CUSTOMER RETENTION AND LOYALTY PROGRAMS: AN EXAMPLE OF GAMIFICATION
Want to know how big firms use gamification to target customers and conquer their loyalty? Take a look at this case study on a top player: Starbucks
The last of the three case studies about gamification that we want to present you, belongs to the customer retention area. In this article, in particular, we’ll take a look at how gamification can help in building a successful loyalty program.
After all, if Starbucks decided to use it, it’s definitely worth a try.
Customer retention and business loyalty strategy
A few weeks ago, one of my friends bought a game for Nintendo’s latest console. Nothing weird, uh? Except the console in question had not been released yet, and there wasn’t even a date!
That’s where the little marketer inside of me thought: “Man, that’s one hell of a loyalty strategy Nintendo has!”
I mean, Nintendo’s customers are so trustful that the product will be good, that they are buying beforehand, whatever it’s available and related to the upcoming product.
It’s basically every seller’s dream!
Having virtually “blindfold-trusty” customers is one of the main advantages of developing a loyalty program strategy.
Now, let’s dive into the concept of loyalty and find out what benefits it brings to the brand.
User loyalty or Customer retention?
As many marketers know, Customer retention is another fancy word for user loyalty.
Customer retention refers to the bundle of activities that an organisation or company leads in order to reduce customer defections. According to research, loyal customers tend to spend 67% more than new customers. The problem is that companies lose around 13% of their client base every 5-years. We have to consider however, that some companies have a very elementary retention strategy and do not consider loyal customers to have more importance or even equal importance of new clients.
The advantages of a loyal customer base
However, loyal customers bring a lot of advantages and benefits to the firm.
For example, they know exactly what they want and are willing to pay more to have it. We could say that these types of customers are insensitive to price rising, at least until a certain extent.
Moreover, since they know the firm’s products very well, they usually have that extra nudge of motivation when it comes to trying new products that are released.
Last but not least when a customer registers for a Loyalty Program, he or she has to give some personal basic information and this means a treasure trove of data for the company. These datas can be used to track purchasing behaviors, which means customize advertisement and products to be more appealing to the customer.
All these benefits were taken into consideration when Starbucks launched it’s loyalty program ”My Starbucks Rewards”. And naturally when the app was developed, many gamification techniques were involved to make it more engaging to the customers.
So, how does the Starbucks loyalty program work?
There are several game elements that are embedded into the system to make it more appealing and engaging. Let’s check them out.
POINTS: The app is quite pleasant to surf and has an enjoyable UX. After the registration, the customer can interact with the app and every time he/she makes a purchase, he/she would gain stars which are basically the points within the Starbucks ecosystem.
LEVELS: Another classic game element embedded within the app, is the usage of levels. The more stars are collected, the higher the level, the better the rewards.
REWARDS: The rewarding system includes free refills, a birthday gift, 2 hours of free wifi, customised promotions etc. It is strictly related to the level of the user, making it more attractive to belong to the Gold level.
PROGRESS BAR: The evergreen “progress bar” shows the customer where he/she is and how many more points he/she needs to get to the next reward. Naturally, the closer to the next tier, the higher the desire to purchase.
Perfection is hard to reach
What is probably missing in the app, is the opportunity to share our progress with other users. Therefore loosing the chance to build that status symbol image that is so dear to Starbucks customers. As we already mentioned in the previous articles, community creation is a fundamental step in the gamification process.
For example, it is not possible to share on social media and there is no leaderboard that tells you how high you are ranking, in comparison to all your friends or Starbucks customers in general. So basically what is missing in the app, is the competition and community-belonging vibe.
Finally, the user cannot create an avatar of himself. It would be nice to have a more visual-effective way to check our own ranking. However it is important to underline that not all gamification strategies have to include all game elements and design. But when a full-fledged gamification strategy is used, it can lead to a more effective customer-retaining result.
The final results
Indeed, as the researcher in the paper “Gamification Effect of Loyalty Program and Its Assessment Using Game Refinement Measure: Case Study on Starbucks” found out, Starbucks obtained immense success with the app, but especially towards recent customers and for a medium term length.
According to their research, after the introduction of My Rewards, Starbucks saw a 26% rise in profits and an 11% total revenue lift. Imagine what could have been, if the app could be improved with more focus on intrinsic-motivation-triggering features.
More to come
Congratulations! You have concluded the “trilogy” of practical gamification cases! It seems like you really like this topic 😀
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Stay tuned for our next article on the History of Gamification.