This article examines the underlying of gamification, explores how brands can utilize gamification to engage and motivate consumers and examines some examples of brands that are successfully utilizing gamification.

1. January 2014
By Michael Goodman
Nexus Research Group Report
Gamification: Driving Engagement and Loyalty
Executive Summary
In a world where consumer’s attention and loyalty are increasingly fragmented, brands are searching
for new ways to engage with consumers, build loyalty, and ultimately drive sales. One method is through
gamification, which is the use of game theory and game mechanics in a non-game context to engage and
motivate consumers. Gamification incorporates principles from game design, psychology, marketing,
economics, and strategy to create a powerful tool for engaging and motivating consumers.
Though the term gamification is relatively new the concept and techniques have been around for
decades. Early examples include prizes in boxes of Cracker Jacks and cereal boxes to entice young
shoppers while later, more sophisticated efforts include airline frequent flyer programs or the American
Express Platinum Card.
Today, retailers and manufacturers such as Samsung (Samsung Nation), Pepsi (Foursquare/Pepsi
Reward from SXSW 2011), Target (Virtual Currency, Rewards), and CVS (Extra Care Card) are using
gamification techniques to engage and guide consumer impulses (see Exhibit 1).
Exhibit 1
Gamification Examples
Source: Google Images. 2013
Nexus Research Group has published this content for the sole use of Nexus Research Group and its clients. It may not be
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to change without notice.
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2. Gamification: Driving Engagement and Loyalty
January 2014
The remainder of this article examines how these underlying principles form the foundation for
gamification, explore how brands can utilize gamification to engage and motivate consumers and
explore some examples of brands that are successfully utilizing gamification. While gamification
principles can be used in a variety of ways this POV will focus on their use in a marketing context.
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3. Gamification: Driving Engagement and Loyalty
January 2014
Introduction
Brands have always had to contend with the need to reach consumers through multiple forms of media – TV, Print,
Radio, Internet etc., but this challenge is compounded by the ever increasing number of connected devices consumers
can used to connect to media. According to the TVBs 2013 Infinite Dial Study, there are 256 million TV users in the
U.S., 243 million radio users, 232 million Internet users of which 182 million are connected at home via broadband,
139 million smartphone users and 27 million tablet users (see Exhibit 2). At times it seems like trying to reach
consumers is like searching for the provable needle in a haystack.
Exhibit 2
Media Fragmentation
Source: Infinite Dial 2013, TVB – TV Basics, Arbitron & RADAR
Number of Users
300
256
Persons 2+
(in Millions)
250
230
243
232
223
200
182
178
139
150
2003
2013
100
33
50
27
NA
NA
0
TV
Radio
Internet
Home Smartphone
Broadband
Tablets
Further compounding this issue is fragmentation within each medium. For example, television has seen an explosion in
the number of options available to viewers. According to the Nielsen Company’s "Television Audience 2008", the
average TV household received an average of 130.1 channels, of which they viewed 17.8 for 10 or more minutes per
week. While it might not seem like TV households are view a significant number of available channels it is important
to keep in mind that each households views different channels, resulting in a fragmented audience. This is evidenced by
the continued erosion of broadcast network TV ratings over the years.
Nor is the online world any better, examination of the top ten social networks shows an equally fragmented audience.
While Facebook clearly dominates with an estimated 750 million unique monthly visitors, other social networks have
very significant user bases as well. In addition, it is not uncommon for consumers to have accounts with multiple social
networks.
Also, the demographic composition of social networks can vary greatly. In a study conducted by the Pew Research
Group in 2012, Pinterest was rank 4th overall based upon estimated unique monthly visitors but among teens 12-17, it
fell to 8th place. In comparison, Instagram, which is not even ranked among the top ten social media networks in the
Pew study, was the 3rd most popular social media network among teens 12-17.
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4. Gamification: Driving Engagement and Loyalty
January 2014
Exhibit 2
Top Ten Social Networks
Source: eBizMBA, Most Popular Social Networking Websites - October 2013
Top Ten Social Networks
Facebook
750.0
Twitter
250.0
Linkedin
110.0
Pinterest
85.5
MySpace
70.5
Google+
65.0
DeviantArt
25.5
LiveJournal
Est. Unique Monthly Visitors
20.5
Tagged
19.5
Orkut
17.5
0
100
200
300
400
500
600
700
800
Est. Unique Monthly Visitors
(in Millions)
As a result of all this fragmentation, brands must to try to catch an increasingly elusive consumer, requiring them to
attempt to engage consumers across multiple media types and platforms. To counter this fragmentation, brands need
new ways to engage with and build a loyal customer base. One way to achieve this is through gamification.
Gamification is not a game, nor is it an attempt to make everything into a game. Rather it is the application of game
dynamics, game elements, and game mechanics to non-game experiences to motivate and drive a behavior. This might
include building brand loyalty, increasing spend, driving consumers into a store, increasing website traffic, registering
new users, or getting shoppers to write a product review or send an invite to a friend. While not a game, gamification
techniques do utilize many key game principles – the most important being fun.
Other principles include:
Implied rules of play.
A framework within which play is undertaken.
A problem solving activity approach with a playful attitude .
A balance of structure and exploration. Too much structure (rules) and the game is not fun, too open-ended and
the game has no purpose.
Criteria for success (winning) and failure (losing).
Players must make meaningful choices.
Involve learning or problem solving. At some level there has to be a challenge or problem to be overcome.
Chance or randomness.
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5. Gamification: Driving Engagement and Loyalty
January 2014
Growth of Gaming
While gamification is not gaming they do share many core principles and gaming has seen tremendous growth over the
past decade. No longer the domain of adolescent males, games are played by everyone (young, old, male, female) on a
variety of devices (PCs, laptops, smartphones, tablets, video game consoles, handheld consoles, etc.). It is estimated
that 2 out of 3 U.S. households are active in electronic games of some sort with over half the population between 18
and 49 playing some form of game once a week. According to the Entertainment Software Association 2012 Essential
Facts Report:
Consumers spent $24.75 billion on video games (physical and digital), hardware and accessories in 2011.
The average gamer in the US is 30 years old and has been playing for 12 years. Sixty-eight percent of gamers
are 18 years of age or older.
Forty-seven percent of all gamers are women and women 18 years of age or older are one of the industry's
fastest growing segments.
Today, adult women represent a greater portion of the game-playing population (30%) than boys age 17 or
younger (18%).
Thirty-three percent of gamers play games on their smartphones, and 25% play games on their handheld
device.
Since the earliest days of video games, critics have been skeptical of them as a medium. But the reality is that their
scale is enormous, with a potential reach rivaling that of television. But what makes video games so appealing?
Chalk it up to basic human nature. Video games are designed with a structure and system of rules in which players will
a) enjoy the process or journey, and b) create a sense of added value. A fun process coupled with a system for
incentives or rewards for a job well done can become downright addictive. These same game-play mechanics that make
games so addictive are slowly working their way into other applications.
With "gamification," companies study and identify natural human tendencies and employ game-like mechanisms to
give customers a sense that they're having fun while working towards a rewards-based goal. In doing so, they hope the
added value will enable and reinforce positive behavioral change across a wide spectrum of non-game-related issues.
Gamification techniques can be applied in a variety of ways (see Exhibit 3).
External. The most common applications of gamification principles is in sales and marketing, where
gamification techniques are being used to engage with consumers, drive awareness, build loyalty, and
ultimately drive sales. In addition, gamification provides invaluable data for use in analytics and predictive
modeling.
Internal. Though external applications of gamification principals have garnered the majority of publicity
internal applications to motivate employee behavior have also been successful. Target has applied gamification
principals to its checkout process to motivate employees and speed up customer checkouts and salesforce.com
has integrated leaderboards into its software.
When using gamification principles internally, companies must take care to apply gamification techniques with
care in order to not to de-motivate employees. Disney tried to motivate the uniformed laundry crew at its
Paradise Pier hotels in Anaheim by installing big flat-screen monitors which displayed employees' work speeds
compared to one another. The screen displayed the names of several coworkers at once, with "efficiency"
numbers in green for those near or above 100% of the expected pace and red numbers for those who aren't as
fast. This led to dissension and made employees worry that a reasonable pace won't be enough to keep the boss
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6. Gamification: Driving Engagement and Loyalty
January 2014
happy. According to union officials, employees have been known to skip bathroom breaks out of fear that their
production will fall and managers will demand an explanation. Disney laundry employees refer to the
scoreboards as the “electronic whip.”
Behavior Change. Gamification principles are even being used to enforce speed limits, encourage weight-loss
and healthy lifestyles, and even assist in post-concussion treatments.
Exhibit 3
Where Gamification Adds Value
External
•
•
•
•
Internal
• Human Resources
• Sales
• Product Enhancement
• Crowd Sourcing
Behavior
Change
Marketing
Sales
Customer Engagement
Loyalty
• Health & Wellness
• Sustainability
• Personal Finance
Examples of Gamification
As noted previously, gamification is rapidly gaining acceptance across a wide range of industries. Noteworthy
examples include the following:
Xbox Live - Achievements, Leaderboards, Points
Microsoft was an early adopter of gamification techniques when they introduced achievements. Gamers earn
achievements by completing specific tasks or actions in games. This motivated gamers to play deeper into games and
experiment with titles beyond specific genres. It also creates an aggregate and visible record of their achievements for
all to see.
Source: iMediaConnection
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7. Gamification: Driving Engagement and Loyalty
January 2014
CheckPoints - Virtual Currency, Rewards
Users scan specific products in exchange for CheckPoints, which can then be exchanged as a virtual currency for
rewards such as gift cards. Brands create programs with CheckPoints to drive retail activation and product engagement
all based on gamification of the shopping experience.
Source: iMediaConnection
Shopkick - Virtual Currency, Rewards, Contests
Similar to CheckPoints, ShopKick incents users with specific retailer offers. ShopKick users interact with products in
store and earn points which translate to virtual currency. ShopKick also incorporates a hyper geo-targeted approach to
driving engagement. By rewarding behavior by simply entering a participating retailer, ShopKick can influence where
consumers shop.
Source: iMediaConnection
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8. Gamification: Driving Engagement and Loyalty
January 2014
Points, Badges & Leader Boards
As noted previously in the Disney example, poorly thought out or executed attempts at gamification can have negative
consequences. Two common pitfalls that brands fall into include active disengagement and an over reliance on points,
badges and leader boards.
Active Disengagement. This when a consumer realizes their behavior is being manipulated for no reward.
While badges and points may deliver momentary value, they generally do not offer long-term value. More
importantly they offer little likelihood of generating long-term consumer engagement.
PBL Dependency. A second, and related trap brands fall into is an over reliance on points, badges and
leaderboards. These three game elements are the most common rewards used to motivate consumers and when
used correctly are very effective but an overreliance on these three elements leads to them losing their
effectiveness overtime.
For example, cash back programs can quickly transition from a program to engage consumers and encourage
customer loyalty to an expectation that “I am going to get money back” and if they don’t offer me this I will
take my business elsewhere. This behavior generates no loyalty to the brand and makes it difficult for brands to
modify their loyalty program without alienating their customer base.
To better understand why this is so we need to take a step back and examine some of the psychology that underlies
gamification. While gamification draws upon a variety of disciplines in psychology (e.g., behavioral economics,
behaviorism, self-determination theory) I’m going to focus on Motivational Theory for the moment. In particular, we
will take a moment and discuss Intrinsic and Extrinsic Motivation.
Intrinsic Motivation. Intrinsic motivation is an innate drive to do something (or your pursuit of activities that
are rewarding in and of themselves). Some examples of intrinsic motivations in gamification include
communities, gifting, duels, unexpected rewards, and quests.
Extrinsic Motivation. Extrinsic motivation pushes consumers to do (or avoid) something because of an
external reward or punishment. Some examples of extrinsic motivations in gamification include points, badges,
leaderboards, and fixed levels.
Both intrinsic and extrinsic motivation will motivate consumers to engage in various behaviors, however, intrinsic
motivation, though more difficult to implement yields far more powerful and sustainable results. Particularly when
combined with extrinsic motivations. Extrinsic motivation when used alone loses its effectiveness overtime and in
some cases can be outright de-motivating. Care must also be taken when combining intrinsic and extrinsic motivations
that extrinsic motivations do not crowd-out or replace intrinsic motivations.
At the same time too much intrinsic motivation, without a tangible reward can be problematic as well. The best
combination of motivations is a mixture of extrinsic and intrinsic motivation. An unexpected reward accompanied by
praise from the community is the ideal solution to ensure the right motivation with the right connection. One of the best
sites to see this in action is Fitocracy.com. Fitocracy is a website dedicated to helping consumers exercise and lead a
healthy life style. It does a great job combining extrinsic rewards (e.g., points, badges, leader boards) with intrinsic
rewards (e.g., interest groups, community praise, shared experiences).
Key Takeaways
Gamification has received a lot of attention recently but their remains a lot of confusion around gamification. What it
is, exactly? How it should be implemented? What makes it work? Gamification is not a magic bullet that will cure all a
brands ills. Just adding a few badges and a leaderboard is not gamification. Here are a few things to remember when
gamifying.
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9. Gamification: Driving Engagement and Loyalty
January 2014
Gamification is not just about points and badges. While status icons, points, and badges are important
elements to consider when designing a gamified system including achievement-based goals such as skill-based
learning and “big wins” is more critical.
Not everything should be gamified. Gamification has many benefits. When done well it can increase brand
awareness and engagement and help drive sales. Used internally, it can help increase production, build
teamwork, motivate employees to achieve goals, and increase voluntary engagement. But when implemented
incorrectly or applied to the wrong behaviors there is danger of goals shifting to “winning” when winning isn’t
what’s important, cheating or “gaming” the system, masking a flawed product or process or fatigue–meaning
stakes must constantly rise to be effective
Set clearly defined goals to measure success or failure. Why are you gamifying? What are you trying to
achieve? Having clearly defined goals prior designing a gamified system helps to ensure that your gamified
system is properly aligned to your objectives. Sometimes this may even indicate that gamification is not the
right tool for the job.
Delineate target behaviors. Identify specific behaviors you want to impact. Are you trying to get consumer to
buy more paper towels? Do you want people to feel positively about your brands? Being specific about the
behaviors you want to encourage allows you to design specific elements into you gamified system to
encourage these behaviors. Delineating behaviors also allows you to ensure that the behaviors you want to
encourage are not in conflict.
Make it fun. Gamification, while not a game draws upon the principles of game design and game mechanics.
The most important being it has to be fun.
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