Your customers hoard airline miles and covet their status-symbol black American Express. What was once called "consumer incentives" is now known as "gamification"—and here's how to integrate it into your company and win consumers' hearts and minds while you're at it.
There's a green card. Then there's silver, gold, and platinum. And then there's the Centurion—the black American Express card. Which do you want in your wallet?
A handful of luxury brands have for decades used promises of status to encourage customers to spend more through loyalty to their brands. Today, brands of all stripes are experimenting with the psychology of status and power in rewarding customers. A generation raised on video games is wired to love incentives—and that doesn't just mean freebies.
Consider Foursquare, a company built entirely on a game-design model. Users earn badges—virtual reinforcing awards—for checking in at places they encounter when going about their daily life. As a bonus, they're alerted to money-saving deals nearby. Eight million people have downloaded the Foursquare app, and use it to check in. It is as if the company has tapped into airlines' frequent-flier rewards program possibilities—without itself offering a tangible reward.
The new rewards ecosystem is a marketer's dream. But the first thing to understand is that it's simply game mechanics at work. This strategy of applying game-design principles to things that aren't otherwise considered games has been dubbed "gamification." And the growing popularity of adopting gaming tactics—which are useful not only to encourage loyalty but also to gain metrics by which to track consumer behavior—means it's no longer just the realm of large companies with sizeable marketing budgets.
"Historically, customer engagement was something big brands did a lot better due to full scale loyalty programs," says Gabe Zichermann, a blogger who authored Game-Based Marketing and who hosts of the Gamification Summit. "That's because they had the budgets to do that. JPMorgan Chase can offer rewards miles, when your café on the corner can just do, say a buy-10-get-one-free card."
That's changing. Countless start-ups are incorporating game-design strategies, hoping to eventually grow revenue off of consumer data, or by using a combination of data plus game-mechanics to influence consumer behaviors. Here's how the experts suggest going about adding a game layer to your company.
Rewarding Customers Through Gamification: Why Game Mechanics?
People are hard-wired to enjoy positive reinforcement. And, well, play is fun.
Consider golf: Social interaction aside, why would anyone go to a course and attempt to hit a tiny ball into a far-away hole? "If we were thinking of standards of productivity, we would just invent a machine that stands over the hole and sort of shoots the balls into the hole," explained game designer Jane McGonigal, who studies the social and mental impact of gaming, at her South by Southwest Interactive festival keynote speech this year. "Instead, playing the game is something entirely different."
Gaming reinforces players through positive feelings generated by achievements, which are perceived through points, badges, discounts, or any award—tangible or not. Game mechanics are, simply, ways of generating those positive feelings.
"Foursquare was a really great early example of this happening," McGonigal says. Foursquare started this whole trend of making achievements and giving people badges for doing stuff."
Giving customers something positive encourages additional interaction with your brand, service, or product. For this very purpose, LinkedIn added a progress bar that documents user-profile completion. But that's not its sole purpose.
"Filling out your profile, that's a behavior LinkedIn wants to motivate. The progress bar is this total insight to your progress as a user," says game designer Gabe Smedresman, who designed the Facebook game Crazy Boat, and who is working on a social-interaction app called Meet Gatsby. "That taps an innate human desire to complete things, and not leave things undone. That's what games do—they are systems that give people pleasure."
For LinkedIn, the benefits are straightforward. Giving users even perceived achievements harnesses users motivation in a way that gives the company more loyal users who are more invested in the service. As a bonus, it collects more data on its users.
Dig Deeper: How to Measure Your Brand's Online Influence
Rewarding Customers Through Gamification: Status is Everything
Much of rewarding your best customers used to be done through giving them gifts, discounts, or freebies. Game mechanics are becoming so good at reinforcing customers that some experts are asking: Why reward customers by putting something free to them in their hands when so much of what feels good is in their heads?
"In the old view of things, we think, 'Well, if we do anything for our customers, we should just give them free stuff.' But free stuff is the old view," says Zichermann. "Now we know that status, access, and power are both easier to give and reward customers better."
Take the café on the corner Zichermann referenced earlier. What would happen if instead of giving customers a free coffee every now and then it made a priority lane for faster service to reward loyalty?
"It's not that free stuff isn't good, it's that the consumer can price the free stuff, eventually. They know that a coffee costs $2.00." Zichermann says. "They cannot put a value on status, access, and power benefits very well—and they tend to overestimate the value of these things."
