Monday, January 17, 2011

What Happens when Old World Loyalty Meets Gamification? Let the Loyalty Gamification Begin!

One of the hottest topics in loyalty and technology right now is Gamification - the technique of applying game mechanics to non-game situations, like health and education.

Although the evolution of gamification ranges from green stamps, to frequent flyer programs, to virtual games like Farmville, and furthermore, there are hypotheses on turning everyday reality into games, very few has asked the key question - how can we apply the principles of gamification back into traditional loyalty points programs, such as AAdvantage and Airmiles? What would that look like?

Well, remember, that the most common method of communicating with members is the monthly points statement. So that’s the best place to let the gamification begin. A glimpse at the future is shown below.

1. Virtual currency: Traditional loyalty programs already use virtual currency, which is a core principle of gamification. Surveys have indicated that cardholders look forward to their account statements - so show them their account balances. And for the convenience of your cardholders, display the cardholder's account number too. When someone is redeeming their points online, they're more likely to search for their account number through their emails than to dig out cards from their wallets.

2. Progression: Show your cardholders where they are in relation to their redemption goals. Many cardholders have already set mental redemption goals, but you can formalize that by giving them an opportunity to set goals during enrolment or through your website. Display their progression as a percentage of points towards the desired goal since it’s a human instinct to want 100%.

3. Levelling: From a loyalty perspective, levelling is typically known as a loyalty class or tier, such as the transition from silver to gold. In most cases, levels are a simple way of referring to a certain amount of points, just like how a yard is another way of saying three feet (keep in mind that in some games, levelling and the virtual currency is not correlated, e.g., you collect coins in Mario Bros., but that doesn’t get you to the next level). Let your cardholders know if they're close to levelling up to the next loyalty tier. Encourage them to spend more by giving them suggestions on how they can accelerate to the next level.

4. Personalized Promotions: Increase engagement with your cardholders by displaying things that they've indicated that they like or prefer. You can still display the same core offer to all your members, but be sure to tailor each message to each group of cardholders using their preferences. For example, if you want to increase bookings at a particular resort, you can highlight the great golfing that's available to members who are golfers, but highlight the spa for members who are spa-goers. The key is to tailor the offer message to increase the probability of a click-through.

5. Leader Boards: Leader boards are a staple in great games – everything from Pac-man to Angry Birds. Leader boards create a sense of achievement, excitement, and a competitive community. On the other hand, typical Loyalty programs are often very secluded and anti-social so the opportunity to improve them is tremendous. It won’t be trivial since there may be privacy issues when it comes to displaying leaders because points are tied closely to actual spending. However, in the brave new world, a cardholder would be able to see where they rank relative to their peers in their region or at a store they frequent.

6. Bonusing: Be creative with bonusing. Give bonus points for behaviours other than purchasing a certain product or buying at a particular time. For example, you can give away bonus points for completing profiles and surveys, for "liking" your Facebook page or for answering questions on Twitter. Use bonus points as a way to increase brand engagement, but use them carefully to prevent inflation of your virtual currency.

7. Lottery: These points are based on fundamental issues in human motivation – the value of a surprise (or random reward) has an exceptionally strong impact in creating repetitive behaviour. So keep your cardholders guessing by injecting a bit of randomness in your program. Examples of this are the age-old swipe-and-win or a more specific implementation such as the Chase Picks up the Tab promo where Chase Bank randomly pays for entire purchases made with Chase cards on behalf of their cardholders – in fact, they claim that they do this every five minutes!

8. Status: Status is usually tied to tiering in traditional loyalty programs, e.g., Elite status in AAdvantage. In traditional loyalty programs, levelling is a predictable course to achieving status since more purchasing means more points, and in turn, more points means higher levels and status. However, we should learn from social gaming applications like Foursquare and Gowalla where status is achieved through social competition instead of predictable levelling. For example, a member can be crowned the "mayor" of a location with special privileges if they frequent the location more than others. Keep your status competition hyper-local (i.e., down to the location level) so that the attaining the status looks achievable.

There are many more game mechanics that you can use in a loyalty program, but this is a start to bridge new world gamification to old world loyalty.

Monday, January 10, 2011

Facebook Deals - The social media killer of loyalty stamp cards?

Over the weekend, I went into my hyper research mode on discovering social media tools for loyalty. I managed to dig out something called Facebook Deals. Even with diligently checking my twitter feed and reading the loyalty tech news every day, I managed to miss the launch of this product. Apparently, it was born with a whisper in November in conjunction with the launch of Facebook Places.

Organizations can use Facebook Deals to create simple loyalty programs for Facebook users. By checking in at business locations, Facebook users can unlock and redeem promos and discounts. Think Foursquare meets Groupon. To make it easy for businesses to choose a loyalty program, Facebook created four options for simple loyalty programs.

The following loyalty program options are excerpted from Facebook:

1. Individual Deal: You can offer this type of deal to both new and existing customers. You may create Individual Deals when you want to launch a new product, get rid of excess inventory, offer seasonal incentives, or simply get more people into your store.

2. Friend Deal: Friend Deals allow you to offer discounts to groups of up to 8 people, when they check in together. Friend Deals are a great way to build even more exposure for your business because more stories are generated when multiple people check-in.

3. Loyalty Deal: To focus on rewarding your most loyal customers, create a Loyalty Deal. These deals may be claimed by customers only after a certain number of check-ins. Depending on your business, the number of check-ins may vary. Please note that you must create a deal that is redeemable after no fewer than two and no more than 20 check-ins.

4. Charity Deal: Create a Charity Deal to make a donation to the charity of your choice. This is a great way for your business to give back to the community while adding a human touch to your business.”

Ex. Individual Deal Ex. Loyalty Deal

Can Facebook compete?

Yes, on the surface, it seems like Facebook's attempting directly to oust the group-buying behemoth Groupon, but take a look at number 3 in the deal types above entitled Loyalty Deal. In this case, just like a loyalty punch card or stamp card, you get a reward when you visit the location after a pre-configured number of times. From the screenshot above, you can see that even the UI mimics a loyalty stamp card. Best of all for the business, the service is free and Facebook doesn't make a cut from the deal like in the group-buying model. Once Facebook releases Deals to over 200 million active users on Facebook, 1.5 million active business pages and tight knit online social communities, it seems a no brainer that Facebook Deals can be the winning formula to replace the cumbersome old loyalty stamp card - or will it? Here are my thoughts on why it won't:

1. User adoption to Facebook Places is still early - instead of checking in with Places, most people are still using the good ol' Facebook status update function to communicate where they are. Additionally, not to discount Facebook’s potential, there are other vendors farther ahead in providing location-based status updates among friends.

2. Location-based marketing is still in it’s infancy - most small and medium-sized businesses are still struggling with Twitter, let along trying to understand how location-based marketing can benefit them.

3. Consumers need a smartphone and a Facebook account to participate - even though smartphone and Facebook usage is rising dramatically each year, less tech-savvy consumers won't fit that demographic. This means that even if a merchant is using Facebook Deals as their loyalty program, the merchant will still have to offer an offline version of the stamp card.

4. Facebook is moving far from its core product - when you think of Facebook, you think of it as great tool for connecting people, sharing content and creating online communities. You probably won't think of Facebook as a provider of location-based services or couponing. These titles are reserved for Foursquare and Groupon respectively. Again and again, when large tech companies reach a certain level of success, they start to deviate from their core offering and take other people's spaces. As we know from the flop of Google Wave, Buzz and Orkut, that approach just doesn't work. How can Facebook compete with the laser focus of Groupon’s product and sales teams? Often it is simply the first-to-market who dominates.

Don't get me wrong though. As businesses and consumers become more tech savvy, we'll probably see Facebook Deals become an integral part of consumer loyalty. However, there will always be a place for the paper stamp card.