In this article you will learn:
Loyalty programs are the name of the game for marketers today since keeping a customer is 5x less costly than acquiring new ones, and nearly half of a brand's revenue is created by only about 8% of their most loyal customers.
As transactional offers - like coupons and generic percent-off discounts - have proven less and less effective, brands are beefing up their customer loyalty programs to set themselves apart and drive greater engagement. However, it’s no longer a one-size-fits-all market because, as of March 2021, U.S. consumers belonged to 16.7 loyalty programs on average but actively used a little less than half of those. Meaning there is stiff competition to keep buyers engaged with your loyalty program, and buyers expect brands to provide personalization, relevance, and an emotional connection.
So how are the most innovative brands driving engagement with loyalty members? They’re leveraging gamification in their loyalty programs as a differentiator and a key component in the personalized, customer loyalty loop.
What is Gamification?
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.
Early gamification tactics often tacked simple game mechanics, like badges or cartoonish elements designed to feel like a video game, to existing loyalty programs. But those badges didn't convey any status or provide any meaningful value; they didn't build a relationship with customers.
On the other hand, modern gamification leverages customer data insights and creates experiences with multiple steps, all connected to driving value for the customer and business outcomes for the brand.
The Point Guy, shares a perfect example of this as demonstrated by United Airlines.
“Every few months, United Airlines will roll out these “stealth promotions.” These are targeted offers that allow travelers to earn extra miles for completing a certain number of requirements. The promotions are targeted and will generally fit your travel patterns. For instance, members who haven’t flown United much recently tend to be targeted for more compelling offers.”
As mentioned, a core concept in gamification is leveraging customer data to present them with offers and rewards that are valuable and relevant to them while meeting your brands business objectives.
It’s important to note that the effort to achieve a goal must be balanced with the reward. Reaching a goal should be challenging but not frustrating, and the reward should be of sufficient value for the effort expended. But the key is that the overall effort to achieve the goal must be balanced.
In the United Airlines explanation, the offers and rewards were relevant to the travel patterns. So a non-frequent flyer could be presented with an offer to book one flight with United and receive X amount of points, based on their previous flight history.
There are three major considerations when implementing gamification:
- Utilize your zero- and first-party data to make it personalized - a generic gamified experience will turn off customers as easily as a earn and burn loyalty program;
- Provide persistent reminders of progress and rewards, so customers can see what the next reward is and that it looks good; and
- Apply AI/ML to create balanced offers and experiences - automating gamified experiences that have a unique balance for each customer enables brands to scale.
Through our years of work with Fortune 100 brands, Formation has also found that 3-steps is the right balance that gets customers to engage with a gamified experience without it seeming too overwhelming. We believe in the 3-step concept so much we built it into our platform as a standardized offer type!
Below is an example of what gamification may look like with a retailer and how the rewards are offered.
Why Gamification Improves Customer Loyalty Programs
A gamified loyalty program provides a powerful set of tools to better engage your customers and induces emotions like excitement, intrigue, and happiness to influence specific actions. But it needs to be thoughtfully done in order to have the desired results.
Think about your favorite apparel store - say you shop 3-4 times a year and spend around $150. If you had to spend $300 in one shopping trip to receive an offer or promotion, that's unlikely to encourage you to try and get the offer, given that it’s such a drastic difference.
Instead, it will feel frustrating as the value is insufficient for the effort and dollars you’ve invested with that brand. Remember - the effort and the reward must be balanced and feel achievable
Asking shoppers instead to download the app to receive 10% off any purchase is an offer that is valuable to them and in return, your brand achieves another engagement outlet with the consumer and builds a deeper relationship.
When done well, gamification reinforces the value of the brand, brings the customer closer to the brand, and feels like an organic part of the customer experience. According to research from BCG, this kind of gamification can increase a brand's growth rate by 6% to 10%.
When implemented with your loyalty program, gamification can deepen engagement, which ultimately leads to increased customer lifetime value (CLV). Perhaps you want to stretch buyers into a new purchase category, direct them to interact with your brand in a new way (maybe by downloading the app), or you ask them to provide you with valuable first-party data that you can use in future campaigns- those multi-action interactions allow you to deepen your brand's relationships with customers.
And with that ability, you're now able to learn more about your customers on an individual level and leverage that knowledge to meet your business objective while providing your customers with a fun and interactive experience that presents a relevant reward.
Gamification in Loyalty Programs: It’s Not Only Transactions
It's a common misconception that offers are only transactional. But as we saw in the example above, that's not the case. Gamified experiences in your loyalty programs can be powerful because they enable marketers to combine transactional and non-transactional actions, which drive deeper engagement.
These experiences are designed to evolve customers from a tentative introduction to the brand into a lifetime relationship with it. They give customers clear actions for better engagement and provide clear guidance on the value and benefits a customer will receive for each action.
Gamification is Powered by Dynamic Offers
These gamified experiences enable different pathways for customers to explore, 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.
When brands implement AI and machine learning platforms, each step of the gamified experience is composed of personalized offers or events that encourage consumers to take action. In addition, there is progression and narrative crafted around the game steps to engage the customer further.
Over the past decade, advances in automation, data collection and analysis, AI and machine learning platforms, integration between any system using APIs, and cohesive omni-channel experiences have brought us closer than ever to true one-to-one, personalized marketing.
With these advances, marketers can offer customers what they want, when they want, and make it available in their preferred channels. This makes delivering personalized, engaging customer experiences possible and enables marketers to have those experiences adapt to customers' needs and preferences over time.
This type of personalization and automation is possible with Dynamic Offers. Dynamic Offers can accelerate the ways companies engage their customers with gamification and drive that deeper engagement every brand is looking for.
Implementing a dynamic offer platform like Formation enables you to offer your customers a truly personal, relevant, timely, and fun experience to get the most out of gamification.
Why Brands Benefit from Modern Gamification
When asked what get’s customers to engage with a gamification and why it works so well for a loyalty program, Formation, Co-Founder and Head of Business, Rob Fagnani says:
“First it’s simply the fact that there are multiple steps in the offer, versus typical offers that you see today that are focused around one transaction. In a multi-step offer you can achieve a goal across multiple transactions.
Second is the fact you can incorporate any type of action into the offer. For example brands that have low transaction frequency can incorporate non-purchase actions so they can actually drive engagement with customers in between purchases.
Third, because you have multiple actions that go into an offer, you can show a greater reward because you’re asking the customer to do multiple things. It’s likely a reward that's greater than any they’ve ever seen before and that drives additional engagement as they’ll want to see what they need to do to accomplish that large reward.
All of those things combined with personalization drives greater relevance over time, helps the customer through a journey, and up levels your loyalty experience.”
Multi-step games drive digital engagement and help build deeper relationships with customers.
Best Practices: Your Gamification Checklist
Ready to implement gamified experiences into your loyalty programs? Beyond adding dynamic offers to tech stack, your team should consider these best practices:
Clearly Define the Outcome You Desire:
All brands have business objectives they’ll focus on for a campaign – deeper digital engagement, customer retention, or reducing churn – which are the tactical steps that increase overall CLV. Define your company's business objectives and how you can wrap those into your gamified loyalty program, as different game design elements can trigger different outcomes. Some of those objectives are:
- Spend more - Increase the average order value for each visit;
- Increase frequency - Increase the number of visits per consumer in a specific time frame;
- Omnichannel engagement - Increase adoption of digital channels for store-only customers and in-store visits for digital-only customers;
- Elevate onboarding - Enhance new customer onboarding to generate additional activity during the first 60 to 90 days;
- Reduce churn - Identify customers who are at risk of attrition and reduce churn;
- Exclusive brands - Generate engagement with brands available only through that retailer;
- Category exploration - Extend buying behavior to multiple product categories; and
- New product launches - Generate excitement and increase purchases of new products.
For these objectives, remember, brands can require loyalty program members to take an action to receive a reward, whether it’s transactional or non-transactional. For example, a consumer might be asked to download the mobile app and fill out their preferences in order to receive a reward – a coupon or points in the loyalty program. Then the next offer from the brand may require a purchase to receive a reward.
Map out The “Storyline”:
The better a business loyalty program is structured, the easier gamification will be. Remember, the game is fun only if the player understands how to play.
Remember these tips:
- Encourage customers by being flexible and providing instant rewards for signing up instead of an incentive to sign up for a program; and
- Rewards should be offered with each new benchmark a customer passes
Encourage Customers to Adopt Digital:
You need to go beyond asking a customer to download a mobile app or scan a loyalty card with every purchase. Using gamification to pair digital actions with making a purchase enables you to incentivize digital adoption and greater engagement with your loyalty program, while also helping them have a seamless experience inside a store and while online shopping.
In the modern age, consumers use their digital devices and platforms to engage with brands like never before. From social media, to push notifications, and in-app experiences- if you’re not adopting your brand or your customers to the modern digital world, you’re missing out on having a direct line to your customers virtually 24/7.
Gamification paired with digital actions enables you to incentivize digital adoption and greater customer engagement with your loyalty program. It also helps customers have a seamless experience inside a store and while online shopping.
Try these types of non-transactional offers to boost brand loyalty on your digital platforms:
- Offer customers the option to share their rewards status and achievement badge from your loyalty program on their socials;
- Download the app;
- Refer a friend to buy a product, or join the loyalty program.
As consumer behavior and expectations change, brands can no longer survive with static, un-personalized customer experiences.
Your loyalty program has the potential to make a considerable revenue impact in these upcoming years, and keeping your loyalty members engaged over time is vital. Get started with gamification today, and ensure your brand is in the half of those 16.7 loyalty programs your customers are actually engaging with.
Download our Free Guide to Modernized Loyalty Offers.