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."
Status rankings seem to be fundamental to humans' worldviews—and that's about feeling loved by something you've invested energy, time, or money in.
When JetBlue Airways was just starting out in the early 2000s, it didn't have a loyalty program. Instead, it offered a bevy of customer services that other airlines didn't consistently: Leather seats, customizable in-flight entertainment, snacks aplenty, cheap tickets, and consistently kind employees. That wasn't enough.
That lasted exactly two years before enough customer surveys mounted up begging for a frequent-flier program that the True Blue miles program was founded. "This is true with every industry. It's going from a nice-to-have to a must-have," Zichermann says. "It's a way for small companies to take advantage in their market vertical."
He posits that gamifying an aspect of your company could be more beneficial than was early-adopting social media. "How many more sales we get from our Twitter feed is still unclear to people," he says. "But as soon as you get someone hooked on your system versus someone else's, the harder it is to switch, and that's profits."
Any coupon-clipper or group deal-site aficionado knows that it feels pretty good to snag a deal the Joneses might not have spotted. Consider LevelUp, one of the newest group-deal websites. Its premise: Purchase a Groupon-like deal, say, $10 worth of ice cream at Toscanini's in Boston for $5. Instant win. After you purchase that deal, another is offered to you, perhaps 60 or 75 percent off ice cream from the same shop. Bonus point.
"It's kind of a re-molding of what was kind of a passive job of coupon clipping 40 years ago," says Samantha Skey, the chief revenue officer for Recyclebank, a business that works with communities build household incentives into recycling or saving energy. "It's an activist buyer who is gaming the system to get the best deal when she goes to buy those lemons. That consumer—and her desire to do the right thing and feel smart and get a good deal—is at the heart of what we do."
Recyclebank's business is to profit from cities actively processing less trash and doing more recycling, but go to its website, and it just looks like fun. "Earn points. Get rewards. Better the planet," it reads.
Dig Deeper: The Pros and Cons of Using Groupon
Rewarding Customers Through Gamification: Constantly Consider Your Customers' Motivation
In building a system to deliver rewards for your customers, it's important to consider first your goals. Are you primarily attempting to encourage brand loyalty—or are you trying to meet new customers? Are you trying to give customers something light and fun—or are you looking to amass more valuable customer data?
Next, consider within a system what specifically about your audience or customer base you can specifically reward. Simultaneously consider any aspects that could potentially turn them off. For example, if you're targeting a young audience of early adopters for whom sharing neat things or achievements with friends is natural, offer social-media sharing into your rewards system. But that might not work for everyone.
Brian Burke, the research vice president at Gartner, a global research firm that published a study on the expanding reach of gamification for companies, said that different people are motivated by different responses, so finding a good fit—particularly regarding social media and asking customers to disclose information—is key.
"There is some portion of the target audience that's likely to never engage because they find it creepy," he says. "Other segments of the population play games to develop relationships and find social interaction. Inherently, you're never going to reach 100 percent of the population."
Burke says his research into motivation and game-play, when conducting the study that determined that by 2015, 50 percent of companies that manage innovation and research will use gamification to drive innovation, he found that not all people play for the same reason. While he classified people into categories of explorers, achievers, and killers—those with an "I win, you lose" mentality—and those who play just for the social interaction. "There are some people out there who want no one else to know anything about them, and there are other people who want to push social interactions and foster bonds," Burke says.
For Games that Give, a company that builds Facebook games for brands, consumer-sharing is essential to a game's success. The goal for a Facebook game with heavy brand-integration is the same as any basic marketing: Eyeballs. So, going viral through heavy online sharing of scores, successes, and enjoyment of the game by players is key. But it's also a tricky thing to encourage.
"You really only have between five and 10 seconds to make an impression on people, so you use little tricks," says Adam Archer, one of the founders of Games that Give. "At what point do you ask people to share with their friends? They are most likely to share right after they've won something."
And sharing online might just be more valuable than word-of-mouth—because it's easy to track. But it's part of the same mission, Zichermann says.
"What you're trying to do with gamification as a business owner, is identify your most loyal fans, engage them to both generate more revenue for you and fire them up to become brand evangelists for you," Zichermann says.
Dig Deeper: The Power of Loyalty-Card Apps
Rewarding Customers Through Gamification: Don't Creep Out Your Customers
The danger of offending consumers' senses of privacy is a detail of which to remain consistently aware.
"With gamification, you have access to the underlying behavioral data in a massive-scale way. Instead of flying blind, you can know exactly what people are doing on your site," Smedresman says. "After you have that, this non-blindness of what people are doing, you can start manipulating that. That's gamification."
GroupMe might offer group chat today, but tomorrow, it might suggest places for active groups to go meet, and spend money, Jared Hecht, one of the company's founders, told Inc.com at SXSW.
"It means that people who have a vested interest in manipulated consumers' behavior are going to be a lot more sophisticated about that," Smedresman says. "It's going to be our jobs as consumers to be mindful as to when we're being exposed to these incentivisers."
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Rewarding Customers Through Gamification: Build in an Autonomous Feel-Good Aspect
With every consumer motivated by slightly different impulses and rewards, consider one of the most influential customer trends of the decade: Going green. Pushing customers toward feeling like they're doing good—either for themselves, or a greater cause—can be another powerful motivator. In the case of Recyclebank, it's lowering your electricity use or landing more of what comes into your house in packaging from the grocery store in your recycle bin.
"We've done side-by-side comparisons: If you integrate a socially responsible theme to the brand, you can see an increase by 40 percent in engagement—the time they spend in the game—over 40 percent in retention, and over 50 percent higher virality," Archer says. That means the user is more than 50 percent more likely to invite their friends to play, or, in other words, to become an ambassador for the brand.
While Games That Give develops entire autonomous game systems to represent a brand, Nissan has adopted just a few game mechanics for its Carwings, a system that keeps track of all of your car's fuel use, battery status, efficiency, and more. The program not only gives you feedback on your efficiency, but also puts your stats in competition with those of other Nissan Leaf drivers.
Is the big green pat on the back enough of a reward for your customers to continue interacting with a giving-back gamified system? Maybe not, says Skey of Recyclebank.
"I wish I could say the rewards are secondary, but I don't think they are yet," Skey says. With that in mind, Recyclebank rewards its users with grocery and goods coupons. "It would be great to get to the point where diminishing your footprint and increasing your eco-IQ was reward enough."
Dig Deeper: How to Encourage Your Customers to Do Good
Rewarding Customers Through Gamification: Additional Applications
If Burke and Gartner are correct, the corporate applications for these game-design tactics are going to go way beyond customer rewards. Consider, Burke suggests, that Michellin uses online alternate-reality portal Second Life as a training program for enterprise architects.
"I believe that employee performance in a company environment is a growing use," Burke says. "Companies are starting to—instead of using a training manual or holding quarterly reviews—move toward a social-networking environment for performance and performance feedback."
It's not too much of a stretch to imagine a system in which an employee is awarded a badge or points for a speedy and well-crafted response to a boss's e-mail. But what about a system that tracks employees' behaviors in order to quantify work completed? What about crowdsourcing research and development? What about incentivising word-of-mouth promotion? Countless applications abound, both inside the walls of a company and out.
Now that companies are thinking outside of credit-card color-schemes and flight miles as rewards, not even the virtual sky is a limit to what can be done in this space.
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