Upping Your Rewards and Loyalty Game

September 08, 2020

Upping Your Rewards and Loyalty Game

As the coronavirus pandemic continues to disrupt our way of life, new and emerging ideas are reshaping almost all aspects of the retail industry. Many of the trends already present prior to the pandemic are accelerating, such as the investment in delivery services, automation, and digital commerce. At the same time, consumers are enjoying more and more power as they connect to brands and retailers at multiple levels physically and through digital channels. Never have people had this much influence on what others will buy or use, which makes customer retention and loyalty more important than ever. Yet, all the latest customer loyalty statistics show that holding on to your existing customers while attracting new ones is becoming increasingly difficult.

Get in the Game!

For many customers, loyalty as we know it today, has become synonymous with discounts. Customers have been conditioned to think this way, since most companies offer points programs and rewards without strategically thinking about truly building individual customer engagement. According to Forrester Research, more than 75 percent of customers are members of loyalty programs for the discounts. As a result, customers may be members of multiple loyalty programs, countering the nature of what it is to be loyal.

At spindy, we believe the next generation of customer engagement and loyalty must be focused on excitement and entertainment. Excitement and entertainment are critical elements of a loyalty and rewards program if you are to organically leverage social platforms. Gamification is one of the most appealing ways to add these elements to a loyalty strategy, both customers and companies will see mutual benefits.

Gamification Keeps Consumers Coming Back

The sweet spot for gamification today is digital applications, with consumer brands, such as Samsung, Nike and Pepsi, leading the way. Programs like McDonald’s famous Monopoly game have pioneered the success of gamification in the restaurant industry: “We've found that when people play the online Monopoly game, there's a level of customer engagement that keeps them coming back,” Chris Hess, VP of McDonald's ad agency The Marketing Store, told Promo Magazine, adding “They're quicker to get back into the store and revisit.” 

While big brands have the resources to develop customized gamification applications, there is a tremendous opportunity for coalition loyalty platforms to aggregate loyalty programs from many retailers, services and brands. Some examples of these aggregators exist today, such as Air Miles in Canada, Nectar in the U.K., and Shopcade and Womply in the U.S. However, these programs use only basic game mechanics and extrinsic reward schemes. The opportunity for emerging coalition loyalty platforms is to further engage members with more intrinsic rewards and more sophisticated game design approaches.

Gamification, usually described as the application of game elements to non-game contexts, is a fast-growing trend across many facets of business. Gamification takes what we like about games and incorporates these features into everyday activities to make them more exciting and engaging. Combined with cash rebates and the science of variable rewards, gamified loyalty builds powerful, lasting consumer engagement. 

The Science of Gamification

The concept of variable rewards was first documented by B. F. Skinner in the 1930s. Since then, researchers have further refined the understanding of reward driven behavior to recognize that dopamine, the neurotransmitter that drives us to search for rewards, is released in the brain in greater quantities when rewards are unpredictable. Rather than using conventional feedback loops, variable rewards based systems employ this new, stronger habit-forming mechanism to engage users and drive sales. A study by Cambridge University (and further studies since) found that gambling is rewarding – for your brain, at the very least. Any kind of gambling – for real money, or even for free – triggers the brain’s reward-circuit – which releases dopamine, as discussed above – and makes you feel good. These same principles can be applied to retail, without creating loss for the consumer, while utilizing the same psychological incentives that keeps the patrons of casinos in front of slot machines.

Increase Perceived Value with Gamification

Fundamental to the popularity of gamification in a rewards or loyalty program is that that value derived by the consumer is often greater than the actual reward received. For example, a consumer playing a cashback game may only get back 10% of the purchase, but the opportunity to receive 100% cashback will elevate the value of that 10% and keep them coming back to play again, and our data shows, spend more.

Traditional rewards and incentive programs were effective two decades ago, but the world has evolved. Simply increasing points or offering large discounts no longer drives customer engagement and often hurts brands. What is needed, instead, is a smarter and more thoughtful approach to creating deeper, more reciprocal relationships with customers, with less focus on giving-away-the-store to program-hoppers and tire-kickers only interested in a transaction-based relationship.

Gamification has evolved over the past several years from an untrusted and misunderstood “cool new thing” to become a staple of serious business strategy. Businesses will need to look to vendor partners such as spindy that can deliver a comprehensive, yet easy to manage solutions to stay ahead of the curve. Understanding loyalty, behavioral psychology, and small business management is critical to designing a sustainable gamification promotion program. Visit spindyapp.com to see how spindy works for consumers and if you are a retailer operator, more information is available on our business site.

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Balazs Wellisch

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