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How Gamification Drives Customer Loyalty | 2022 Consumer Data

May 4, 2022

In this article you will learn:

Formation surveyed 500 US adult consumers to see where they feel current loyalty programs are falling short and what they actually want out of their loyalty programs.

What are the Downfalls of Current Loyalty Programs?

Good interactions between a brand and a consumer put a smile on the consumers’ face. The best interactions or experiences are the ones that a consumer will brag about to their friends, and keep them coming back to your brand again and again.

Imagine being able to create those powerful moments continuously, in a way that is relevant and valuable to the customer and to the overall success of your brand. The reality is that most customer loyalty programs today are not engaging and not transparent enough to provide those moments​​. Eighty percent of consumers say they have to research their loyalty programs to know what they need to do in order to get their next reward, and almost half (44%) of those customers are not willing to spend time figuring out the next steps.

What does this mean for brands? It means they’re taking a massive hit to their customer retention and revenue numbers through the very programs that are supposed to be improving those metrics.By creating set it and forget it programs with unclear directions and little personalization, today's loyalty programs aren't driving the kind of customer engagement that can impact their brand's success.

However, we've seen innovative brands overcome these pitfalls to create wildly successful loyalty programs. So, what's their secret?

It’s gamification.

Gamification allows brands to create loyalty programs that drive long-term customer retention and revenue. When done well, gamification reinforces the value of the brand, brings the customer emotionally closer to the brand, and feels like an organic part of the customer experience. When implemented with your loyalty program, gamification deepens engagement, which ultimately leads to increased revenue and customer lifetime value (CLV).

What Customers Don’t Want from their Loyalty Programs

Forty percent of people disregard notifications from their loyalty program, but they aren’t checking out because they don’t care; quite the opposite. Consumers are disengaging from their loyalty program because they don’t feel a connection to the brand.

In today’s world of customer-centric commerce, consumers are bombarded with branded offers on a daily basis. It takes more than a mass email or a name in the subject line to get noticed. Consumers are demanding personalization and relevance in order to give your brand a bit of their attention and potentially a share of their wallet. They want offers that provide them value in relation to their current shopping habits and preferences- and a program that mirrors those preferences as they change.

But consumers aren’t disregarding programs because of personalization alone. Some members simply don’t know what to do next within their loyalty program. Almost half of consumers (48%) wish their loyalty programs better outlined the actions needed to get to the next tier level.

Confusion like that makes it impossible for brands to build excitement and encourage buyers to take any other actions. This results in members simply giving up and moving on to another brand which provides them with more of what they want, when they want it.

Sixty five percent of people said they are more likely to tailor their shopping and spend a certain amount to reach specific goals within a loyalty program if it’s clearly laid out for them. This gives brands a golden opportunity to build clear, engaging journeys within their loyalty program that presents customers with personalized offers that build an emotional connection and loyalty to the brand. This will result in brands seeing an increase in customer satisfaction, loyalty, and revenue.

What Customers Do Want from their Loyalty Programs

Consumers want clearly laid out loyalty programs with offers and interactions that are relevant and personal to their unique lives. And they also want fun! Seventy three percent said they feel more inclined to shop at brands that make their loyalty experience fun and rewarding.

The best way to provide this fun to your members is through game and challenge based offers. Games and challenges engage your customers and induces emotions like excitement, intrigue, and happiness to influence specific actions. Sixty three percent say the prizes or items they’ve earned from winning a challenge or game from a brand are more rewarding than the coupons they get randomly.

That’s where the glory of gamification comes into play!

The Power of Gamification in Loyalty

Gamification incorporates game mechanics to increase customer engagement, improve sales, and strengthen brand loyalty, allowing you to engage with customers in a modern way. A gamified loyalty program provides benefits to both you and your buyers.

Solving the current downfalls customers feel and brands see within their loyalty programs, one benefit of gamification is that it creates an interactive, clearly laid out journey for individual buyers based on their shopping preferences and habits.

Another benefit is these gamified experiences enable different pathways for customers to explore and provide non-transactional experiences, personalized rewards, and an emotional connection, creating deeper engagement with every single customer.

But how exactly do brands get to the point of providing those experiences and repping those benefits for their customers and themselves? By leveraging AI and machine learning solutions and platforms.

When brands implement AI and machine learning platforms that incorporate gamification, each step of the experience is composed of personalized offers or events that encourage consumers to take a specific action or series of actions. In addition, the most powerful games or challenges have progression and narrative crafted around the game steps to further engage the customer.

When implemented with your loyalty program, gamification can deepen engagement, which ultimately leads to the biggest benefit for brands - increased CLV or revenue.

Loyalty programs are not dead. And consumers are not disengaging from current programs because they suddenly dislike shopping. Brands are simply not creating programs that create value for modern consumers.

To set themselves up for future revenue stability and growth, brands need to view programs as an essential part of their business that should be at the center of every customer interaction. This is especially relevant as Millennials and Gen Zs enter the picture with buying preferences that have the power to make or break industries.

“According to two US studies, millennial spending sits at just over $65 billion – whilst Generation Z is at almost $100 billion. And that’s before you even factor in the influence that the youngest Generation Z members have on their Generation X parents,” writes Wunderman Thompson. These generations will be loyal buyers for decades to come, and Millennials (80%) and Gen Z (78%) are the top age groups that frequently make purchases to advance their status in loyalty programs. Ensuring your company understands how to engage and retain them as customers by giving them the ability to interact with your brand's loyalty program is vital to current and long-term success.

Overall, with 63% of people saying they frequently make purchases to advance their loyalty status, and 66% of those people saying that's the only reason they make those purchases, the opportunity to increase revenue and loyalty is there - brands just need to take it.

See Gamification in Action -> Product Demo Video

Gamification with Formation

Creating personalized loyalty games enable brands to better engage with customers, and encourage actions that drive incremental sales and increased brand loyalty. The bonus is, there’s no need to dramatically update your tech stack to achieve all this - you just need a dynamic offer platform that utilizes game mechanics.

Formation helps brands build deeper relationships with every customer, beyond the transaction. Our patented Dynamic Offer Platform leverages brands’ first-party data to automatically generate each customer’s offer with the best action and reward, then manages the deployment, measurement and fulfillment of each offer across the marketing stack. Brands see 8X revenue lift, 60% savings in the efficiency of their reward spend more engagement, and 40% increase in category exploration, personalization within your customer segmentation is the secret to success.

Formation powers offer optimization for some of the world’s largest Fortune 500 companies, and we’re ready to help your brand start creating personalized games for your loyalty program today!

Learn More -> Formation