Emerging micro-economy, branded currency and the future money
Nike enters into the branded currency market with its latest marketing strategy in association with JWT Mexico. The campaign, designed to excite the segment of sports aficionados and runners. They can earn bidding points by stretching their running distance. The distance covered is being accumulated using the Nike+ iPhone application. Runners bid using these points to purchase Nike products from their auction site, that’s why the campaign is called “BID YOUR SWEAT”.
For the likes of Nike, many big brands have come up with their own branded currencies. Some of the major brands who have launched their own branded currencies include Amazon, Starbucks, and Vodafone. The preference of market giants for branded money is not just a coincidence. In a global survey carried out by Edelman (according to the survey only 50% of people have trust in Banks, whereas 77% people have shown their trust in new and evolving technologies) results suggest that consumers are losing trust in banking institutions, whereas it was found that they have absolute faith on technology. The trust of users in newer technology is also evident when we take the example of Bitcoin (a crypto-currency). The Bitcoin price increased by over 6000 percent in 2013, and many developers, entrepreneurs, and investors have started taking interest in crypto currencies. More and more people have started believing in them and are able to foresee opportunities that are contained within.
It is surprising both how and why institutions like Banks have lost their reputation. Paul Kemp-Robertson, the co-founder and editorial director at Contagious Communications, gave a TED Talk in June 2013. He believed that “reputations are built on trust, consistency, and transparency”. The putrefying reputation of banks has been aided by branded and crypto currencies gaining in faith amongst users.
According to Kemp-Robertson “So if you’ve actually decided that you trust a brand, you want a relationship, you want to engage with the brand, you’re already kind of participating in lots of new forms of currency.” Being one of the most trustworthy brands in the industry, it won’t be difficult for Nike to build up trust amongst consumers, which is required for the campaign. As there is an active participation required by the user, so a complete transparency is being maintained through the Nike+ application, which comes as an added plus. The boom in the mobile app industry has also played an important role. As users are getting more and more exposed to in-app payments, discount coupons, credit points and the never ending pool of new and high-end applications, they are actually demonstrating their trust in the brands. Nike+ app on iPhone capitalizes on that trust by embedding their monitoring technology in an application. These behaviours guarantee repeat purchase and strong brand loyalty.
So, can we say that change is not so far away, maybe? But we are certainly moving in that direction. From one Bitcoin company in 2009 to over 500 companies today, the number is showing a constant upsurge. The increase in crypto currency market cap and new companies coming in looks impressive. Therefore, it is not hard to believe that companies like Pinterest, WordPress, Subway, Victoria’s Secret and many more have started accepting Bitcoin as currency, and that industry giants like Amazon, Vodafone, Nike have come up with their own concepts of virtual currency. With the constant acceptance by consumers and complemented by dynamic and ever evolving technology, the future of branded currency looks prodigious. And with the interest shown by the big players, this gives it a robust footing to enable the market to mature more rapidly.
Though crypto currency is legal in most countries (except Iceland) and provides a transparent platform, the industry has its own share of damaging instances. In one of such instance where Mt. Gox declared bankruptcy after losing $473 million of their customer’s Bitcoin due to, supposedly, theft. In addition to that it is difficult to track the crypto currencies, which increases the chances of fraud. To regulate the industry, countries are enforcing conditions which can minimize losses. In Russia, though crypto currency is legal, it is illegal to buy goods using them. Also, crypto currency is treated as property for taxation purposes, so that means these currencies will be subject to capital gains tax.
Does this mean there are chances that similar currencies will grow as a result of Nike? Bitcoin and other branded currencies are placed on the same platform; however the risk in branded currency will be less compared to Bitcoin. This is primarily due to the fact that branded currencies are backed by reputed brands and do not involve massive transactions. These currencies are traded when needed. On top of that, the Nike campaign does not include any money transactions; therefore there are no eventualities which can have such a damaging outcome compared to when actual money is concerned.