Gamification and customer engagement: how to redesign retail 5.0 for the future

//Gamification and customer engagement: how to redesign retail 5.0 for the future

Gamification and customer engagement: how to redesign retail 5.0 for the future

2019-07-12T17:15:15+02:00 29 January, 2019|

Technology plays an important role in our daily lives. Nowadays we are all constantly connected, thanks to different kinds of devices: the use of smartphones, tablets and personal computers means we are online almost 24 hours a day.

All this deeply affects our behaviour and our habits, including the way we purchase goods and services.

One rule of selling is clear: the closer you get to the customer, the more likely you are to succeed! For this reason, engaging the customer has become the main goal for most companies. This means they need to create a deep emotional connection with users, enabling the creation of long/medium term relationships, able to generate profits and, above all, customer loyalty.

Today more than ever, companies aim to have customers who are supporters of the brand – so-called ambassadors, who have confidence in the brand, and spread the word amongst their friends.

Sales strategies based on discounts, promotions and special offers will be effective in the short term, but they will not be able to create engagement, interaction, nor loyalty among the referenced targets.

A price-based relationship is not sound, it does not increase the customer’s participation in the brand’s activities and will not be able to make the company thrive.

Moreover, a price-based relationship ends up attracting only opportunistic customers, who are constantly looking for the best offer.

This theory was confirmed by Gallup in its market research Gallup’s CE3™ – B2C Customer Engagement Meta-Analysis:

“Brands that involve their customers effectively will get 63% less friction with the consumer and

55% more in average spending “

 

Research has confirmed the positive effects that customer engagement has on a company’s results in terms of the overall number of commercial units (branches, stores and similar) and individual activities.

The survey collected data from more than 24,000 business units and interviewed almost 65,000 customers, selected from 9 of the main economic sectors spread across 12 different markets.

Customers were divided into three categories:

  1. Fully involved,
  2. Indifferent,
  3. Demotivated

According to Gallup, customers belonging to the first category are the main source of profit for a company and those who are most likely to establish a lasting relationship with the brand over time.

The reason for this is that they feel fulfilled and understood by the company, that they can count on it, they are proud of it and consider it to be suitable for them.

For example, according to the results, respondents who felt they had a high level of engagement with the hotels in which they stayed, tended to spend 46% more each year than those who feel disappointed by the same hotel.

The same result was found in banking services: each year, involved customers enable banks to earn 37% more than the unmotivated customers.

Furthermore, the research highlighted the significant differences in behaviour that the first category of users (fully involved) and the second (indifferent) have towards the brand.

If they are just “satisfied,” customers will not have the same value as those having a high level of engagement with the company.

This is the reason why classic consumer loyalty programmes do not work.

 

“Only 50% of users involved in incentive and loyalty transaction are really active.

Despite having received a prize, 20% of users do not redeem it. “

Source: Bond Loyalty Report

 

But how can we measure the engagement of our own users?

 

One of the most important metrics to measure user involvement is DAU/MAU: daily active users (DAI) and monthly active users (MAU).

It has become popular, since Facebook decided to use it to evaluate the applications on its platform.

Reference values with respect to user involvement are:

DAU/MAU <20% indicates a low level of engagement,

DAU/MAU> 20% indicates a good level of engagement,

DAU/MAU> 50% indicates an excellent level of engagement

What are the factors that influence DAU/MAU?

Flurry, an international company that deals with mobile analytics and advertising, has created a scheme which accurately shows the degree of customer loyalty for different categories of goods and services.

The scheme identifies 4 different quadrants with respect to the values of DAU/MAU of services/goods, according to the elements that characterise them.

engagement retention frequency

Source: Flurry

 

As a matter of fact, Flurry showed that the metrics for each service/good can be indicators of natural and cultural elements.

For example, services such as communication are used with high frequency: just think of email, social networks and chats. Of course, others are used less frequently: tax payment software will be used only once a year, and Halloween masks will be purchased only once a year.

Of course, Halloween masks are important for the market even if they are purchased only once a year. It would make no sense to use these products and services every day.

The conclusion, according to Flurry, is that a high DAU/MAU cannot be achieved in all categories. We, therefore, should not apply the same parameters when considering different categories, metrics have to be interpreted with reference to the type of business.

Retail disruption: how technology is changing our purchasing behaviour

 

The impact of technology has been strong in terms of user engagement, but the effect it has had on purchases is no less impressive!

In its research Disruption in the retail industry – Managing strategic risks (2015), Deloitte analysed past and ongoing changes, focusing on their constant growth.

Technological, social, political, economic and environmental changes have given rise to various dangers that threaten, and have led to modifications, in pre-existing models.

The behaviour of the consumer is one change: they alter their preferences and their decisions relating to how, when and where to buy. And this dreaded disruption does not spare the retail sector.

Developing new business models is now fertile ground thanks to these changes, while the classic models are faced with an increasingly uncertain future. They have to cope with the growth in e-commerce, new payment methods, sharing economy: all of which creates a new and totally different consumer-seller relationship.

In order to understand the significance of the phenomenon of retail disruption, just think of the exponential growth of online purchases. This has affected all of us, whether we are users or just spectators.

The study Dressed for digital – the next evolution in fashion marketing by BCG (Boston Consulting Group) and ZMS (Zalando Marketing Services) stated that by 2020 25% of sales will be online, compared to the current 20%.

This does not mean that real stores, as we know them today, will disappear. However, they will have to transform and improve. Indeed, they will play a leading role in creating an integrated retail experience, bridging the gap between digital and physical reality.

Retailers must be able to adapt their strategies according to the habits, behaviours and preferences of their customers.

Customers expect to see their needs anticipated and satisfied, almost in real time.

Not only do expectations grow, they also become more complex: the customer requires a facilitated experience, integrated into both the offline and online environment, without any interruptions. It must be able to inspire and guide them, so that their needs will be satisfied.

Companies need to be able to involve users. In doing so, they will encourage customers to undertake a customised “path,” which in turn will create a strong engagement with the brand.

A winning strategy means creating the right space for the customer: he/she should feel free to interact with the brand at the right moment. He/she shouldn’t feel forced nor obliged to commit if they feel they are not ready to do so.

These paths have to be open, but at the same time, should offer guidance, so that shopping becomes a pleasant experience.

Moreover, an interesting experience for the customer will also increase the company’s sales and profits.

Another factor which should not be underestimated is the personalisation of the shopping experience; the mass approach has long since passed.

The reason for this trend has been explained by Jessica Distler, a fashion expert and joint managing director of BCG: the greater the degree of personalisation in communication, the greater the retention and engagement of customers.

The study Dressed for digital – the next evolution in fashion marketing highlighted how online retail provides more opportunities for companies/brands to approach their customers, including through greater personalisation.

Through the use of personalised digital strategies, sales have increased by 15%!

Unfortunately, this is easier said than done. The performance of companies, however, is not proving to be consistent in this: 76% of companies recognise the potential of a personalised experience but only 13% actually implement ad personam strategies (email, social networks, screen advertising, etc.). This gap needs to be filled as soon as possible.

 

Gamification: how to increase user engagement

 

Change is the only constant element of our reality, therefore, retail disruption can be faced by building and designing a significant level of engagement for customers, with the aim of developing a long-term positive relationship.

Is there any better way to impress our customers than gamification?

The correct use of game levers that reward the player when he plays – and buys – the company’s brand have proved to be one the most effective solutions.

 

“Clients with a high level of engagement

have a meaningful impact

on the company’s final results”

Alex Gault – DeepMarkit

 

Engagement is essential for differentiating your company from its competitors, enabling it to stand out as being the best among, what seems to be, a never ending array of choices, ones that the user is forced make every day.

Gamification helps to increase engagement by finding ways to motivate, influence and, above all, involve the increasingly demanding modern user.

Browers, the director of Epsilon marketing, argues that gamification is a valuable tool for companies because it can make customers feel part of the engagement programmes, by using human nature itself. The natural tendency of people to socialise, learn, compete and achieve goals is the basic principle of gamification strategies.

Moreover, Browers underlines the fact that the correct use of gamification in a company loyalty programme should be able to create a specific advantage: the interactions with the brand will be simpler, more informative and more enjoyable.

 

With gamification, the customer journey follows in the footsteps of the player journey

 

The use of gamification in creating the customer journey, will increase the level of engagement thanks to the fact that it is based on the same logic used in game design.

Amy Jo Kim, a game designer, writer, entrepreneur, and director of Game Thinking, explained how important it is to develop a gamification path that takes into account the user’s experience over time. In fact, the customer journey must be able to adapt to the user’s increasing level of experience and competence.

Those using the application for the first time will not have the same degree of knowledge as those who have used it for many years, right? Therefore, it is essential to take these variables into account when formulating a gamification journey plan for the customer.

 

player journey

Source: Amy Jo Kim

 

According to Amy Jo Kim, a player journey scheme should group players into 3 main categories:

1.The Newbie- onboarding phase,

  1. The Regular – habit-building phase,
  2. The Enthusiast – mastery phase

The level of engagement must be high over time, and related to the type of player and their characteristics.

Gamification system developers should be able to find the right balance between the difficulty of the challenges to be faced, the information to be learned and the skills the player has to acquire in each phase.

The game mechanics must be shaped in a way to attract and support all three user categories, both in the short and long term.

Since time plays a crucial role in a player’s experience, let’s look at the elements Amy Jo Kim consider to be essential for each phase.

The newbie user will need to learn the fundamentals: for him/her, every element of the game is a novelty. They will need to be welcomed with a guide and/or a tutorial, provided with goals, understand their own progress and be rewarded with prizes. Moreover, it would be good to provide them – in moderation- with extrinsic motivations (tangible or intangible external recognitions).

The regular user, on the other hand, will need new and interesting content, challenges and activities that are able to keep their engagement high over time. A player who plays often wants to be able to meet and interact with other users, thereby laying down the foundations for the creation of a community. Moreover, they seek a meaning to their presence there, and thus build in their own intrinsic motivations (internal motivation deriving from the fun they receive, and the challenge they face, in performing the action itself, without the need for external rewards).

The engagement of the expert user will be powered by levers such as exclusivity – for example content to be unlocked, reserved for a privileged group- recognition, and the possibility of having a significant impact on the system and its components, including other users. In short, they want to feel different from the crowd and be recognised by the whole community as a guru and as a point of reference.

 

community time pattern influence

Source: Amy Jo Kim – Gamification Workshop 2010

 

Within a gamification system, goods and services have a lifecycle, and so do the communities which develop alongside it.

The graph devised by Jo Kim shows how time and the degree of influence within the system are correlated.

The aim is to succeed in creating societal systems capable of identifying and influencing players who have a high value within their gamification system.

This issue was described in detail in the Millington model, which lists four phases of a community’s lifecycle:

  1. Creation – the moment when the community takes shape, the activities are simple and slow. This phase should last a maximum of 9 months; a longer period could indicate the presence of problems (too few users – elements that push members away);
  2. Organisation – during this stage, things start to improve, the level of member engagement increases and, although the community has not fully developed, its growth has begun;
  3. Maturity – the community has become self-sufficient, users are now co-creators of content, activities are both individual (micro-level) and collective (macro-level);
  4. Mitosis – this phase occurs only if the community becomes too large and dispersed, so that it can’t continue to exist as a single group. The positive effect could be the creation of some “sub-groups,” that is smaller communities with objectives which are more focused than those of the main group.

 

Flow channel: the logic of engagement in gamification

 

 

But how does gamification manage to keep the level of user engagement high?

We can find an answer in the concept of flow, defined by psychologist and researcher Mihaly Csikszentmihalyi in his book Flow: the psychology of optimal experience.

The definition of flow as given by the famous psychologist is:

“The flow is a highly satisfying psychological state involving:

clear objective, Intense need for concentration, lack of interruptions/distractions,

clear and immediate feedback on progress toward the goal, sense of challenge.”

Mihaly Csikszentmihalyi

 

 

The optimal experience occurs when a person is completely engaged in an action; he/she feels totally immersed in that activity, so that euphoria and concentration are at their maximum level. Such a level of concentration leads to a loss of self-awareness and the sense of having lost track of time.

When a situation makes us feel in the flow channel, we feel so involved and efficient that we can achieve high quality results with hardly any effort.

The activity, carried out with such high levels of engagement and motivation, does not feel like a burden and time passes quickly and pleasantly. This can be applied both to leisure and work activities.

 

flow channel

Source: Mihaly Csikszentmihalyi – “Flow: The Psychology of Optimal Experience”

 

The graph created by Csikszentmihalyi represents the flow concept in the best possible way: its logic rests on the direct connection between the presence of increasing challenges in the gaming system and the continuous engagement of the user.

This type of scheme illustrates how you can increase your skills and achieve significant goals at the same time.

The best way to keep your users in the flow is to offer them the right amount of challenges based on their skills. Once again, personalisation is essential for game and gamification applications.

A right balance prevents users from experiencing boredom and anxiety, which are the enemies of engagement.

The user feels anxious when challenges are too difficult for their abilities, likewise they will feel bored if the level of challenge is too low compared to their abilities.

Raph Koster, author of the book A theory of fun for Game Design, described the gaming experience. Its mechanics in corporate gamification applications follow the same dynamics, like a pleasant learning machine. Its charm derives from the challenges and opportunities which can be realised, as well as the possibility of obtaining rewards and skills.

According to Amy Jo Kim the user is always the main point of interest, whether we are thinking of the creation process for a game, an application for gamification or a website. It is essential to understand what the user needs at the beginning of the process and, even more importantly, during the evolutionary process. The development of the application should be as fast as the user experience, and these changes are a clear example of this adjustment.

Gamification is able to support businesses by giving them the opportunity to keep up with the developments required in a constantly changing world. Its logics are able to leverage customer engagement: companies will have the right tools to remodel their action plan, without being overwhelmed by disruptive trends in progress.

We will talk about customer experience and many other applications of Gamification at the workshop HR Gamification in Milan.

Parleremo della customer experience e di tante altre applicazione della Gamification al seminario HR Gamification – Milano 2019