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Using Gamification In Your Loyalty Program To Increase Customer Engagement

July 12, 2018 Gamification

Is your company ready to up its loyalty game? It’s no longer enough to simply offer customers a loyalty program, retailers should be using gamification to increase their customers’ participation and satisfaction with the program. Research conducted by TechValidate found that “30% of companies using gamification improved registration conversion rates by upwards of 50%.”

WHAT IS GAMIFICATION?

Gamification involves applying elements of game playing, such as narrative, points/rewards, strategy, and leaderboards to something that is not a game like a loyalty program. Gamification of a loyalty program capitalizes on human psychology to entice consumers to participate and stay engaged in the program and thus with the brand as well.

Gamification can be used to motivate consumers to do more than just make in store purchases. It can be used to incentivize participation in surveys that help retailers gain valuable market insight into what their customers really want, as well as their spending habits.

The reason that gamification of loyalty programs works so well is because it plays upon psychology and makes participation fun.

Using Gamification In Your Loyalty Program To Increase Customer Engagement

3 PSYCHOLOGICAL REASONS GAMIFICATION WORKS

1. COMPETITION FOR STATUS

Gamification of a loyalty program creates a sense of competition, especially when that program involves share-worthy bragging rights like badges or titles. Loyalty programs can use gamification to make their members feel special by creating tiers or levels of participation that come with special rewards and incentives.

2. SATISFACTION OF COMPLETING TASKS

Why does crossing an item off of your to-do list feel so gratifying? According to something called The Zeigarnik Effect, people tend to think about uncompleted tasks more than completed ones because uncompleted tasks make us uncomfortable. Once a person completes a task they feel a sense of relief and accomplishment.

Loyalty programs that use gamification to break down larger goals into smaller tasks, also known as sequencing, makes the desired goal seem much more achievable. They also give consumers the satisfaction of completing many tasks, allowing them to draw lines through them on their mental to-do list.

3. SOCIAL PROOF

People want to be where other people already are. Similarly, they want to shop where other people shop and belong to loyalty programs that people they know belong to. People are social creatures who desire to feel a sense of belonging. According to Colloquy, “27% of millennials would stay in a loyalty program because it has a competitive game or social aspect.”

Loyalty programs that use gamification to create teams formed through word of mouth referrals are leveraging social proof to drive engagement. Accenture Strategy’s report “Seeing Beyond The Loyalty Illusion: It’s Time You Invest More Wisely” concluded that “55% of U.S. consumers express loyalty by recommending the brands and companies they love to family friends.” Gamification can also be used to increase customers’ word of mouth referrals indirectly by posting reviews and/or endorsements on the retailer’s website or on social media.

3 GAMIFICATION TIPS TO INCREASE LOYALTY PROGRAM PARTICIPATION

1. KEEP IT SIMPLE AND STRAIGHTFORWARD

The more complicated the rules of your company’s loyalty program, the less likely your customers will be to participate. Creating clear goals and an easy to redeem rewards structure will also increase consumer participation.

If the loyalty program is too hard to understand or it takes too long to redeem rewards customers will stop participating. An in-depth loyalty census conducted by Colloquy in 2017 concluded that “57% left a program because it took too long to earn rewards.”

2. CREATE VISUAL PROGRESS CUES

Using a leaderboard or status bar in the gamification of your loyalty program will give your customers visual cues that show them their progress and how close they are to earning the reward they are working towards. The closer a person perceives themselves to be from reaching a goal, the more likely they are to finish the necessary tasks to reach it.

A psychological effect called expectancy, is at play here. Expectancy dictates that “as the distance from the goal decreases, both the desirability and the feasibility of completion are believed to increase.”

3. GIVE THEM A HEAD START

The Endowed Progress Effect says that when you give a person a head start towards a goal, they are more likely to complete a task and reach the goal. Researchers Joseph C. Nunes and Xavier Drèze tested this psychological phenomenon in their study entitled, “The Endowed Progress Effect: How Artificial Advancement Increases Effort.”

They conducted an experiment with two control groups. They randomly distributed 300 loyalty stamp cards to customers at a metropolitan car wash. Half of the cards required eight stamps for eight additional car washes in order to receive a free car wash. The other half of the cards required ten stamps to receive a free car wash, however they already had two stamps already. This gave customers the impression of having a head start even though the goal of getting customers to purchase eight car washes remain unchanged.

The study showed that “the redemption rate for those possessing a card requiring 10 purchases, yet endowed with two stamps, was 34% versus just 19% for those who possessed a card requiring a total of eight purchases.” The perceived head start gave the customers the illusion that they only had to complete a task that was already started for them, versus having to start a new task. That gave customers the motivation to participate in the program.

Gamifying your loyalty program can dramatically increase the participation rate. Using elements of game play that capitalize on human psychology are extremely effective. So, if you want to win with your loyalty program, it’s time to get in the game.

This article was written by Loyal~n~Save, an omni-channel customer loyalty solution for retailers looking to increase customer retention and new customer acquisition.