In my last post, I mentioned that defining loyalty was still a hot topic with big brands in corporate America. Two roundtable discussions that I participated in produced distinctly different definitions of loyalty and the results made sense based on their respective business objectives.
The undeniable definition of loyalty that I’ve used for a while has to do with creating profitable behavior change. While some companies speak in esoteric terms about loyalty, they usually revert to mercenary evaluation methods when it comes time to justify annual budgets.
My quantitative approach was challenged recently by a client who served up its own definition of loyalty based on study, debate, research, and their public brand promises. The definition went like this:
“Create a repeat customer who is an advocate of our brands or products and who will actively recruit new customers through positive word-of-mouth
This advocacy is based on the highest levels of satisfaction, making the customer willing to risk their own character, trustworthiness and overall reputation with no reward beyond expressed appreciation of others”
The definition combines the tangible measures of repeat visit and purchase with referral and recommendation, one of the clear powerhouse marketing trends in the social realm online. It also includes a zinger at the end, implying that the willingness to recommend can be made “with no reward beyond expressed appreciation of others”.
This touches on exactly what game mechanics can bring to energize a loyalty program and why brands should carefully study the possibilities of employing “gamification” to stimulate behavior change on a consistent basis over time while drastically reducing the cost of the rewards needed to get the job done.
The loyalty business case is built on creating incremental profit contributions for a business which outweigh the cost of operating a program or series of campaigns by multiple orders of magnitude. When you dissect the operating budget of most loyalty programs as we know them, you’ll find that approximately 80% of annual expenses incurred are reward cost. Fulfilling points collected and redeemed by members with anything from gift cards, cash back or travel packages, costs money – lots of money.
Every business I’ve been in contact with over the past 2-3 years is seeking to deliver higher value to its customers through a loyalty program at a lower cost of delivery. By definition, a solution that can help to deliver this perceived high value while reducing costs is highly attractive at the least, a silver bullet at the most.
Using game mechanics as a core part of a loyalty program value proposition capitalizes on core aspects of human nature. As a people, we are competitive, we care what others think about us, and we like to finish the things we start. Yes, we’re not all the same, and there are variations of implementing game mechanics that can address a broad spectrum of stimulants to human behavior and trigger people to act.
That action can take the form of signing up for a loyalty program, completing a member profile, referring friends to the program, referring the loyalty sponsor’s brand to friends and family and much more. So far, we’ve seen gamification techniques work well in B2B and enterprise settings. We’ve also seen how game mechanics can increase customer engagement in communities and within specific web environments.
The next phase of evolution in gamification and loyalty will be to witness how the two intersect to create value for consumers, create long term sustainable behavior change and do it all at a lower cost of operation. Just the thought of it makes me want to play the game.