that you've been at a specific place, just by scanning the product, that's an opportunity. Right now you are becoming part of a loyalty-driven program. That is very engaging, right?
I look at that kind of thing as gamification. It's a, it's a weird way to say it, but it really is. Right? Why do we make the consumer wear our shirt?
Couldn't they just have the same engagement with location services on their phone without the shirt? I actually think all things you're saying are, are spot on that like there's something kind of magical and interesting about like, no, you gotta wear the product or you gotta have the product on when other people interact with you or you go to this place. And I also feel like there's a surface area for brands and projects and creators to say, I'm gonna create some fun kind of journey building and activities and quests around how I want this to go.
I like this gamified world and it just makes life more enjoyable in some ways, and it may seem silly, but I think doing that with merchandise to prove things, to unlock things to connect with other people, that extra step is kind of like a step in a game.
And I, I think that that's something that's also pretty cool about what you're doing and the opportunity and how it relates to loyalty. Cuz loyalty is a game. Loyalty is some sort of a game that you're doing with your customers or your fan base to basically say, okay, if I do this, and if you do that, then this thing will happen.
It's very much like game programming, but you're just doing it around what's fun and interesting, and rewarding to a particular customer and how that customer base engages with the brand. NFC chips, content unlocks, programmable, physical, digital overlay. We barely scratched the surface of what people are gonna do with that, and so I think it's totally related to loyalty.
I think about what's so important to web3, which is the feeling of community. And we always talk about who's building a community in the right way. Or, we say “they didn't get the community down” and there's something about this shared community aspect of merch or merchandise or having something physical, right? Like I couldn't identify you on the street if I'm just using location services on my phone.
You see tweets about “I wore my Bored hoodie to the airport, no one said anything. We're still early, right?” But you walk down the street and you see people wearing the same team logo as you and there's au automatically some kind of community there.
So I think there is something fun about the actual physical merchandise of it all. And then when you take that and you tie it to a digital asset that's provable, programmable, all of those things, then there's something extra special there. And this idea of real-life questing almost is really interesting.
We've seen this phenomenon with Pokemon Go, for example.
Now, you have an NFC chip in your pocket, that is the drawing factor. It makes it fun. And when you're talking about loyalty, like you said, Adam, it's a game. It's meant to be fun. And I think what NFTs can bring to that is fun, right? I'd love your opinion for those who haven't heard it on why you think NFTs and Web3 are such an unlock for loyalty.
I was thinking about this today, it's like when you think about Uber: they're not like a mobile company or a location services company, but there was that magic ingredient of what mobile and location services did to enable a new type of transportation paradigm in Uber.
When I think about NFTs in web3, I think about how ownership changes the experience. I think about how it's one thing to have gamification and storytelling and community. You know, when you add the element of ownership and collectibility into the experience of loyalty, it's like a magical ingredient that allows consumers and brands to have more of an emotional game, connection. They can play around with whatever the loyalty construct is and whatever the engagement construct is. It's not the technical element of ownership that matters. In fact, I think the technical element of ownership right now is getting in the way, but it's the feeling of ownership.
There's utility and there's the community and I get to kind of control my game piece here, which is my NFT. It's also a digital asset. It might have an emotional connection to me cuz it's got art and collectibility. That combination to me is that magical ingredient for the next generation of loyalty.
And that's what gets me excited. So it's more of a feeling and a construct that Web3 enables than the technical aspect of it. But you have gotta have the technology to go with the feeling. And that to me is the why. I think NFTs and digital collectibles and this whole kind of space that we all think about every day is gonna end up being a game changer for loyalty for brands.
James, anything to add on top of that?
Yeah, a couple of things from even before, when Adam started talking about gamification, it reminded me of a bit of a parable of Robinhood. It was wildly successful at generating a huge trend in retail investors because it gamified the experience of investing: If you can gamify the experience, you're gonna have a higher level of engagement.
And it doesn't have to be children, right? Everyone finds pleasure and the ability to easily engage in something. And if it feels gamified, it'll be more highly engaged. And I think that that's critically important for us to understand why we're so bullish on this technology.
It's kind of gamifying that loyalty experience in a way that it hasn't been in the past. And that's intriguing. And the other thing that you were mentioning, if you see someone walking down the street, that's a perfect example. And I'm, I'm starting to use this example more and more.
If I ever saw someone walking down the street in a Nike-branded product today, right? I'm probably not high-fiving them. However, if you provide the opportunity with these chips to say, if you go engage with that person, you'll gain from that.
There is a whole other reason for me to recognize a brand and then go engage because I'm now gaining from that experience. So it does become a social engagement tool in that way. If it is a product that has a logo, you're now incentivizing the individual to wear that to gain that recognition, and you can actually place a higher value of loyalty on that because they're advertising for you.