gamification: driving engagement and loyalty

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January 2014

By Michael Goodman

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 Report

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.



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 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.

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



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



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 salesforce.com

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



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

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

• Marketing

• Sales

• Customer Engagement

• Loyalty

External

• Human Resources

• Sales

• Product Enhancement

• Crowd Sourcing

Internal

• Health & Wellness

• Sustainability

• Personal Finance

Behavior Change



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.


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.


http://theblackfin.files.wordpress.com/2011/08/checkpoints_scan.jpg

http://theblackfin.files.wordpress.com/2011/08/checkpoints_reward.jpg

http://theblackfin.files.wordpress.com/2011/08/2_store_walkin-small.jpg

http://theblackfin.files.wordpress.com/2011/08/4_rewards_mall-small.jpg



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.com. 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.



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.