How to create sustainable growth in the metaverse
The commercial opportunities offered by the Metaverse are potentially game-changing, with initial estimates saying the Metaverse is likely to be an $8 trillion to $13 trillion opportunity by 2030 — across all sectors and industries. The challenge? capturing this value. For executives considering getting started, experts from Simon-Kucher & Partners outline the steps to take advantage of the Metaverse opportunity.
While the concept of the metaverse has existed since the 1960s and the term was coined in a 1992 science fiction novel, advances in technology such as virtual and augmented reality, internet connectivity, and blockchain have only recently allowed people to imagine how so could look like a metaverse.
There is no standard definition of what the metaverse is, and much remains unclear about where the metaverse leads. However, there are some important—and widely accepted—characteristics of what defines a metaverse.
Proponents of the emerging physical-digital technology believe the metaverse has the potential to transform how the world and society works.
From a commercial perspective, the Metaverse will create new products, new business models, and new sales, marketing, and monetization approaches. It will expand the way organizations interact with consumers, improve the way they do business within their ecosystem and redefine how they build brands.
With high stakes, companies are wondering how to start and those who turn their heads risk falling behind the market. At Simon-Kucher & Partners, we have carved out our own view on how business leaders can create sustainable commercial growth in Metaverse and realize that potential.
Successfully laying the foundations for growth in the Metaverse requires clarity and flexibility across all commercial growth levers.
1) Dynamic Metaverse Strategies
Business models are transformed, expanded, and reshuffled as the Metaverse evolves. We’re already seeing signs of these shifts across a variety of industries. The music industry, for example, will soon need to consider how digital property creators will change their future monetization model – having just experienced a significant shift from CDs to digital music and streaming.
Those companies that take the plunge and decide to explore the metaverse will thrive by tying their overall corporate vision and brand identity to clearly defined use case opportunities. As technology continues to evolve, organizations must align their existing physical world strategies with the future dynamics of the virtual world to create a holistic strategic roadmap.
Business leaders must systematically define what impact the metaverse expects on their business, what opportunities and risks they face, and how they want to position themselves in the short and long term.
In the short term, we expect most brands will focus on building a presence in the Metaverse to support and promote sales of existing products. Longer-term success is achieved through strategic penetration into new virtual offerings, markets and business models, as well as exploring NFTs and other tokenized assets and services.
Three questions for your strategy team to start the conversation:
- Why do we want to be part of the metaverse?
What does it mean for us and our business?
What are the opportunities and what are the risks?
2) Integrated Metaverse sales
The Metaverse will streamline the way we make sales. The way to the customer is becoming increasingly phygital – which accelerates the trend towards physical and digital touchpoints through virtual connections. Online communities will expand traditional sales approaches and enable teams to create new sales models and channels for both existing (physical and digital) and future virtual offerings.
Being able to reach prospects in new places and through new channels enables sales teams to deliver better and more holistic selling experiences with better outcomes. The ability to engage with audiences in more immersive environments also enables sales teams to build stronger relationships and communities with people through common themes, passions, or pain points.
Classic trade shows can become virtual events, fashion players can explore virtual fittings via AR and VR, and machine manufacturers can showcase their products in fully remote but immersive environments.
These types of initiatives will enable the Metaverse as a significant distribution channel for existing portfolios. In parallel, and as companies expand their offerings to include new virtual Metaverse products and services, new sales approaches will emerge. Mint allow list raffles or airdrops of virtual goods as a reward for product usage are already common practice across the emerging NFT ecosystem, and skills to assess and execute such sales approaches need to be developed.
Three questions for your sales team to explore Metaverse growth opportunities:
- What role will the Metaverse play in our omnichannel sales strategy?
How will we use the Metaverse to drive sales of our existing products?
What will be our sales approach for virtual goods and metaverse products?
3) Immersive Metaverse Marketing
New channels, immersive formats, engaged audiences: there will be significant opportunities to engage and market to customers across all elements of the marketing funnel, both by expanding current marketing practices and by creating entirely new marketing formats.
For example, developments in extended and augmented reality will increase the convergence of digital and physical marketing practices. Approaches previously reserved for digital environments—like deep targeting and personalized messaging—will spill over into physical environments, powered by AR layering. Entirely new virtual marketing formats are likely to emerge, replicating or revolutionizing current marketing practices.
We already see many brands from different industries implementing innovative marketing approaches in virtual environments. For example, Hyundai has launched a mobility adventure in Roblox where users can learn about and experience their mobility offerings. Similarly, Gucci created an interactive virtual exhibition in which initially neutral avatars absorb components of the exhibition spaces through which they travel.
B2B players like Cisco have already shifted some of their trade marketing to virtual conferencing environments. These are just a few examples of many that will emerge as the metaverse develops.
Additionally, NFTs and tokens will enable brands to rethink customer loyalty, brand engagement and retention practices by turning customers into stakeholders and communities. In the long term, these new marketing approaches will most likely be relevant to all customer segments. In the short term, they will be especially strong at reaching younger generations.
Gen Z already spends or plans to spend a lot of time in the Metaverse, and using the Metaverse as a channel will be an effective way to market to this demographic.
Three questions for your marketing team to build engaged communities:
- In which virtual environments do we want to communicate?
How can we create meaningful communities around our products?
How can we use digital assets to drive awareness and loyalty?
4) Innovative Metaverse monetization
Two major metaverse streams of influence will alter, expand, and potentially disrupt current models of monetization: increasing digital connectivity and Web 3.0 ownership paradigms.
First, the increasing convergence between the physical and digital worlds will reinforce current trends towards more innovative pricing models. Better connectivity and digital integration of physical products will allow more companies to move away from a simple one-time purchase of their products and explore new monetization models that are more closely tied to the value provided – such as: B. Usage or data-based pricing.
This novel monetization mechanic doesn’t just apply to existing products. Players will also be able to create new revenue streams and business models enabled by better digital/physical integrations (e.g. data monetization).
Second, Web 3.0 ownership paradigms and tokenization will result in significant changes to existing monetization models. Tokens and royalties will shape and drive business models for virtual goods. NFT memberships could replace or extend subscription models while incentivizing co-development of products and services.
Additionally, token-based business models will transform how marketplaces work and how they capture and distribute value, from buyers to sellers to platform providers.
Players can benefit greatly from the innovative monetization approaches made possible by the Metaverse. Those who build on the opportunities while successfully managing new price dynamics relative to existing monetization approaches, existing channels and existing currencies will unlock significant growth opportunities.
Started
As more use cases are created and the technology becomes more accessible, the Metaverse is becoming a major revenue stream for many individuals, brands, and developers who understand the growth opportunities it offers. Increased adoption will drive growth and create value for everyone involved — including the developers building on it, the brands monetizing it, and the users participating in it.
Businesses should start by exploring and implementing the building blocks for a metaverse strategy. At Simon-Kucher & Partners we propose a six-step approach:
- scan
The starting point is an examination of basic strategic parameters, potential use cases and ideas for potential metaverse applications. - Prioritize
From a long list of ideas, the identification of commercial potential, technological and environmental requirements, and feasibility drives the creation of the shortlist. - Relay a message
Creating organizational consensus on strategic direction and initial use cases is critical to move from decision to development. - draft
Once the alignment is created, selected sales, marketing, and pricing use cases should be designed and iterated. - pilot
Initial experiences with Metaverse applications should be piloted, reviewed and integrated to create organizational insights and improve strategic parameters. - scale
Use cases that have undergone pilot and iteration phases should be scaled to transition from short-term to long-term growth.