Potatoes win Prizes – Gamification, Loyalty and Viggle

Over the past few years I’ve been working in the mHealth and smart energy sectors.  Both have a common belief, which is that consumers will do things that are in their own interest – namely spend time and effort in order to save themselves money and keep themselves fit.

That mantra has seen a raft of new companies appear in each sector, directly targeting the public with products that attempt to change consumer behaviour or lock them into a brand.  In the mHealth sector most have realised that medical or clinical approaches are too difficult, so have euphemistically renamed exercise and dieting as health and fitness.  Meanwhile, energy utilities are attempting to improve their image by rolling out customer engagement programs, whether that’s in the form of green button apps in the US, or in home energy displays in the UK.  Both hope that this will result in customer loyalty for their brand, attracting new customers and retaining existing ones.

In recent months both sectors have latched onto gamification, often as a result of hiring strategic marketing people from web and mobile phone companies.  They’ve taken to gamification like enthusiastic bricks to water, hoping it will change the way consumers value their products and buy from them.  I think they’re sadly mistaken.  As proof, I’d cite the success of Viggle, which illustrates exactly what the average consumer wants from gamification.  Viggle let’s you win points by watching TV.  It’s nothing to do with better health or savings on your energy bill – it’s the couch potato dream of free pizza for mindless inactivity.

The genesis of much of what’s going on can be traced back to loyalty schemes in the retail sector.  Retail loyalty schemes aren’t new.  In our grandparents’ day there were co-operative stores which offered a divvy (dividend) for regular customers, either through savings books or trading stamps.  Later on, companies like Green Shield expanded that principle to multiple participating stores, allowing shoppers to earn points on purchases by collecting stamps which they could exchange for gifts.  That in turn has evolved into credit card cashbacks and cross store loyalty cards like Nectar.  They are all basically loyalty schemes that reward you for going back to the same store.  Traditionally these loyalty schemes weren’t data driven; they simply made a record of how much money you’d spent and rewarded you accordingly.

The best known example outside retail chains is Air Miles, which was launched in the UK in 1988 and has been emulated by virtually every airline. Most of these schemes are aimed at regular flyers, trying to make sure you suppress your preferences about when or possibly where you fly in order to accumulate miles that give you free flights, gifts or upgrades.  They’ve been remarkably successful, not least in keeping their customers away from experiencing what may be higher service levels on a rival airline. It fascinates me that even the most reviled of budget airlines now run loyalty schemes, which still appear to attract customers.

None of these schemes make much use of the data they collect, other than totting up points to award prizes.  Hence their value to the companies using them is predominantly one of retaining essentially faceless customers.

The shift to extracting value from the data happened when a small start-up called Dunnhumby approached Tesco in 1994 with a proposal to change the way they used their customer information.  The story has been told many times, but consisted of Dunnhumby applying data analysis techniques to understand just what Tesco’s customers were buying.  Their success in doing this led to Tesco’s ClubCard loyalty scheme, still seen as the benchmark for any such retail loyalty offering, and the famous quote by Tesco’s chairman, Lord MacLaurin that “What scares me about this is that you know more about my customers after three months than I know after 30 years”.  Ironically, Tesco has been one of the major supporters of Green Shield stamps ten years before, but had dropped them because of the cost.

Dunnhumby has grown and now supports many other clients and its alumni have founded competing companies to engage more segments of the retail sector.  Their proposition is more than just loyalty.  It uses data to understand what we buy and when we buy it, and entices us to do more of the same through segmentation and personal offers.  It’s a trick that most other retailers have attempted to emulate, with varying degrees of success.  Whilst they may have been successful in the old fashioned loyalty stakes, it’s far from clear whether any of them have achieved the data analysis and business transformation gains that Tesco has made.  However, a lot of that comes down to an understanding of using data for generating new insight, rather than merely for reporting and asset tracking.  That’s a common failing of many who are embracing the new buzzword of Big Data, who do not have the insight themselves to realise that it offers something fundamentally new, not just bigger Excel spreadsheets.  (The few that do understand this already consider Big to be a passé adjective, having embraced the infinitely more interesting subject of Broad Data.)

Whilst most company’s aspirations stop at loyalty – many would be delirious to achieve even that, the new kid on the block is gamification.  Gamification is an attempt to meld together the old world of loyalty with the new world of Apps.  Apps pose a problem to many traditional companies, as does the whole concept of social media.  They see their customers consuming apps and want to be a part of that, preferably putting their brand onto this new, more intimate, fourth screen.  Many lost a lot of money in commissioning largely trivial apps that had little effect.  But as Apps evolved, it became apparent that consumers were using them in a somewhat unexpected way.  Games were being taken up by new demographics, not least by women, who now account for over half of the revenue for some mobile games.  And a new industry of health and fitness devices, whose very existence depends on making self-sacrifice compelling were digging into the behavioural research of people like Robert Cialdini to keep their target users counting the calories and walking the walk.  All of a sudden the potential was there to try and expand this concept into other everyday tasks to help reinforce brand loyalty.

So we see industries from hotel chains to utilities, health clubs to publishers trying to jump on the bandwagon.  The greatest, yet most fanciful conviction about its potential contribution appears to come from energy companies and healthcare start-ups, who respectively believe that we care about saving money and getting fit.  In thinking this, they delude themselves about the reasons behind gamification’s success, which also turn out to be its Achilles Heel.  Which is that it’s only fun if it’s fun.  To be explicit, for most people, games are about winning something.  And an important motivator is having the chance of winning something that you didn’t expect to win and winning it now.

That’s why it’s so difficult to use gamification to reinforce a brand or build up loyalty for the general public.  I don’t dispute its success in health and fitness for a small section of the population, but I’d maintain that it is and will probably only ever be a small section.  I have friends who use fitness apps to compete against each other, whether that’s in cycling, jogging or losing weight.  But without exception, these are people who always competed or who have addictive personalities, and frequently both. The most passionate ones are those who are giving up one addiction, such as smoking, for another, which may be their pedometer.  But they’re a limited set of people.

It’s why I’d claim that gamification will never work for things like changing energy use behaviour or losing weight for the vast majority of the population.  Neither give the instant reward that’s so important to the gamer.  Switching off a light won’t have an effect on what you pay for at least a month or more.  Nor is the final saving compelling enough. It might give better odds than buying a lottery ticket, but part of the compulsion of games is not just the ratio of the reward to the effort, but its immediacy.  Unlike most games playing, switching off the lights is not fun at the time – it’s doing something mundane for the promise of a longer term good.

Which is why Viggle hits so many buttons.  It rewards you with points for watching TV.  You know what you’re going to win.  You can see your score racking up relatively quickly as there are achievable targets.  And the reward isn’t worthy and boring – it’s a pizza.  Gamification doesn’t get much better than that.  Moreover it fulfils the second important imperative for any successful gamification app, which is that it generates data for the provider which can be processed and sold, funding the service for its provider. That’s very important, as someone needs to pay for the on-going service with the IT infrastructure costs behind it, which is something that appears to be missing in all of the more worthy gamification plays.

The conclusion is that any energy company pursuing gamification is probably pouring money down the drain.  For it to work, they need to find a persuasive marriage of action and short term reward, like watching TV and getting free pizza.  And whilst a lot of people might be able to propose something they’d like to happen when they turn the lights out, I suspect we’re a long way from any utility daring to offer that as an incentive to save energy.