2013
11.15

On November 5, Peggy Smedley, host of The Peggy Smedley Show, kindly invited me on to discuss the implications and issues surrounding the application of gamification to retail. It is an important subject that will absorb significant investments from retailers and brands across the broad spectrum of consumer products. The entire interview can be heard here.

There will be truly exciting developments in the use of gamification—with its ties to Big Data analytics and social networks—in markets and industries other than retail. One very recent one comes in the form of using gamification to improve recruiting results in the semiconductor industry. Accenture announced on November 11 that it would help NXP, a company that provides NFC-compliant chips making their way into myriad connected devices that comprise the Internet of Things, improve recruiting results through the application of “analytics, gamification, and social media techniques.”

What is exciting about the use of this technology triad (analytics, gamification, and social media) in a human-resources function (recruiting)? It is a brilliant approach to finding technologically empowered candidates for technical positions within a targeted demographic. Watch how this plays out among technology companies fishing for qualified talent in a common pond; early adopters will have a significant competitive advantage, as well as be able to reduce dependency on search firms.

Gartner Analyst Brian Burke’s report, issued a year ago to the day of our radio conversation, has been cited repeatedly to support the projections of retail’s adoption of gamification to grow customer engagement.

My concern about the increasing use of gamification in the retail space is based on one that played out in an older, initially analog, format: The loyalty card.

When loyalty cards were first introduced, they were no more than plastic user identification cards that one placed in a wallet and pulled out at the register in the issuer’s “brick and mortar” store. The physical card developed forward as a magnetic stripe-enabled card. POS (point-of-sale) terminals were being introduced into the retail ecosystem that could read the card and tie the purchase to the customer’s record. Bar codes were added to some cards when scanner capability at POS reached critical mass.

Regardless of the transactional format of the card, transactions were always one way. It was still a card and therefore consumer adoption, meaning participation in a loyalty program, leveled out at about 11 active programs. That was the general practical upward limit of how many cards you could fit in a wallet or purse. It was the “saturation point” for the consumer.

Most of those cards in the wallet turned out to be with merchants that were local to the consumer. With the rise of ecommerce, the customer could use the loyalty program online, and could print out coupons and other value offers to use at the stores, but the positioning of value on the plastic card was never a practical outcome. Some of you may remember that NFC-enabled cards would be the solution (think Japan’s successful early 2000’s network of merchants tied to the Japan Railway pass, which allowed money and other value tokens to be loaded to the physical card). It was not destined to happen here in the United States.

Then along came smartphones in late 2007. Here was the platform that would solve the problem of value delivery and two-way value consumption, but would be the answer to the problem of too many plastic cards in the wallet. The smartphone was positioned to be the electronic, mobile wallet of the highly connected consumer. This platform gave hope to NFC and other transactional formats that mass adoption was feasible.

Brands and retailers moved their loyalty programs into the mobile application space, and putting aside the recession, have, for the most part, successfully retained their core program participants. Yet as smartphones became pervasive, and their use at POS enabled (think barcodes or QR codes on the phone’s display being scanned at POS, for example), the problem of saturation arose—again.

Smartphone-enabled consumers have been changing the nature of shopping, giving rise to the “threat” to brick and mortar retailers called showrooming. A customer goes to a store, sees a product he or she likes, tests it out, and then goes online via the phone to shop for a merchant (ecommerce or other brick-and-mortar retailer) offering a lower price for the item. Retailers such as Best Buy are turning this around.

What is lost is the sense of loyalty. When you stay in a Best Buy store and purchase the item there after doing the showrooming drill, you’ll still be asked if you have the Best Buy program to apply the purchase against. However, did the loyalty program get you in the door in the first place? That is what the application of the triad technologies, the most visible of which is the “draw” that the application of gamification technique will generate, is intended to resolve.

That’s fine, but for “average” consumers, will they now come to Best Buy because of the game’s draw, or because the store remains locally convenient to where they live? It may prove to be some combination of the two.

We also need to be careful about what we mean by an “average” consumer. I don’t think that label is meaningful anymore. Rather, there are different “averages” that apply to the range of demographics retailers’ target. An average consumer in the 15-to-18 year old demographic is very different from one in the 50-to-55 range.

While smarter consumers may be less loyal because of the power of smartphones to search out the best deal, the challenge becomes just how many different merchants can you practically check before your make the purchase? People have bandwidth constraints too, and adding and searching merchant apps approaches marginal returns after some number of searches is done. The consumer hits the saturation point. Will a consumer that has a successful game experience trumpet the win to friends and family on Facebook, and not shop around? This is the desired outcome for the retailers and brands investing in gamification.

Merchant and brand competition for consumer mindshare through gaming tied to social networking will no doubt intensify. Will the 2020 forecast in the Gartner report be attained, or will some form of saturation take the adoption rate downward?

What do you think?

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