Retail TouchPoints: Scoring Loyalty Points with Funware

Jun 08, 2010

By Amanda Ferrante

Through a special arrangement, presented here for discussion
is a summary of a current article from the Retail TouchPoints website.

innovator and entrepreneur Gabe Zichermann argues that, while Google has been
a major force in driving the discoverability of brands and retailers online,
the massive concentration of pay-per-click advertising plus the ease of browsing
online has eroded e-tail brand relationships substantially. His new book, Game-Based
Marketing: Inspire Customer Loyalty Through Rewards, Challenges and Contests
explores the concept of “funware,” a
new model for incorporating and leveraging videogames and game mechanics to
reach today’s

In an interview with Retail TouchPoints, Mr. Zichermann said
companies like Foursquare and Chase as well as the U.S. Army are cutting through
the clutter and creating lasting, durable loyalty through game mechanics like
points, badges, levels, challenges and rewards.

“Funware is the use of game mechanics in non-game contexts, and really
springs from the notion that any consumer experience can be made more fun,
and through fun, more engaging,” said Mr. Zichermann.

One of the simplest “big
picture” ideas for retailers, according
to Mr. Zichermann, is to leverage the lessons of FarmVille, the online virtual
farming game, and refocus loyalty rewards away from discounts and merchandise
to “soft” or virtual goods.

“Example after example shows that consumers are equally motivated by
status as they are by cash or prizes, which means that retailers can offer
cheaper rewards (virtual branded merchandise, early access to new products/services)
in lieu of costly rewards,” said Mr. Zichermann. “Such a switch will
actually improve retention and sociability (especially among younger demographics)
while vastly reducing loyalty program costs.”

For example, in its Chase
Picks Up The Tab promotion, JP Morgan Chase offered a slot-machine style reward
when users paid for items at any merchant with their debit cards. In some cases,
Chase covered the bill. A Foursquare promotion offered special rewards for
Jimmy Choo buyers who acquired specific virtual badges for completing tasks
in a given day. The promotion drove hundreds of thousands of virtual and real
visits for the shoe company.

Mr. Zichermann said the book explores consumer
motivations through a game-playing lens.

“These include user drivers like exploration, socialization, achievement
and killing (not as bad as it sounds),” said Mr. Zichermann. “These
motivations drive each of us, to varying degrees, and at different times.”

added, “The stickiest content for consumers is that which delivers
social status, enabling them to appear smarter, more connected, more successful,
etc., with their friends. Game-based marketing is premised on the notion that
an effective loyalty and reward system in the 21st century is based on social
status: Facebook, Twitter and rewards that emphasize users’ individual
desires to be recognized.”

Discussion Questions: What do you think of video game mechanics and virtual
awards as a driver of online marketing efforts? Is this the way brands can
tap into the socialization aspects of the internet? Can such virtual rewards
be applied to offline customer acquisition and retention efforts?

Please practice The RetailWire Golden Rule when submitting your comments.

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8 Comments on "Retail TouchPoints: Scoring Loyalty Points with Funware"

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Joel Warady
Joel Warady
10 years 11 months ago

Game-based marketing is today’s hot topic. Everyone is either doing it or taking a look at it. But today’s hot topic is tomorrow’s yawn.

Yes, people still are playing Farmville, and are excited about the “socialness” of the game. People are still collecting badges on Foursquare as well, and for the time being, it is driving traffic, and keeping people engaged. But I’m old enough to remember when Pong excited us, and kept us engaged as well.

Everything that is new becomes old. I would not recommend throwing out the marketing plan to adopt game-based marketing. It is today’s fad that will be tomorrow’s S&H Green Stamps.

Steve Montgomery
10 years 11 months ago

I admit I spend a lot of time on the computer, but none of it is for playing games (other than the occasional game of solitaire). It amazes me the amount of time a segment of our population devotes to game playing on their computers. That being said I can understand that for their peer group the ability to gain status is understandable.

In the old world, things such as rings, pins, trips and special parking spaces may have worked as motivators because they demonstrated that you had achieved a certain status. Part of the issue with them was the time it took to achieve them. In today’s sound bite, instant gratification world devoting months or years to a specific goal must seem quaint.

For those who elect to spend time online playing games, rewards that allow them to attend status amongst the other players of the game makes sense. Based on the article, it also allows retailers to save money–a win/win for those involved.

Joshua Herzig-Marx
Joshua Herzig-Marx
10 years 11 months ago

Shoppers have already adopted game mechanics to save money, find new items, and interact with customer service. If you need evidence, just Google “The Grocery Game” or “The Coupon Game.” Successful game designers have tapped in to both the individual and collective psyche to better waste our time.

Game mechanics can be used to explain other seemingly non-economic behaviors such as contributing to Wikipedia or even lawn care. It’s just smart marketing to study what game mechanics can teach about affecting behavioral change in our customers.

Joan Treistman
10 years 11 months ago

Steve and Joel’s comments reflect the fast changing environment and I would underscore their beliefs. While Mr. Zichermann’s thoughts are based on real world examples of gamers’ engagement, we have yet to experience shoppers’ motivation beyond finding what they want and owning the product they’ve chosen.

It’s a gamble to place the people who play FarmVille (for many many hours) in the same category as shoppers who are looking for a particular product at perhaps a good value. There’s the motivation. Now we want to add another layer of motivation with a game, a reward. It all takes time. How much time will shoppers invest for the reward? In gaming, the emotional connections are typically about competition and achievement. It can also be about camaraderie and collaboration.

I know that motivation influences user satisfaction at a website. I’ve done the research and written a paper on that topic. However, I am doubtful that retailers can fabricate motivation, just because they want to.

Ed Rosenbaum
10 years 11 months ago

You can be sure it is going to come out in a big way sooner than later. The iPhone is the precursor of it. The technology is being developed somewhere and will be marketed to potential users in such a way that they will see a large upturn in the sales needle. That will make it worth the effort.

Jonathan Marek
10 years 11 months ago

We are in the phase of a million ideas regarding how social networking and mobile can be used to stimulate sales. Game-based ideas are a reasonable subset. 99%+ will fail, but I think you can see from the varied BrainTrust comments that there is no agreement around what’s real and what’s a fad. Ultimately, as in 2001-2002, what’s real will be decided by what actually creates value for customers (whether end consumers, retailers, or consumer goods companies).

From the retailer and consumer goods company standpoint, there are two answers: either try lots of ideas and fail fast on all but the best, or wait it out and see what emerges. If you have a good process for innovation, the former is the way to go.

Doug Stephens
Doug Stephens
10 years 11 months ago
Despite Joseph Pine (The Experience Economy) telling us that retail would be all about buying “experiences” instead of products, I think we actually we moved further towards treating products purely as commodities. In the process, I feel retail actually became more boring over the last 20 years. One store after another, selling largely the same stuff. Game-based marketing has the potential to breath some excitement back into retail and not a moment too soon as far as I’m concerned. If bricks and mortar is to survive, it’s going to need a virtual shot in the arm. While some of the panelists might regard things like Foursquare as flavors of the month, I feel it’s important to remember that while Foursquare may or may not be around in the long term is insignificant. What matters is that the advent of location based services will undoubtedly create a fundamental shift in the way people and places (including stores) relate to one another. We can’t just dismiss these things as fads, without looking for their lasting implications.
John Crossman
John Crossman
10 years 10 months ago

While this concept is hot now and may change, I would want to be the retailer that advances it to the next level. You can’t advance it unless you are working on it.


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