Customer loyalty can play a huge role in turning the fortunes of any business around. Every business’s biggest asset in a highly competitive business environment is its customers. Traditional loyalty programs have been a gold mine for businesses for many years, but with new digital platforms and changing consumer behavior, mere issuance of points and discounts is not enough to win over and keep them hooked on.
A huge momentum in the US market is gaining around the gamification of referral loyalty programs. Game dynamics can be applied to customer loyalty strategy and nurture higher engagement, more referrals, and eventually long-term customer relationships.
Why Gamification Works in Referral Programs?
Gamification engages several main psychological drivers that explain why it tends to be very effective in a referral loyalty program. Some of these include:
- Competition: Leaderboards and competitive challenges appeal to the customer’s natural competitive and competitive desire to compare themselves with others.
- Achievement: Badges, levels, and rewards for completing tasks deliver a sense of achievement to customers.
- Social Validation: Sharing achievements or referring to friends provides a sense of social approval.
- Instant Reward Gratification: The rewards, such as points or unlockable perks, provide instant activation of their needs for recognition.
All these drivers push the customers to be active participants in a referral program, which converts passive customers into brand advocates.
Key Benefits of Gamified Referral Loyalty Programs
There are many benefits of gamification in referral loyalty programs. Let’s have a quick look.
Increased Customer Engagement
Gamification is applied in the referral loyalty programs to highlight customer engagement. Loyalty programs, traditionally, appear very transactional and at times quite boring. Introducing challenges, levels, and rewards through interaction gives the business much more momentum and excitement. Customers get to acquire some kind of badge or perk when they refer a definite number of friends or achieve specific milestones, for example, five successful referrals.
Motivation through Rewards
Gamification in loyalty programs enables companies to make use of variable rewards that keep customers on their toes. In a gamified loyalty program, there is no one reward for every activity but rather tiered rewards, the value of which increases as the customer completes more referrals or engages with a brand over time.
Deepening Customer-Brand Relationships
Loyalty programs deepen the relationship between customers and brands. It is through such gamification that enjoyment and immersion are brought into this relationship.
Brands can also introduce gamified features to the loyalty program to lend a personality to it. A fitness brand might create a referral challenge that fits the bill for their messaging—for instance, get customers to “race” each other for sharing friends in return for rewards in fitness.
Social Sharing and Network Effectiveness
By their very nature, referral programs are word-of-mouth, and gamification only serves to enhance this by encouraging social sharing. When people are motivated to share unlocked rewards, earned badges, or moving up on leaderboards through social media channels, it’s because these do just that.
And some programs even incentivize users to challenge their friends, which certainly boosts friendly competitions and consequently drives referrals. The more customers see their peers achieve goals or gain rewards, the more likely they are to participate in the program themselves, sparking a powerful network effect.
Exponential growth comes from the viral element of a gamified referral program—this is because with every new referral, the possibility of getting even more customers arises for that same reason: to receive rewards and upgrade ranks.
Gamification in Action: Success Stories from the US Market
Most US companies leading reference loyalty have implemented gamification in their loyalty programs and therefore enjoy the significant benefits of higher engagement and referrals.
For example, the coffee giant Starbucks uses a gamified loyalty program wherein clients earn “stars” for each transaction or referral made, and the stars can be redeemed for free goods. In addition, Starbucks sometimes offers specific short-term challenges so that customers can earn extra stars by completing a range of activities like purchasing particular items or inviting friends within the set duration. This gamified strategy makes the program feel new and exciting for clients while achieving better engagement rates.
Similarly, Dropbox is famous for the usage of gamification in powering its referral program. This is done by giving extra free storage for every friend that the user referred. For every friend, the user is given a certain amount of space; every time they bring somebody in, they earn more space—this promotes users to share the program with many people. This led to massive growth for the company during its early years.
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To implement successful gamification in referral loyalty programs, businesses must invest in a robust loyalty management platform or software. Novus Loyalty is a leading loyalty management software catering to the needs of diverse businesses. With proven experience in implementing gamification in referral loyalty programs, they have helped businesses engage customers and build loyalty.
