This is Part I of “Gamification In Retail,” a four-part series dissecting Gamification: what it is, why it’s growing and how best-in-class retailers are leveraging it. Part II will appear in the March 20 newsletter.
Games are powered by six core elements: desire, incentive, challenge, achievement/reward, feedback and mastery. Human nature has wired us with an innate urgency to become the best at a specific activity, and more importantly, be rewarded for our expertise and dedication.
Hence the appeal of gamification: a principle and marketing tactic that is gaining quick momentum in the retail industry. In fact, the gamification market is currently worth approximately $100 million and is expected to reach nearly $2.8 billion by 2016, according to data released by M2 Research.
Gamification is the process of utilizing game mechanics and thinking to drive engagement and action. By rewarding users with points and badges in return for frequent visits and purchases, the applications arm retailers with the resources to increase in-store foot traffic, as well as purchase rates.
Initially, the success of check-in applications such as foursquare and shopkick predicted the potential and lucrative benefits of this gaming strategy. However, it was social game developer Zynga that spotlighted the power of gamification when the company filed for an IPO in December 2011. The provider of Facebook-based games — including FarmVille, CityVille and Words With Friends — currently is acquiring more than 200 million active users per month, and is the shining example of social gaming. In fact, Facebook uncovered in its own IPO filing that Zynga was a key asset to the social network’s success during 2011, spotlighting the anticipated explosion of Internet gaming.
Facebook noted in its IPO filing: “We currently generate significant revenue as a result of our relationship with Zynga, and, if we are unable to successfully maintain this relationship, our financial results could be harmed.” The S-1 form also indicated that Zynga profits account for 12% of the site’s total revenue.
With social games moving more to the forefront, retailers are presented with a prime opportunity to tap competitive tools and strategies to improve engagement, drive in-store traffic and boost loyalty initiatives.
Companies across markets are partnering with gamification vendors, including Badgeville, Bunchball and Ifeelgoods to create more memorable brand experiences. Currently, nearly half (47%) of client implementations focus on user engagement, while 22% revolved around brand loyalty and 15% are focused on brand awareness, according to M2 Research.
“Gamification in retail is turning typical retail customer behavior — purchasing, visiting a web site or store, or signing up for a newsletter — into elements of a game where customers receive tangible or symbolic rewards for their participation in this game,” said Scott Silverman, Co-Founder and VP of Marketing for Ifeelgoods, a virtual goods solution provider. “I would expect that at least half of all national retailers will consciously employ gamification strategies in the next two to three years. The majority of retailers we’re talking to today are exploring gamification; it’s also a big topic for senior executives. They are in the process of finding the right application to bring it to their business.”
Gabe Zichermann, author and Summit Chair/CEO of Gamification Co, indicated that more companies, especially retailers, will begin to employ gamified methods as the company-wide benefits become more widely recognized and tangible. “Continuing on the extraordinary momentum of 2011, the gamification industry will grow substantially this year,” Zichermann told Retail TouchPoints. “Some of the major themes we’ll explore at Gamification Summit 2012 in San Francisco [in June 2012] mirror the dynamic shifts happening in this space. These include: the gamification of work, particularly the engagement of frontline employees; the participation of ‘big loyalty’ and how this will affect gamification efforts; and design challenges — from reward models to long-term attention.”
With gamification becoming more vital component of optimal customer loyalty strategies, many retailers are wondering how they can implement competitions and challenges to improve ROI. Through detailed investigation of target audiences, merchants can determine the optimal channel, as well what rewards/incentives are most effective in driving action and brand allegiance.
Zichermann characterizes gamification as “the process of using game thinking and game mechanics to engage audiences and solve problems.” A widely recognized advocate of gamification, Zichermann has authored two books on the subject: Gamification by Design: Implementing Game Mechanics in Web and Mobile Apps and Game-Based Marketing: Inspire Customer Loyalty Through Rewards, Challenges and Contests.
“Put another way, it’s about taking the best ideas from games, loyalty programs and behavioral economics and using them in new, exciting ways,” Zichermann explained.
Industry analysts are keen on the concept of gamification for all types of brands. A recent Forrester Research report, titled “Gamification Of Marketing Strategies Boosts Consumer Engagement,” spotlighted how brands, films and merchants alike can achieve increased loyalty, purchase rates and other results by tapping into the human need for achievement and success. Forrester analyst Elizabeth Shaw described the tactic as “The insertion of game dynamics and mechanics into non-game activities to drive a desired behavior.”
Previously, Forrester defined successful engagement as degrees of the four I’s: involvement, interaction, intimacy and influence. Gamification utilizes these strategies to enhance communication and action, and in turn, create more compelling and memorable experiences for consumers, Shaw reported.
According Shaw, gamification encourages “the four I’s of engagement” in the following ways:
Involvement: Gamification allows brands to increase participation among consumers, leading to increased site returns, new visitors and registrations.
Interaction: Content becomes more meaningful to shoppers when they are connected to brands and retailers. Gamification incentivizes players to interact with products, leading to the increased likelihood of purchase. For example, marketers can leverage an action/reward dynamic for the activities and behaviors they want to increase, the report explained.
Intimacy: A leading challenge for retailers is making their brand more approachable and personable. By tapping gaming strategies, merchants can spark a real-time, intimate connection with consumers through fun and rewards, leading to long-lasting and trusted relationships.
Influence: Incentives such as tokens, badges and offers encourage consumers to share games with their social graph. Encouraging these “social bragging rights” helps boost word-of-mouth and encourages bystanders and peers to join the game.
Through these four areas, retailers can develop a gamification strategy that drives action and encourages brand loyalty.
Part II of the “Gamification In Retail” feature can be found here.