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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<p>Nexus Research Group has published this content for the sole use of Nexus Research Group and its clients. It may not be </p> <p>duplicated, reproduced or retransmitted in whole or in part without the express permission of Nexus Research Group. All </p> <p>rights reserved. All opinions and estimates herein constitute Nexus Research Groups judgment as of this date and are subject </p> <p>to change without notice. </p> <p> Copyright 2014. Nexus Research Group. All rights reserved. </p> <p>January 2014 </p> <p>By Michael Goodman </p> <p>Gamification: Driving Engagement and Loyalty </p> <p>Executive Summary </p> <p>In a world where consumers attention and loyalty are increasingly fragmented, brands are searching </p> <p>for new ways to engage with consumers, build loyalty, and ultimately drive sales. One method is through </p> <p>gamification, which is the use of game theory and game mechanics in a non-game context to engage and </p> <p>motivate consumers. Gamification incorporates principles from game design, psychology, marketing, </p> <p>economics, and strategy to create a powerful tool for engaging and motivating consumers. </p> <p>Though the term gamification is relatively new the concept and techniques have been around for </p> <p>decades. Early examples include prizes in boxes of Cracker Jacks and cereal boxes to entice young </p> <p>shoppers while later, more sophisticated efforts include airline frequent flyer programs or the American </p> <p>Express Platinum Card. </p> <p>Today, retailers and manufacturers such as Samsung (Samsung Nation), Pepsi (Foursquare/Pepsi </p> <p>Reward from SXSW 2011), Target (Virtual Currency, Rewards), and CVS (Extra Care Card) are using </p> <p>gamification techniques to engage and guide consumer impulses (see Exhibit 1). </p> <p>Exhibit 1 Gamification Examples Source: Google Images. 2013 </p> <p>Nexus Research Group Report </p> <p>Gamification: Driving Engagement and Loyalty January 2014 </p> <p> Copyright 2014. Nexus Research Group. All rights reserved. </p> <p>The remainder of this article examines how these underlying principles form the foundation for </p> <p>gamification, explore how brands can utilize gamification to engage and motivate consumers and </p> <p>explore some examples of brands that are successfully utilizing gamification. While gamification </p> <p>principles can be used in a variety of ways this POV will focus on their use in a marketing context. </p> <p>Gamification: Driving Engagement and Loyalty January 2014 </p> <p> Copyright 2014. Nexus Research Group. All rights reserved. </p> <p>Introduction </p> <p>Brands have always had to contend with the need to reach consumers through multiple forms of media TV, Print, </p> <p>Radio, Internet etc., but this challenge is compounded by the ever increasing number of connected devices consumers </p> <p>can used to connect to media. According to the TVBs 2013 Infinite Dial Study, there are 256 million TV users in the </p> <p>U.S., 243 million radio users, 232 million Internet users of which 182 million are connected at home via broadband, </p> <p>139 million smartphone users and 27 million tablet users (see Exhibit 2). At times it seems like trying to reach </p> <p>consumers is like searching for the provable needle in a haystack. </p> <p>Exhibit 2 Media Fragmentation Source: Infinite Dial 2013, TVB TV Basics, Arbitron &amp; RADAR </p> <p>Further compounding this issue is fragmentation within each medium. For example, television has seen an explosion in </p> <p>the number of options available to viewers. According to the Nielsen Companys "Television Audience 2008", the </p> <p>average TV household received an average of 130.1 channels, of which they viewed 17.8 for 10 or more minutes per </p> <p>week. While it might not seem like TV households are view a significant number of available channels it is important </p> <p>to keep in mind that each households views different channels, resulting in a fragmented audience. This is evidenced by </p> <p>the continued erosion of broadcast network TV ratings over the years. </p> <p>Nor is the online world any better, examination of the top ten social networks shows an equally fragmented audience. </p> <p>While Facebook clearly dominates with an estimated 750 million unique monthly visitors, other social networks have </p> <p>very significant user bases as well. In addition, it is not uncommon for consumers to have accounts with multiple social </p> <p>networks. </p> <p>Also, the demographic composition of social networks can vary greatly. In a study conducted by the Pew Research </p> <p>Group in 2012, Pinterest was rank 4th overall based upon estimated unique monthly visitors but among teens 12-17, it </p> <p>fell to 8th</p> <p> place. In comparison, Instagram, which is not even ranked among the top ten social media networks in the </p> <p>Pew study, was the 3rd</p> <p> most popular social media network among teens 12-17. </p> <p>230 223</p> <p>178</p> <p>33</p> <p>NA NA</p> <p>256243</p> <p>232</p> <p>182</p> <p>139</p> <p>27</p> <p>0</p> <p>50</p> <p>100</p> <p>150</p> <p>200</p> <p>250</p> <p>300</p> <p>TV Radio Internet Home Broadband</p> <p>Smartphone Tablets</p> <p>Pe</p> <p>rso</p> <p>ns </p> <p>2+</p> <p>(in</p> <p> Mill</p> <p>ion</p> <p>s)</p> <p>Number of Users</p> <p>2003</p> <p>2013</p> <p>Gamification: Driving Engagement and Loyalty January 2014 </p> <p> Copyright 2014. Nexus Research Group. All rights reserved. </p> <p>Exhibit 2 Top Ten Social Networks Source: eBizMBA, Most Popular Social Networking Websites - October 2013 </p> <p>As a result of all this fragmentation, brands must to try to catch an increasingly elusive consumer, requiring them to </p> <p>attempt to engage consumers across multiple media types and platforms. To counter this fragmentation, brands need </p> <p>new ways to engage with and build a loyal customer base. One way to achieve this is through gamification. </p> <p>Gamification is not a game, nor is it an attempt to make everything into a game. Rather it is the application of game </p> <p>dynamics, game elements, and game mechanics to non-game experiences to motivate and drive a behavior. This might </p> <p>include building brand loyalty, increasing spend, driving consumers into a store, increasing website traffic, registering </p> <p>new users, or getting shoppers to write a product review or send an invite to a friend. While not a game, gamification </p> <p>techniques do utilize many key game principles the most important being fun. </p> <p>Other principles include: </p> <p> Implied rules of play. </p> <p> A framework within which play is undertaken. </p> <p> A problem solving activity approach with a playful attitude . </p> <p> A balance of structure and exploration. Too much structure (rules) and the game is not fun, too open-ended and </p> <p>the game has no purpose. </p> <p> Criteria for success (winning) and failure (losing). </p> <p> Players must make meaningful choices. </p> <p> Involve learning or problem solving. At some level there has to be a challenge or problem to be overcome. </p> <p> Chance or randomness. </p> <p>17.5 </p> <p>19.5 </p> <p>20.5 </p> <p>25.5 </p> <p>65.0 </p> <p>70.5 </p> <p>85.5 </p> <p>110.0 </p> <p>250.0 </p> <p>750.0 </p> <p>0 100 200 300 400 500 600 700 800</p> <p>Orkut</p> <p>Tagged</p> <p>LiveJournal</p> <p>DeviantArt</p> <p>Google+</p> <p>MySpace</p> <p>Pinterest</p> <p>Linkedin</p> <p>Twitter</p> <p>Facebook</p> <p>Est. Unique Monthly Visitors(in Millions)</p> <p>Top Ten Social Networks</p> <p>Est. Unique Monthly Visitors</p> <p>Gamification: Driving Engagement and Loyalty January 2014 </p> <p> Copyright 2014. Nexus Research Group. All rights reserved. </p> <p>Growth of Gaming </p> <p>While gamification is not gaming they do share many core principles and gaming has seen tremendous growth over the </p> <p>past decade. No longer the domain of adolescent males, games are played by everyone (young, old, male, female) on a </p> <p>variety of devices (PCs, laptops, smartphones, tablets, video game consoles, handheld consoles, etc.). It is estimated </p> <p>that 2 out of 3 U.S. households are active in electronic games of some sort with over half the population between 18 </p> <p>and 49 playing some form of game once a week. According to the Entertainment Software Association 2012 Essential </p> <p>Facts Report: </p> <p> Consumers spent $24.75 billion on video games (physical and digital), hardware and accessories in 2011. </p> <p> The average gamer in the US is 30 years old and has been playing for 12 years. Sixty-eight percent of gamers </p> <p>are 18 years of age or older. </p> <p> Forty-seven percent of all gamers are women and women 18 years of age or older are one of the industry's </p> <p>fastest growing segments. </p> <p> Today, adult women represent a greater portion of the game-playing population (30%) than boys age 17 or </p> <p>younger (18%). </p> <p> Thirty-three percent of gamers play games on their smartphones, and 25% play games on their handheld </p> <p>device. </p> <p>Since the earliest days of video games, critics have been skeptical of them as a medium. But the reality is that their </p> <p>scale is enormous, with a potential reach rivaling that of television. But what makes video games so appealing? </p> <p>Chalk it up to basic human nature. Video games are designed with a structure and system of rules in which players will </p> <p>a) enjoy the process or journey, and b) create a sense of added value. A fun process coupled with a system for </p> <p>incentives or rewards for a job well done can become downright addictive. These same game-play mechanics that make </p> <p>games so addictive are slowly working their way into other applications. </p> <p>With "gamification," companies study and identify natural human tendencies and employ game-like mechanisms to </p> <p>give customers a sense that they're having fun while working towards a rewards-based goal. In doing so, they hope the </p> <p>added value will enable and reinforce positive behavioral change across a wide spectrum of non-game-related issues. </p> <p>Gamification techniques can be applied in a variety of ways (see Exhibit 3). </p> <p> External. The most common applications of gamification principles is in sales and marketing, where </p> <p>gamification techniques are being used to engage with consumers, drive awareness, build loyalty, and </p> <p>ultimately drive sales. In addition, gamification provides invaluable data for use in analytics and predictive </p> <p>modeling. </p> <p> Internal. Though external applications of gamification principals have garnered the majority of publicity </p> <p>internal applications to motivate employee behavior have also been successful. Target has applied gamification </p> <p>principals to its checkout process to motivate employees and speed up customer checkouts and salesforce.com </p> <p>has integrated leaderboards into its software. </p> <p>When using gamification principles internally, companies must take care to apply gamification techniques with </p> <p>care in order to not to de-motivate employees. Disney tried to motivate the uniformed laundry crew at its </p> <p>Paradise Pier hotels in Anaheim by installing big flat-screen monitors which displayed employees' work speeds </p> <p>compared to one another. The screen displayed the names of several coworkers at once, with "efficiency" </p> <p>numbers in green for those near or above 100% of the expected pace and red numbers for those who aren't as </p> <p>fast. This led to dissension and made employees worry that a reasonable pace won't be enough to keep the boss </p> <p>Gamification: Driving Engagement and Loyalty January 2014 </p> <p> Copyright 2014. Nexus Research Group. All rights reserved. </p> <p>happy. According to union officials, employees have been known to skip bathroom breaks out of fear that their </p> <p>production will fall and managers will demand an explanation. Disney laundry employees refer to the </p> <p>scoreboards as the electronic whip. </p> <p> Behavior Change. Gamification principles are even being used to enforce speed limits, encourage weight-loss </p> <p>and healthy lifestyles, and even assist in post-concussion treatments. </p> <p>Exhibit 3 Where Gamification Adds Value </p> <p>Examples of Gamification </p> <p>As noted previously, gamification is rapidly gaining acceptance across a wide range of industries. Noteworthy </p> <p>examples include the following: </p> <p>Xbox Live - Achievements, Leaderboards, Points </p> <p>Microsoft was an early adopter of gamification techniques when they introduced achievements. Gamers earn </p> <p>achievements by completing specific tasks or actions in games. This motivated gamers to play deeper into games and </p> <p>experiment with titles beyond specific genres. It also creates an aggregate and visible record of their achievements for </p> <p>all to see. </p> <p>Source: iMediaConnection </p> <p> Marketing</p> <p> Sales</p> <p> Customer Engagement</p> <p> Loyalty</p> <p>External</p> <p> Human Resources</p> <p> Sales</p> <p> Product Enhancement</p> <p> Crowd Sourcing</p> <p>Internal</p> <p> Health &amp; Wellness</p> <p> Sustainability</p> <p> Personal Finance</p> <p>Behavior Change</p> <p>Gamification: Driving Engagement and Loyalty January 2014 </p> <p> Copyright 2014. Nexus Research Group. All rights reserved. </p> <p>CheckPoints - Virtual Currency, Rewards </p> <p>Users scan specific products in exchange for CheckPoints, which can then be exchanged as a virtual currency for </p> <p>rewards such as gift cards. Brands create programs with CheckPoints to drive retail activation and product engagement </p> <p>all based on gamification of the shopping experience. </p> <p>Source: iMediaConnection </p> <p>Shopkick - Virtual Currency, Rewards, Contests </p> <p>Similar to CheckPoints, ShopKick incents users with specific retailer offers. ShopKick users interact with products in </p> <p>store and earn points which translate to virtual currency. ShopKick also incorporates a hyper geo-targeted approach to </p> <p>driving engagement. By rewarding behavior by simply entering a participating retailer, ShopKick can influence where </p> <p>consumers shop. </p> <p>Source: iMediaConnection </p> <p>Gamification: Driving Engagement and Loyalty January 2014 </p> <p> Copyright 2014. Nexus Research Group. All rights reserved. </p> <p>Points, Badges &amp; Leader Boards </p> <p>As noted previously in the Disney example, poorly thought out or executed attempts at gamification can have negative </p> <p>consequences. Two common pitfalls that brands fall into include active disengagement and an over reliance on points, </p> <p>badges and leader boards. </p> <p> Active Disengagement. This when a consumer realizes their behavior is being manipulated for no reward. </p> <p>While badges and points may deliver momentary value, they generally do not offer long-term value. More </p> <p>importantly they offer little likelihood of generating long-term consumer engagement. </p> <p> PBL Dependency. A second, and related trap brands fall into is an over reliance on points, badges and </p> <p>leaderboards. These three game elements are the most common rewards used to motivate consumers and when </p> <p>used correctly are very effective but an overreliance on these three elements leads to them losing their </p> <p>effectiveness overtime. </p> <p>For example, cash back programs can quickly transition from a program to engage consumers and encourage </p> <p>customer loyalty to an expectation that I am going to get money back and if they dont offer me this I will </p> <p>take my business elsewhere. This behavior generates no loyalty to the brand and makes it difficult for brands to </p> <p>modify their loyalty program without alienating their customer base. </p> <p>To better understand why this is so we need to tak...</p>