[Podcast] Loyalty Management Series: Gamification and How It Can Make Loyalty Fun (Or Not)

Game developers have been using data-driven motivational techniques to design highly addictive gaming experiences for years. Gamification applies the same principles that inspire people to play games – things like achievements, status and rewards – and applies them to non-gaming contexts to drive specific consumer behaviors. With the ascendance of big data and sophisticated analytics, businesses have a much more granular understanding of customer behavior and motivations, and are hence leveraging gamification techniques at greater scale and as an increasingly effective way to influence consumer behavior across a variety of different scenarios.

The social science behind gamification is real – and very effective. As an example, professors Joseph Nunes and Xavier Dreze conducted a seminal study entitled “The Endowed Progress Effect” in which they ran a simple loyalty program at a car wash to examine the impact of gamification on participation. In the program, customers received a free carwash for every eight paid carwashes. The participating customers all received stamp cards to keep track of the carwashes they used, but half the cards had eight empty slots and half had ten slots with two of the slots already stamped. While both groups needed the same number of stamps to qualify, the second group had nearly double the rate of completion – 34% vs 19%. By creating an artificial sense that they didn’t have to start from scratch, the professors had induced greater motivation in the second group.