Gamification: Driving Engagement and Loyalty


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This article examines the underlying of gamification, explores how brands can utilize gamification to engage and motivate consumers and examines some examples of brands that are successfully utilizing gamification.

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Gamification: Driving Engagement and Loyalty

  1. 1. January 2014 By Michael Goodman Nexus Research Group Report Gamification: Driving Engagement and Loyalty Executive Summary In a world where consumer’s attention and loyalty are increasingly fragmented, brands are searching for new ways to engage with consumers, build loyalty, and ultimately drive sales. One method is through gamification, which is the use of game theory and game mechanics in a non-game context to engage and motivate consumers. Gamification incorporates principles from game design, psychology, marketing, economics, and strategy to create a powerful tool for engaging and motivating consumers. Though the term gamification is relatively new the concept and techniques have been around for decades. Early examples include prizes in boxes of Cracker Jacks and cereal boxes to entice young shoppers while later, more sophisticated efforts include airline frequent flyer programs or the American Express Platinum Card. Today, retailers and manufacturers such as Samsung (Samsung Nation), Pepsi (Foursquare/Pepsi Reward from SXSW 2011), Target (Virtual Currency, Rewards), and CVS (Extra Care Card) are using gamification techniques to engage and guide consumer impulses (see Exhibit 1). Exhibit 1 Gamification Examples Source: Google Images. 2013 Nexus Research Group has published this content for the sole use of Nexus Research Group and its clients. It may not be duplicated, reproduced or retransmitted in whole or in part without the express permission of Nexus Research Group. All rights reserved. All opinions and estimates herein constitute Nexus Research Group’s judgment as of this date and are subject to change without notice. © Copyright 2014. Nexus Research Group. All rights reserved.
  2. 2. Gamification: Driving Engagement and Loyalty January 2014 The remainder of this article examines how these underlying principles form the foundation for gamification, explore how brands can utilize gamification to engage and motivate consumers and explore some examples of brands that are successfully utilizing gamification. While gamification principles can be used in a variety of ways this POV will focus on their use in a marketing context. © Copyright 2014. Nexus Research Group. All rights reserved.
  3. 3. Gamification: Driving Engagement and Loyalty January 2014 Introduction Brands have always had to contend with the need to reach consumers through multiple forms of media – TV, Print, Radio, Internet etc., but this challenge is compounded by the ever increasing number of connected devices consumers can used to connect to media. According to the TVBs 2013 Infinite Dial Study, there are 256 million TV users in the U.S., 243 million radio users, 232 million Internet users of which 182 million are connected at home via broadband, 139 million smartphone users and 27 million tablet users (see Exhibit 2). At times it seems like trying to reach consumers is like searching for the provable needle in a haystack. Exhibit 2 Media Fragmentation Source: Infinite Dial 2013, TVB – TV Basics, Arbitron & RADAR Number of Users 300 256 Persons 2+ (in Millions) 250 230 243 232 223 200 182 178 139 150 2003 2013 100 33 50 27 NA NA 0 TV Radio Internet Home Smartphone Broadband Tablets Further compounding this issue is fragmentation within each medium. For example, television has seen an explosion in the number of options available to viewers. According to the Nielsen Company’s "Television Audience 2008", the average TV household received an average of 130.1 channels, of which they viewed 17.8 for 10 or more minutes per week. While it might not seem like TV households are view a significant number of available channels it is important to keep in mind that each households views different channels, resulting in a fragmented audience. This is evidenced by the continued erosion of broadcast network TV ratings over the years. Nor is the online world any better, examination of the top ten social networks shows an equally fragmented audience. While Facebook clearly dominates with an estimated 750 million unique monthly visitors, other social networks have very significant user bases as well. In addition, it is not uncommon for consumers to have accounts with multiple social networks. Also, the demographic composition of social networks can vary greatly. In a study conducted by the Pew Research Group in 2012, Pinterest was rank 4th overall based upon estimated unique monthly visitors but among teens 12-17, it fell to 8th place. In comparison, Instagram, which is not even ranked among the top ten social media networks in the Pew study, was the 3rd most popular social media network among teens 12-17. © Copyright 2014. Nexus Research Group. All rights reserved.
  4. 4. Gamification: Driving Engagement and Loyalty January 2014 Exhibit 2 Top Ten Social Networks Source: eBizMBA, Most Popular Social Networking Websites - October 2013 Top Ten Social Networks Facebook 750.0 Twitter 250.0 Linkedin 110.0 Pinterest 85.5 MySpace 70.5 Google+ 65.0 DeviantArt 25.5 LiveJournal Est. Unique Monthly Visitors 20.5 Tagged 19.5 Orkut 17.5 0 100 200 300 400 500 600 700 800 Est. Unique Monthly Visitors (in Millions) As a result of all this fragmentation, brands must to try to catch an increasingly elusive consumer, requiring them to attempt to engage consumers across multiple media types and platforms. To counter this fragmentation, brands need new ways to engage with and build a loyal customer base. One way to achieve this is through gamification. Gamification is not a game, nor is it an attempt to make everything into a game. Rather it is the application of game dynamics, game elements, and game mechanics to non-game experiences to motivate and drive a behavior. This might include building brand loyalty, increasing spend, driving consumers into a store, increasing website traffic, registering new users, or getting shoppers to write a product review or send an invite to a friend. While not a game, gamification techniques do utilize many key game principles – the most important being fun. Other principles include: Implied rules of play. A framework within which play is undertaken. A problem solving activity approach with a playful attitude . A balance of structure and exploration. Too much structure (rules) and the game is not fun, too open-ended and the game has no purpose. Criteria for success (winning) and failure (losing). Players must make meaningful choices. Involve learning or problem solving. At some level there has to be a challenge or problem to be overcome. Chance or randomness. © Copyright 2014. Nexus Research Group. All rights reserved.
  5. 5. Gamification: Driving Engagement and Loyalty January 2014 Growth of Gaming While gamification is not gaming they do share many core principles and gaming has seen tremendous growth over the past decade. No longer the domain of adolescent males, games are played by everyone (young, old, male, female) on a variety of devices (PCs, laptops, smartphones, tablets, video game consoles, handheld consoles, etc.). It is estimated that 2 out of 3 U.S. households are active in electronic games of some sort with over half the population between 18 and 49 playing some form of game once a week. According to the Entertainment Software Association 2012 Essential Facts Report: Consumers spent $24.75 billion on video games (physical and digital), hardware and accessories in 2011. The average gamer in the US is 30 years old and has been playing for 12 years. Sixty-eight percent of gamers are 18 years of age or older. Forty-seven percent of all gamers are women and women 18 years of age or older are one of the industry's fastest growing segments. Today, adult women represent a greater portion of the game-playing population (30%) than boys age 17 or younger (18%). Thirty-three percent of gamers play games on their smartphones, and 25% play games on their handheld device. Since the earliest days of video games, critics have been skeptical of them as a medium. But the reality is that their scale is enormous, with a potential reach rivaling that of television. But what makes video games so appealing? Chalk it up to basic human nature. Video games are designed with a structure and system of rules in which players will a) enjoy the process or journey, and b) create a sense of added value. A fun process coupled with a system for incentives or rewards for a job well done can become downright addictive. These same game-play mechanics that make games so addictive are slowly working their way into other applications. With "gamification," companies study and identify natural human tendencies and employ game-like mechanisms to give customers a sense that they're having fun while working towards a rewards-based goal. In doing so, they hope the added value will enable and reinforce positive behavioral change across a wide spectrum of non-game-related issues. Gamification techniques can be applied in a variety of ways (see Exhibit 3). External. The most common applications of gamification principles is in sales and marketing, where gamification techniques are being used to engage with consumers, drive awareness, build loyalty, and ultimately drive sales. In addition, gamification provides invaluable data for use in analytics and predictive modeling. Internal. Though external applications of gamification principals have garnered the majority of publicity internal applications to motivate employee behavior have also been successful. Target has applied gamification principals to its checkout process to motivate employees and speed up customer checkouts and has integrated leaderboards into its software. When using gamification principles internally, companies must take care to apply gamification techniques with care in order to not to de-motivate employees. Disney tried to motivate the uniformed laundry crew at its Paradise Pier hotels in Anaheim by installing big flat-screen monitors which displayed employees' work speeds compared to one another. The screen displayed the names of several coworkers at once, with "efficiency" numbers in green for those near or above 100% of the expected pace and red numbers for those who aren't as fast. This led to dissension and made employees worry that a reasonable pace won't be enough to keep the boss © Copyright 2014. Nexus Research Group. All rights reserved.
  6. 6. Gamification: Driving Engagement and Loyalty January 2014 happy. According to union officials, employees have been known to skip bathroom breaks out of fear that their production will fall and managers will demand an explanation. Disney laundry employees refer to the scoreboards as the “electronic whip.” Behavior Change. Gamification principles are even being used to enforce speed limits, encourage weight-loss and healthy lifestyles, and even assist in post-concussion treatments. Exhibit 3 Where Gamification Adds Value External • • • • Internal • Human Resources • Sales • Product Enhancement • Crowd Sourcing Behavior Change Marketing Sales Customer Engagement Loyalty • Health & Wellness • Sustainability • Personal Finance Examples of Gamification As noted previously, gamification is rapidly gaining acceptance across a wide range of industries. Noteworthy examples include the following: Xbox Live - Achievements, Leaderboards, Points Microsoft was an early adopter of gamification techniques when they introduced achievements. Gamers earn achievements by completing specific tasks or actions in games. This motivated gamers to play deeper into games and experiment with titles beyond specific genres. It also creates an aggregate and visible record of their achievements for all to see. Source: iMediaConnection © Copyright 2014. Nexus Research Group. All rights reserved.
  7. 7. Gamification: Driving Engagement and Loyalty January 2014 CheckPoints - Virtual Currency, Rewards Users scan specific products in exchange for CheckPoints, which can then be exchanged as a virtual currency for rewards such as gift cards. Brands create programs with CheckPoints to drive retail activation and product engagement all based on gamification of the shopping experience. Source: iMediaConnection Shopkick - Virtual Currency, Rewards, Contests Similar to CheckPoints, ShopKick incents users with specific retailer offers. ShopKick users interact with products in store and earn points which translate to virtual currency. ShopKick also incorporates a hyper geo-targeted approach to driving engagement. By rewarding behavior by simply entering a participating retailer, ShopKick can influence where consumers shop. Source: iMediaConnection © Copyright 2014. Nexus Research Group. All rights reserved.
  8. 8. Gamification: Driving Engagement and Loyalty January 2014 Points, Badges & Leader Boards As noted previously in the Disney example, poorly thought out or executed attempts at gamification can have negative consequences. Two common pitfalls that brands fall into include active disengagement and an over reliance on points, badges and leader boards. Active Disengagement. This when a consumer realizes their behavior is being manipulated for no reward. While badges and points may deliver momentary value, they generally do not offer long-term value. More importantly they offer little likelihood of generating long-term consumer engagement. PBL Dependency. A second, and related trap brands fall into is an over reliance on points, badges and leaderboards. These three game elements are the most common rewards used to motivate consumers and when used correctly are very effective but an overreliance on these three elements leads to them losing their effectiveness overtime. For example, cash back programs can quickly transition from a program to engage consumers and encourage customer loyalty to an expectation that “I am going to get money back” and if they don’t offer me this I will take my business elsewhere. This behavior generates no loyalty to the brand and makes it difficult for brands to modify their loyalty program without alienating their customer base. To better understand why this is so we need to take a step back and examine some of the psychology that underlies gamification. While gamification draws upon a variety of disciplines in psychology (e.g., behavioral economics, behaviorism, self-determination theory) I’m going to focus on Motivational Theory for the moment. In particular, we will take a moment and discuss Intrinsic and Extrinsic Motivation. Intrinsic Motivation. Intrinsic motivation is an innate drive to do something (or your pursuit of activities that are rewarding in and of themselves). Some examples of intrinsic motivations in gamification include communities, gifting, duels, unexpected rewards, and quests. Extrinsic Motivation. Extrinsic motivation pushes consumers to do (or avoid) something because of an external reward or punishment. Some examples of extrinsic motivations in gamification include points, badges, leaderboards, and fixed levels. Both intrinsic and extrinsic motivation will motivate consumers to engage in various behaviors, however, intrinsic motivation, though more difficult to implement yields far more powerful and sustainable results. Particularly when combined with extrinsic motivations. Extrinsic motivation when used alone loses its effectiveness overtime and in some cases can be outright de-motivating. Care must also be taken when combining intrinsic and extrinsic motivations that extrinsic motivations do not crowd-out or replace intrinsic motivations. At the same time too much intrinsic motivation, without a tangible reward can be problematic as well. The best combination of motivations is a mixture of extrinsic and intrinsic motivation. An unexpected reward accompanied by praise from the community is the ideal solution to ensure the right motivation with the right connection. One of the best sites to see this in action is Fitocracy is a website dedicated to helping consumers exercise and lead a healthy life style. It does a great job combining extrinsic rewards (e.g., points, badges, leader boards) with intrinsic rewards (e.g., interest groups, community praise, shared experiences). Key Takeaways Gamification has received a lot of attention recently but their remains a lot of confusion around gamification. What it is, exactly? How it should be implemented? What makes it work? Gamification is not a magic bullet that will cure all a brands ills. Just adding a few badges and a leaderboard is not gamification. Here are a few things to remember when gamifying. © Copyright 2014. Nexus Research Group. All rights reserved.
  9. 9. Gamification: Driving Engagement and Loyalty January 2014 Gamification is not just about points and badges. While status icons, points, and badges are important elements to consider when designing a gamified system including achievement-based goals such as skill-based learning and “big wins” is more critical. Not everything should be gamified. Gamification has many benefits. When done well it can increase brand awareness and engagement and help drive sales. Used internally, it can help increase production, build teamwork, motivate employees to achieve goals, and increase voluntary engagement. But when implemented incorrectly or applied to the wrong behaviors there is danger of goals shifting to “winning” when winning isn’t what’s important, cheating or “gaming” the system, masking a flawed product or process or fatigue–meaning stakes must constantly rise to be effective Set clearly defined goals to measure success or failure. Why are you gamifying? What are you trying to achieve? Having clearly defined goals prior designing a gamified system helps to ensure that your gamified system is properly aligned to your objectives. Sometimes this may even indicate that gamification is not the right tool for the job. Delineate target behaviors. Identify specific behaviors you want to impact. Are you trying to get consumer to buy more paper towels? Do you want people to feel positively about your brands? Being specific about the behaviors you want to encourage allows you to design specific elements into you gamified system to encourage these behaviors. Delineating behaviors also allows you to ensure that the behaviors you want to encourage are not in conflict. Make it fun. Gamification, while not a game draws upon the principles of game design and game mechanics. The most important being it has to be fun. © Copyright 2014. Nexus Research Group. All rights reserved.