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[11 comments]

BrainTrust Query: One Big Reason Why Game Theory Will Drive Customer Loyalty

April 26, 2012

Through a special arrangement, presented here for discussion is a summary of a current post from the Hanifin Loyalty blog.

How to extend the impact of gamification beyond engagement to create longer term loyalty is the subject of debate in marketing circles. Strong voices are challenging the ability of game mechanics to create tangible behavior shifts (Will earning a badge or status in a community make me buy more from that brand?) while the forces driving the game companies are gathering case study data to prove their point.

BigDoor co-founder and CEO Keith Smith stated recently that results from a test of the company's new platform among 25 clients returned an average increase of 153 percent in user loyalty and 672 percent in engagement. "We measure all steps of the user lifecycle," Mr. Smith told Information Week. "We track it back to the user's performance."

In this new world of social loyalty, Mr. Smith chooses to track metrics that are more familiar as web and e-commerce statistics than traditional loyalty measures:

  • How often are people registering?
  • How often are they coming back?
  • Are they inviting their friends?
  • Are there referrals?
  • What's the revenue on a per-user basis?

The results of a study just published by Sociable Labs found 62 percent of online shoppers are active in "social sharing," i.e. they have read product-related comments posted by their friends on Facebook. About 75 percent of these shoppers have clicked on the product link in their friend's Facebook post, taking them to the product page on the retailer's website. Best of all, 53 percent of those who clicked the link made a purchase. Using a derivative calculation, this means about 24.6 percent of all online shoppers are making a purchase based on what they read about their friend's shopping activity on Facebook.

Suddenly the reason for all the excitement about game theory is coming into focus. Many believe loyalty programs are well suited to "connect the dots" between interactions and transactions in the loyalty cycle. Considering interactions such as product reviews, price comparison, and tweet mentions as data points equal in value to a transaction is a stirring thought.

Embracing game theory to drive results from a loyalty program might draw skepticism, but if there was ever a time to observe the behaviors and preferences of our customer base to break new ground, it is today.

Discussion Questions:

Discussion questions: What do you think of the potential of gamification to stimulate customer engagement among the digital generation? Are there examples of game-based programs used by retailers (online or offline) that you think point to this potential?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How are retailers most likely to use "gamified" schemes in their customer loyalty efforts?

Comments:

Customer loyalty has always been the key factor to any retailer's success. Not long ago, the department stores maintained loyalty through their owned credit card operations. Then along came bank cards.

Gaming offers an interesting, new way to build loyalty. It certainly speaks to the plugged-in lifestyle of the customer base that will determine future success and is definitely more interesting than endless price promotions. It is still novel, however. As always, there is the potential to make this as annoying and ineffective as programs built strictly on price. Time will tell.

Bill Emerson, President, Emerson Advisors

I would say it a good idea that retailing adopt more advanced techniques in managing a very complex environment that has a massive amount of data points. As we adopt more of these techniques, it will make us more efficient and effective.

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Joe Nassour, Chief Technology Officer, RetailTactics

I look at this as "the rich get richer" kind of thing. If it's a brand I like and admire, that fits my lifestyle and my friends' lifestyles, games give me a reason to engage and come back frequently which in turn, ups the likelihood I'm going to see friends' posts and products I maybe didn't think of buying until I saw them. However, if the brand is one I'm not that engaged with or don't really want to share with my friends, I don't think a cool game is going to drive purchase.

As with many aspects of social, gamification can enhance and dimensionalize a quality brand. It can't make a lousy brand a whole lot better. I agree games are a great connector and the kind of content that seems to work because it's low commitment, high return. Just make sure the rest of the brand experience adds up.

Lisa Bradner, Chief Strategy Officer, Geomentum/Shopper Sciences

As a Digital Strategist, gamification is a growing part of the discussions I have. There clearly is a large potential to employ game mechanics and use it as a tool to increase loyalty too, but it's not as straight forward as creating badges, points, and likes, to "connect the dots" to loyalty.

The bottom line is always user experience. If a brand offers great user experience it will have all the loyalty it needs. And user experience relies heavily upon meeting/exceeding expectations and providing satisfaction. For some consumers, price is enough satisfaction to do that (e.g. Walmart), for others, it may be status (e.g. Gucci, Mercedes), some may seek great customer service (e.g. Zappos), others still may need game mechanics (e.g. Foursquare) to keep them engaged.

As with all concepts to increase business, the choice to gamify is very brand specific, heavily dependent upon the customer base, requires authenticity, and takes a commitment to integrate and promote it for the long haul. The issue with studies coming out now is that they don't truly address the long tail and report on trends from early adopters. As gamification spreads and loses its early mover appeal, some of the reported results may not hold up to scrutiny -- time will tell.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

The potential of gamification by the retail industry to stimulate customer engagement is great. So great I would argue that gamification is the new loyalty program.

Retailers may have to realize that customers want to have "fun," not "loyalty" and the way to offer a good loyalty program is to offer something fun to interact with. One offline example we are familiar with is the McDonald's Monopoly game where people were having fun collecting the stickers and trading the stickers among each other. A good online example is Dave and Buster's campaign allowing customers to play games on Facebook or their web site to win various coupons.

But for retailers embracing gamification, I would focus more on the Las Vegas/Atlantic City "fun factor" than the EverQuest/World or Warcraft trinkets (badges, etc.) reward factor. Retail gamification efforts should probably focus more touch kiosks offering games that can be actively played for rewards and interactivity versus a boring loyalty point system.

Retail social networks gamification campaigns should model after the concept of fantasy football and fantasy stock trading. Let customers create an avatar and interact in an environment that uses the retailer products.

Ed Dunn, Founder, (Stealth Operation)

The more I observe current consumer behaviors, the more I believe there will be a long tail of preferences for interaction with brands as Ken Lonyai suggests in his comments.

Lisa Bradner is also correct that the brand experience has to represent value to the consumer. We've agreed to this point for years, acknowledging that no loyalty program can alter the fate of a bad product or disappointing service package.

We are in early days and my mantra is to keep an open mind and remain constantly teachable. Now is not the time to draw lines on what will and won't work to engage customers in the future.

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Bill Hanifin, Managing Director, Hanifin Loyalty LLC

Using 'gaming' tactics will certainly stimulate 'customer engagement' from a portion of the digital generation. The question here is what are you trying to achieve. If your definition of engagement is simply to get someone to 'click' a button or capture eyeballs then there is value in the gaming tactic. However, there is a big difference between an engagement and a conversation. In order to develop and nurture your brand, it is imperative to establish a meaningful conversation regardless of the tactic.

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Adrian Weidmann, Principal, StoreStream Metrics, LLC

I think there is great potential for gamification to the target market that it will address. Looking at all the potential audiences, a retailer or brand must evaluate their objectives and integrate their approach with this effort along with concurrent loyalty efforts. The point is, gamification may result in only short-term "loyalty," which isn't really loyalty at all. If you do a one-two punch with your other true long-term/relationship-building efforts, then you will tend to see more long-term brand growth.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Gamification approaches to loyalty and promotional programs offer significant opportunity to increase engagement and participation. The keys here will be focusing on asking two questions about the tactical methods -- "Is it fun?" and "Is there a real benefit or offer?" It may not require a yes to both of these, but at least one is required.

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Matt Schmitt, President, Chief Strategy & Innovation Officer, Reflect

When we look at the next generation of shoppers as well as the next generation of employees in the retail industry, gamification takes a primary place in their world. So why not get to understand the impact using games for loyalty, education, and even for training? Or for the use of technology in the workplace?

Each retailer needs to determine who their customers are and how can they better relate to their customers. We have all been divided into generations, such as baby boomers, generation X, Y and now millenniums. So why not use terms like the igeneration, the speeders or, better yet, the Gamification Generation.

Loyalty has to be more than just the sales program. It has to be part of the customer service experience. The most successful programs provide a real and meaningful experience with rewards to their customers. Games that bring customers to your website, to your mobile app and to your store are powerful. Customers will then see the product and buy the product with not just a coupon or sale price, but with a discount won during the use of the game. Now that is gamification for loyalty.

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Frank Riso, Principal, Frank Riso Associates, LLC

These are all very good responses and indicative of an educated audience. I would like to add that as well providing an unprecedented breadth of new metrics to your loyalty programs, gamification also provides exciting possibilities in the realm of developing brand advocates.

One of the biggest developments of the online environment is the opportunity for community. Gamification allows for measuring and rewarding quality customer contributions. Ratings, reviews, questions and answers, testimonials and tips -- all of these things can be used to recognize contributions to the community. Users identified as 'experts' or 'champions' can be given increased privileges and rewards, but even more compelling are the rewards that come for free; the status and recognition in the social context.

Just like any good loyalty program, gamification provides loss-aversion based stickiness, but with the addition of the social element, the bond becomes significantly more powerful.

Tony Ventrice, Sr. Game Designer, Badgeville

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