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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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 Groups judgment as of this date and are subject

to change without notice.

Copyright 2014. Nexus Research Group. All rights reserved.

January 2014

By Michael Goodman

Gamification: Driving Engagement and Loyalty

Executive Summary

In a world where consumers 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 Report

Gamification: Driving Engagement and Loyalty January 2014

Copyright 2014. Nexus Research Group. All rights reserved.

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.

Gamification: Driving Engagement and Loyalty January 2014

Copyright 2014. Nexus Research Group. All rights reserved.

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

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 Companys "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.

230 223

178

33

NA NA

256243

232

182

139

27

0

50

100

150

200

250

300

TV Radio Internet Home Broadband

Smartphone Tablets

Pe

rso

ns

2+

(in

Mill

ion

s)

Number of Users

2003

2013

Gamification: Driving Engagement and Loyalty January 2014

Copyright 2014. Nexus Research Group. All rights reserved.

Exhibit 2 Top Ten Social Networks Source: eBizMBA, Most Popular Social Networking Websites - October 2013

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.

17.5

19.5

20.5

25.5

65.0

70.5

85.5

110.0

250.0

750.0

0 100 200 300 400 500 600 700 800

Orkut

Tagged

LiveJournal

DeviantArt

Google+

MySpace

Pinterest

Linkedin

Twitter

Facebook

Est. Unique Monthly Visitors(in Millions)

Top Ten Social Networks

Est. Unique Monthly Visitors

Gamification: Driving Engagement and Loyalty January 2014

Copyright 2014. Nexus Research Group. All rights reserved.

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 ten