How companies can use Brand Tokens to increase profit
Use Case for brand tokens for a language school franchise.
We recently got an interesting inquiry from an owner of a language school franchise based in the UK. The question was quite obvious: ‘How can my school benefit from joining Brand Tokens? Is it even appropriate for schools? How will that help me get my students to stay with us, while there are so many other language schools around?’. There are some factors affecting the way brands should organize token distribution systems, once they already join our platform. There are even more ways to benefit from it, too. Based on the given case we would like to share some tips on how to make the most out of Brand Tokens service.
‘First of all, we have to admit this is a great case to picture how brand tokens can be used’ says Szczepan Bentyn, a co-owner of Brand Tokens. ‘I will frankly describe methodology behind the token usage system development, and then describe how it could be used by a language school. Of course I don’t know the business model of language schools in detail, therefore some points may be unsuitable in this case. I’m sure brands can figure out their own ways of token system application thanks to given methodology, though’.
There are three main rules we need to take into consideration while implementing a system of token distribution:
1. Supply = demand
Brand tokens should generally be distributed in quantities that meet the market’s demand — and the other way around. Brands should avoid giving too many tokens away and offering unattractive services or rewards in exchange, since that usually causes a decrease in demand. In case of a drop in the market value, a marketing value of the token goes down accordingly. Therefore the demand of one’s tokens should ideally slightly exceed the supply, which will result in a stable raise of the token’s market value. It’s safe to assume at the beginning, to give away as little tokens as possible.
2. Determining the goal
Most of the companies aim mainly at a raise in sales, meaning their goal is a raise in profit. Therefore while defining channels of token distribution brands should focus mostly on the ones with the highest conversion rates. For example, if a brand’s most effective channel of customer acquisition is Facebook Ads, it’s worth considering increasing its performance even more through token-related actions (ex. ‘Sign up and get 100 tokens now’). For other companies the goal can be to retain customer attention, so Netflix for example could use tokens as a reward for each hour spent watching movies.
3. Value for value — nothing is free
Brands should definitely avoid giving tokens away and not getting anything in exchange. ‘Free’ tokens are usually perceived as worthless. The greater the effort made to obtain the token, the more valuable it seems to a user. That doesn’t mean they should be too difficult to get, though — quite the opposite, actually. A lot of small, easy-to-do tasks can be demanded from users in exchange for tokens, like sharing their personal data or sharing the content of the brand. The main rule here is that if the brand rewards a user with tokens, they get something in exchange — desirably something that translates into a raise in sales.
Case study — a chain of language schools
Let’s see how the aforementioned rules can be used by the language schools chain. A business model of this school is based on language courses with monthly fee or per course settlement; the school offers also trial classes for a one-time payment. Additional profit can be made from selling language books and study materials.
Let’s take a look at the demand, supply and company’s aim in this case:
1. Supply and target:
The school’s aim is to increase sales in courses. Their token distribution channels should then be the ones that generate leads and have a high conversion rate. To boost these values the school can reward potential customers for:
- signing up to a course — this is the most valuable action for the school, hence the reward should be the highest;
- extending the course for the next semester — to avoid students changing schools after finishing the course, the school can reward students for continuing to study in the same school;
- signing up to a newsletter or providing contact information — this will increase the school’s potential customers base;
- signing up to a trial lesson — it may significantly increase the conversion rate;
- completing a competency test — many schools conduct the tests to check the level of students’ language;
- recommending the school to other students — referral systems can be very beneficial.
Some activities can also affect the brand awareness and profit, even though not directly related to sales:
- rewarding teachers for high notes from students,
- rewarding students for participation in language competitions,
- giving tokens for social media activities, such as sharing school’s posts,
- rewarding for rating the school on Google or Facebook,
- rewarding for reading the newsletter,
- token giveaways conducted by cooperating brands from non-competing fields (ex. a nearby coffee shop adding school’s tokens to every order as a special promo offer),
- token payments to other subjects, such as marketing agencies, in exchange for promotion.
In this case the demand can be defined as a value given to students in exchange for previously earned tokens — so for the school it is a way to get their tokens back from the market. Through Brand Tokens platform brands can easily ‘sell’ products and services for their own tokens. They will be available for purchase directly through the mobile application, worldwide, and instantly.
One of many benefits from tokenization is the fact that the demand for language school’s tokens can be both internal and external. Clients rewarded with tokens can exchange them directly for school’s offers, which creates an internal demand. However, these tokens can also be traded or bought at an attractive price by other people on the market, and spent on the school’s courses — this is what we call the external demand. That is why the school should consider offering services and products attractive not only for their existing customers, but also for the potential ones. These may include:
- language courses,
- trial classes,
- custom classes,
- individual courses,
- audits and proofreading.
The wider the range of offered services, the more options the school has to attract a potential customer. Because of the fact that tokens are exchangeable, brands can also create chains of service for their customers. Students attending the language course can get discounts for taxi rides, free coffee at a nearby coffee shop, or VIP lounge access at the airport — all bought by the school’s tokens. Apart from products and services of other brands, school’s tokens can also be exchanged for cash or cryptocurrencies, so they can become a form of an investment for older students or their parents. Offering a wide range of services obtained from many different subjects, the school gives their students unique value, which can be an important competitive advantage in times of high market saturation.
There is one more thing every company should consider when launching their token — the profit margin. It is necessary to calculate what can be offered for the tokens, and how to estimate their value. Ideally clients should be able to buy any product or service the company normally offers, paying with tokens. However, this may be impossible if the profit margin is too low. For that reason services and products with the biggest profit margin should be offered primarily. For example, let’s say the school can afford to make every tenth lesson free for a student. They could reward the student with a free course after attending 9 courses, for the tokens previously earned on these 9 courses. The value distributed by the brand is then equal to the market value of their token. In other words, if one token is worth $1 on the market, the cost of one token for the school is also $1. This is the price that the services and products offered by the school through Brand Tokens platform should be worth.
The language school that will implement the token rewards will see a significant increase in engagement and sales. Its customers will feel greatly appreciated, as they get cash-like rewards that can be easily converted into other products, services or cash. This will make them more willing to promote or refer the brand to their friends and family — especially that they can benefit from it. Tokens can also help build a community around the brand. Furthermore, by aggregating data about token holding brands can know right away which students are the most engaged and improve upon their feedback, providing a better service. Through tokens teachers can also be incentivised to improve their lessons and make their jod feel more rewarding.
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