Online shopping and consumption of digital content is becoming more and more popular in Asia and I don’t have to mention that the region is more than attractive for digital marketers with one billion people online. As the Asia Digital Marketing Association (ADMA) confirms in its recently published Digital Marketing Yearbook, almost half of the world’s online population is now based in Asia, of whom 623 million access the web via mobile. Both the mobile Internet use by smartphone and tablet PC, as well as innovative business models such as online shopping clubs or grouponing platforms, will continue to strengthen this trend and result in rising competition and costs for new customer acquisitions.
Consequently, with regard to these facts, customer retention and intensification, especially in e-commerce, are becoming more important as well, and that’s where gamification comes into play. It works by making technology more engaging and takes advantage of humans' psychological predisposition to participate in games. Currently, it is one of the most promising ways to builds user loyalty, incentivizing customers with points, badges and special offers for performing positive actions. In a nutshell, gamification describes the transfer of motivational factors and principles of gambling on products and services.
Raising customer loyalty by providing rewards
Since people have actually always played, whether in ancient Egypt or Rome, it proves the fact that a good portion of the cognitive and motor development of every person takes place through games. And the one thing that all successful games have in common is the fact that they bring players easily and predictably to a desired action.
The use of this unique impact has huge potential to increase sales and can improve existing (online) products and services. Taken into consideration are mainly five basic needs that are satisfying games participants, namely reward, status, success, self-representation, and competition. Thus, from the perspective of market participants in e-commerce, games are there to evoke action according to rules in anticipation of a particular outcome, usually a reward.
Our ancestors already exploited these mechanisms - just recall the famous "buy two, get one free" that originates from flour and sugar sack trade, where a certain purchase quantity granted getting more goods. Instead of a direct price discount (cash negative), the total price remained the same, heralding the first form of customer loyalty, even though it has been the most expensive one from a dealer’s perspective.
Then, the 1930s traders came up with the idea of uncoupling the rewards for repeated purchases of goods and the actual cash value, introducing small paper stamps as virtual currency. These stamps were issued for each sale of goods and had to be collected and pasted on a sheet. The dealers were able to determine in advance how many stamps were needed for extra goods or discounts, with the consequence that the whole process became non-transparent for the customers.
However, the best is, that here the reward for repeated business has been moved into the future, as the sheet of paper has been as long worthless and not redeemable as it was completely filled with stamps. It means that many traders did not even have to deliver their goods despite repeated purchases.
These two characteristics laid the foundation for the power of customer loyalty programs.
In the 1980s, airlines began offering non-cash benefits in the form of discounts and free flights when collecting miles. However, getting access to comfortable lounges or the use of a faster service ("fast lane") were the real privileges. Getting and showing the status started to become more important than discounts or obtaining additional goods.
Customer loyalty in the digital era
A further development of points-based loyalty programs and status programs took place in 2009 with the service "Foursquare". This location-based social network is rewarding "check-ins" of its users with points that lead to badges and later "Mayor" titles.
The big difference of the digital loyalty program is the fact that the airlines were still awarding status that could make demands on the real world. Foursquare, however, offers only virtual status, which initially leads to no benefit to the participants in the real world. Despite that, this incentive system motivates playfully millions of users worldwide to locate places, shops and restaurants, and make it known.
The coffee house chain Starbucks, for instance, rewards their visitors with Foursquare’s virtual points and prizes for visiting their stores and provides discounts at certain places for that. These discounts, however, are not coming from the operator of the bonus program, but from the advertisers, and are therefore actually more comparable with the booking of an advertisement.
Another example for virtual status is Farmville, the real-time simulation within Facebook that allows its players to build and manage their own virtual farm. Status manifests itself here in the size of the farm, the animals owned and the vehicle fleet. Any moves of all participants will be shared with the respective Facebook friends of the player. Many, but not all virtual goods can be gained through intensive participation in the game, but some have to be bought directly from the game operator ("Farm Cash"). As seen with the loyalty programs of airlines, the collection of points for status serves not only the loyalty purpose, but can also become a new and direct source of revenue.
Looking at the examples, gamification is obviously a valuable marketing tool for monetizing the social Web. Especially for B2B marketers can provide another dimension to being relevant. The badge concept of rewarding loyalty, community contribution and then recognizing it and promoting it within a group or across the wider Web can simply be useful for any customer engagement strategy.
By Daniela La Marca