Tag Archives: gamification

Designing Loyalty Programs

American wallets are stacked with a number of loyalty program cards.  Be it a bookstore, or a coffee shop or a shoe store or a medical store, companies want to track your purchases.  Until recently, I have never stopped to think about how different the programs are. The thought-process started from a discussion about the Barnes and Noble’s loyalty program I had with an executive.

B&N loyalty program is a pay to play scheme, i.e., you pay an annual fee of some $25 and get 10% discount on purchases (I don’t remember the exact numbers).  So, essentially, if you spent more than $250 per year, you are better off.  B&N has designed it such that even if you did not have your card handy, the cashier will be able to give you discounts because he/she only requires your phone number.  They have made it easy because it relieves me from carrying around the loyalty card.  The cashiers do not bother to check any form of id either — I think it is their company policy.   The question that struck me was: would the patrons be freely sharing the card, or would they care about the company and not share it?  I own a B&N card but I have never shared it with anyone (except for my wife, of course).  But I was reasonably sure that these cards are shared by others.  Unsurprisingly, I found a number of people who shared their cards.  They often referred to the card as a “discount” card rather than a “loyalty” card. The adjective that they used possibly describes how they instinctually related to the card.

B&N did not change the existing processes but started gamifying the loyalty program and rewarded people based on how extensively they used the loyalty program cards.  I would expect the perverse incentives to more likely kick in that could lead to worse outcomes for the company.   I don’t have any measure of how successful this gamification venture was but I had an opportunity to chat with a local B&N store cashier soon after their roll out.  Apparently, on the weekend before my visit, a customer generously shared the loyalty card details — i.e., her phone number — so that everyone in the line behind her could get discounts also. Perhaps, the customer did so to win in the gamified engagement.

The question from a “design for instinct” standpoint is: how would you change B&N’s loyalty program so that it still offers the benefit of its customers not carrying the card or id but at the same time limit free-riding?

A colleague of mine, Mohit Tawarmalani, and I discussed this issue and we came up with the following answer.  Anytime someone uses the phone number in order to take advantage of the reward, why not just charge the customer full amount (without discount) but keep track of the discount amount separately?  The only way someone can redeem the discounts is by showing some form of ID or by showing the loyalty program card.  This simple change will naturally limit the use of shared cards.

 

Problems with “Gamification”

I mentioned in one of the previous posts that my thinking has been reshaped because of preparing for the gamification course at Purdue.  However, after thinking about the gamification courses I taught/teach, I am convinced that the word “gamification” does not truly portray what companies are trying to do.

I perceive that many companies are imagining gamification only as a means to incorporating games within their design.  I have seen many start-ups that are trying hard to impose games into various contexts, which don’t even make sense.  I don’t think that these start-ups are going to be successful in the long term.  Similarly, I have engaged in many conversations (some of them with my students also) that reflect serious attempts to formulate a game in irrelevant scenarios.  I was struggling to identify where the issue is.  The fundamental problem lies in what we call as gamification.  Our nomenclature restricts our thinking in many ways.

First, let me take my professorial role to explain what the concept of gamification fundamentally relates to.   It is a very simple idea.  Think about two different worlds.  In one world, some target set of people are not engaged in an intended manner (not purchasing product, or not providing reviews, etc.).  Suppose we can conceive of the second world that is interconnected to the first one — i.e., the actions in the second world can be mapped into actions in the first.  The main concept is how do you design the second world so that the target audience’s behavior in the first world is as intended?

Games are one form of designing the second world and generating the mapping.  It should be clear that it is just a form.  What we actually are doing is that we are “designing for human instincts.”  This is the main concept behind several of the recent transformations I see in this world.  Because games have been around for ages, we find its appeal instinctively.  However, instead of referring to the phenomenon as “design of instincts,” we are restricting our ability to come up with new transformations when we call the concept gamification.

Gamification course @ ISB

The gamification course I teach at ISB is the second time I will be teaching the same course.  To the best of my knowledge, this is only the third time that this course has been offered anywhere in the world (first was at Wharton, second was at Purdue).  The co-instructor on the course is Ram Gopal from UConn.  It is going to be a fun experience.

The gamification course at Purdue attributes its inception to ISB.  Originally, in early 2012, I was asked to teach an elective at ISB.  I did quite a bit of investigation.  When I realized that I could teach the same course and gain some experience at Purdue, I decided to teach it in fall 2012.  When I taught at Purdue, the ideas that I learned while preparing for the course has completely changed my thinking.  This thought-process is very fascinating.

I want to next highlight how my gamification course is different from other gamification courses (including Kevin Werbach’s course).  Gamification means engagement.  That said, one of the key distinguishing feature of my course, which is different from any other gamification course is that I approach engagement not just from game perspective but it is broader.  I am looking forward to an interesting course.