Gamification in Loyalty Programs

Gamification, the integration of game-like elements to motivate behaviour, has emerged as a powerful tool across many industries, particularly in education and employee engagement programs. Though the concept has existed for over a century, the term “gamification” was first coined in 2002 by Nick Pelling. 

Early loyalty programs are considered by some as outright gamification, for example, stamp collection schemes where retail purchases were "gamified" through collectible stamps redeemable for rewards. 

However, a clear distinction exists between traditional loyalty programs and gamification. 

Traditional loyalty programs can be categorized by 

●      Predictable points per dollar spent (typically a 1:1 ratio).

●      Fixed benefits at established spending thresholds.

●      Rewards value is relatively proportional to spending, categorized by reward type.

●      "Gaming" elements are limited to tier mechanics.

Gamification tactics include

●      Elements of chance and uncertainty.

●      Variable, with the potential for disproportionate rewards.

●      Mechanics for collection and completion.

●      Competition elements.

●      Variable reward schedules.

It can be argued that gamification enhances emotional engagement and psychological appeal over generally predictable traditional programs. 

 As brands seek higher member engagement and differentiation, leading loyalty programs are evolving to incorporate sophisticated gamification elements throughout the entire customer journey, creating “games within the game.”

Historical Context and Psychological Factors

Gamification gained widespread adoption in marketing during the latter half of the 2010s and has since evolved into its own industry. After passing through Gartner's "Hype Cycle," it has matured into a robust field with specialized service providers and industry analysts.

In the loyalty domain, gamification is believed to significantly impact the psychological factors that drive ongoing engagement. 

Traditional loyalty programs leverage loss aversion—a behavioral economics concept where consumers aim to avoid missing out on potential rewards. For instance, factors like points expiry motivate members to make further purchases to either use or retain them, but this process can be passive.  If the threat of loss is not apparent or close by, it may lead to inaction. 

Gamification uses loss aversion more actively. The immediacy of potential losses or unrealized gains can drive engagement more effectively. Given that the best gamification tactics use variable prize values and potentially big gains, loss aversion is even more keenly felt.

Quick Service Restaurants

It’s no surprise that many successful loyalty programs with gamification tactics have emerged in industries with lower profit margins, where traditional loyalty models would not work commercially.

The QSR and specialty coffee sectors are excellent examples.

My McDonald's Rewards [1], for instance, is a points-earning program where points can be redeemed for menu items. McDonald's Monopoly promotion supercharges this at a key point in the year and exemplifies successful modern gamification. 

The program has evolved from a simple on-pack promotion to an omnichannel experience incorporating physical and digital elements in markets like Canada. The Canadian "Double Play" feature demonstrates how digital integration can enhance traditional promotional mechanics, encouraging app adoption while strategically driving profitability by placing game pieces on higher-margin items. 

Other global markets have adopted similar approaches, adapting to local digital maturity and consumer preferences. Monopoly targets both earning and redeeming, optimizing engagement. A purchase provides points and an entry to win, which can provide further points and prizes.

Starbucks Stars also employs gamification tactics, running various time-limited challenges and rewards for visit frequency, though it lacks very large prizes within its framework.

Industry Context: Changing Loyalty Economics

In recent years, significant shifts in loyalty program economics have occurred across various industries. Many programs have reduced base earning rates as businesses adjust to economic pressures and changing market conditions. For example:

●      Boots UK reduced their Advantage Card earnings from 4 points per £1 (worth 4p) to 3 points per £1 (worth 3p) in 2023. [2]

●      Major airline programs have repeatedly devalued their mile/point currencies through increased redemption rates. [3]

This reduction in regular loyalty dividends underscores the need for more engaging mechanics to maintain program value perception.

While some programs adapt by aligning points earning with more profitable behaviours, gamification fills the gap by generating excitement and engagement beyond traditional points earning through mechanics such as rewards for app usage or log-ins.

Grocery Retail 

The grocery sector has embraced gamification with notable success. For example:

●      Safeway's Flavor Adventure collect-and-win game (introduced initially as Monopoly but revised in 2022) combines digital and physical collection, encouraging repeat visits during the promotional period. [4]

●      Woolworths Everyday Rewards' "Bank for Christmas" program gamifies saving points throughout the year and has added further gamified mechanics later in the year. [5]

●      Kroger's "Game Day Greats" promotion ties purchases to sports seasons with digital collecting elements. [6]

●      Lidl's have various gamified offers that appeal to different customer segments; for example, the Shop & Win and Shoot to Save games use various mechanics in their app to reward purchases. [7]

These programs effectively maintain customer loyalty during periods of reduced point earning, supporting crucial data collection for merchandising decisions.

Other Sectors 

In other large loyalty program categories, such as airlines or credit cards, gamification tactics have not really taken hold. While some elements, like seat upgrades or event bidding auctions, could be considered gamification, there remains ample opportunity, and we expect tactics to develop quickly in this area.

Does Gamification Always Work?

Many successful programs, like Tim Hortons’ Roll up the Rim, have been in the market for decades and remain highly anticipated by consumers. Even this program has evolved to move the promotion mechanic from on-pack to mobile app online with the app platform that supports the (2019) introduction of Tims Rewards.  Interestingly, the gamification tactics predated the more standardized points-earning model that is now in use.

As with any marketing initiative, many of the best ideas are born through the adversity of testing and learning. Most notable failures will never be properly documented, as brands are in no hurry to publish them, but it’s clear from the timeline and changes in program design that not everything is optimal immediately.

Common pitfalls in gamification tactics include overly complex rules, demotivating experiences when claiming rewards, and fatigue when a tactic runs too long.

Having said that, there are some fundamental principles to remember when putting gamification tactics in place.

Key Principles for Successful Gamification

●      Set Clear Objectives: For example, Tim Hortons’ Roll up the Rim aims to boost sales, upgrade purchase values and drive app engagement.

●      Keep It Simple and Intuitive: Starbucks Stars employs straightforward earn-and-burn mechanics, with clear visual progress communicated through the same app.

●      Provide Meaningful Rewards: Gamification elements should enhance earning and redeeming experiences to optimize engagement. McDonald's Monopoly, for example, rewards purchases with points, menu items, and entries into significant prize drawings.

●      Measure and Iterate: Safeway’s Monopoly Program evolved into Flavor Adventure by adjusting rewards and mechanics based on program performance.

Future Opportunities

As companies tighten budgets and traditional loyalty programs compete more strongly, gamification will be vital for maintaining engagement. The integration of big data analytics offers prospects for personalized gaming experiences that drive both customer engagement and business intelligence.

The future of loyalty gamification lies in creating experiences that span the entire customer journey, from acquisition through to redemption, while maintaining clear value propositions for both businesses and customers.

Technological advancements, particularly in AI, will allow more personalized gamified tactics, and emerging technologies like Augmented Reality (AR) and Virtual Reality (VR) may also play a role.

At RewardOps we believe gamification has a major role to play at all points on the customer journey, especially during rewards redemption, where fostering member engagement is crucial to demonstrate the program's overall value.

Citations

1] “McDonalds Rewards” - https://www.mcdonalds.com/ca/en-ca/getmoremcds/mymcdonaldsrewards.html

2] “Boots Advantage Card” - https://www.bbc.com/news/business-64899536

3] “Airline Value reduction” - https://viewfromthewing.com/the-shift-in-airline-mileage-value-in-2024-who-are-the-post-pandemic-champions-and-laggards/

3] “woolworths points boosting activities’ https://www.woolworthsgroup.com.au/au/en/media/latest-news/2024/woolworths--first-loyalty-programme-members-score-a-surprise-boo.html

4] “Safeway Flavor Adventure” - https://gbtimes.com/how-to-play-safeway-flavor-adventure/

5] “Woolworths Bank for Christmas” - https://swifttelecast.com/woolworths-supermarkets-announce-new-spin-surprise-game-to-take-hundreds-off-your-shop/#google_vignette

6] “Kroger Game Day” - https://www.krogerkrazy.com/kroger-game-day-great-instant-win-game/

7] “Lidl Gamification’ - https://www.hersport.ie/gaelic-football/get-money-off-your-lidl-shop-by-going-to-an-lgfa-game-53425