Traditional loyalty programs for brands are stale, boring, or nonexistent. When designing a new loyalty program from the ground up, the qualities of the program and how it makes customers feel must be ingrained in its design.

A helpful question to ask is, “Where do loyalty programs fall short?” Typically, the answer lies in customer engagement — the program is not fun enough, too complicated, or not valuable enough to keep the customer excited and coming back for more.

Engagement is defined by how frequently people return and the extent of their participation when they do return. If a loyalty program fails to keep customers engaged, those customers will churn, and therefore lower a brand’s LTV.

So what are examples of products or services that do an exceptional job of keeping customers engaged? Games. Video Games, Mobile Apps, Board Games — each of these are designed to keep people coming back and having fun.

Naturally, we believe a well-designed loyalty program should utilize principles of gamification.

According to Gabe Leydon (founder of Machine Zone), there are three qualities of a successful game:

1. Variable outcome

2. Frequency

3. Sense of control

The human brain is meant to learn, and when there is an event with a random outcome that occurs frequently, and the person feels some sense of control over that event, something magical happens. The brain gets trapped in a learning state and starts inventing ways out. These ways manifest themselves in pattern recognition, where people create explanations for the outcome of the event, and those patterns propel the person to keep playing. More broadly, we might call this process of creating motivation flow, and it works even better if there is a component of fun or enjoyment associated.

At its core, gamification is the act of making tasks more intriguing, motivating, and fun. Well-known game designer Yu-Kai Chou describes 8 core drives that motivate humans to complete or engage with certain activities. Let’s dive into those core drives and imagine how they might be part of a successful loyalty program.

1) Epic Meaning and Calling

What it means: When people believe there is something greater than themselves and/or they are chosen to take action.

An example: Chipotle lets customers redeem points for a $1 donation to a charity of choice.

Learnings for Loyalty: Brands can include personalized rewards that make customers feel special. Similarly, they can offer rewards that contribute to a larger purpose (for example, a donation to the customer’s favorite charity).

2) Development & Accomplishment

What it means: The internal drive of making progress developing skills, overcoming challenges, and feeling a sense of achievement.

An example: Delta Airlines allows customers to unlock better rewards as they rank up to higher Medallion statuses.

Learnings for Loyalty: As customers “earn” points, they should feel a sense of improvement — as if they’re working (either alone or together with others) to accomplish some sort of goal.

3) Empowerment of Creativity & Feedback

What it means: When users are engaged in a creative process, they have a sense of freedom to express their creativity, get feedback, and make adjustments.

An example: Cash App allows customers to design their own physical card before receiving it.

Learnings for Loyalty: Brands can allow customers a sense of creative freedom and ability to express themselves through tactics like custom profile pictures, self-designed items, or real-time control over certain activities (like in-app games).

4) Ownership & Possession

What it means: People are motivated when they feel like they own or control something, and they are more likely to retain it than acquire something they don’t already own (a phenomenon called the Endowment Effect).

People also want to make things they own better, and accumulate even more of those things (an urge to gather that is rooted in human DNA).

An example: Many games and brands have their own native currencies or points. In Fortnite, players can use “V-Bucks” to purchase special “skins” for their avatars. While those skins are purely cosmetic and don’t enhance the player’s performance, people still care about them and feel ownership over them.

Learnings for Loyalty: If someone spends a lot of time interacting with a brand and its loyalty system, they will feel more ownership towards their membership. Additionally, “badges” or other types of collectibles incentivize members to increase their status, and thus increase its perceived value.

Most importantly, with web3 technology, a customer now owns their membership with a brand, and they can carry that status with them wherever they go.

5) Social Influence & Relatedness

What it means: People are often motivated to take action by what others do, think, or say. Humans are social beings driven by social elements like mentorship, friendship, acceptance into larger groups, social responses, and competition.

An example: The Wordle phenomenon that took the world by storm last year is a great example. The game itself, where you guess a 5-letter word in a limited number of attempts, is quite simple; however, what made it so valuable was the ability for people to share the outcomes with their friends and turn the game into a daily ritual where people came together to compete and share their results with each other.

Learnings for Loyalty: A strong loyalty program should be built on foundations of community, with multiplayer use cases in mind. Brands can utilize leaderboards, community events, and the ability to share rewards as ways to keep people engaged by interacting with others.

Brands can also implement ways to earn beyond just dollars spent. For example, they might offer shareable rewards, the ability to earn points by sharing on social media, or bonus points for bringing a friend to a store. Digitally, features like “friending” or group quests can bring customers together.

With the web3 concept of vertical interoperability, it’s possible for a brand to verify a user’s identify and actions across all touchpoints (i.e. social media, CRM, online POS, physical retail locations, and more) and reward them in more exciting ways than traditional loyalty software provides — think access to an exclusive experience if your membership pass has reached a certain tier.

6) Scarcity & Impatience

What it means: If people are unable to obtain something immediately, or if there is difficulty in obtaining something that others have, they tend to want it more than they would otherwise.

The fact that we can’t get something right now motivates us to think about it all day. When we think about it all day, we are more likely to stay engaged with it. In a world of an unlimited number of things competing for our limited attention, mindshare is increasingly valuable.

An example: In popular digital games like Clash of Clans, players often must wait for treasure chests to unlock before opening them. Because they must wait for several hours, they’re incentivized to come back to receive their reward.

Similarly, when Facebook first started, it was just for Harvard students. When it finally opened up to the general public, many people wanted to join because they previously couldn’t get into the elite group.

Learnings for Loyalty: Engaging loyalty programs can drop limited edition items, exclusively available for members who have reached a certain tier. Other product features like countdown timers and early access to waitlists for new products can get people excited about the brand.

7) Unpredictability & Curiosity

What it means: For as long as humans have been around, they’ve always had a curiosity to find out what will happen next. While we can’t predict the future, our brains have evolved to think about it often.

Whether it be simply wanting to learn more or the thrill of discovering the unknown, this core drive is part of our DNA and can be powerful when utilized effectively.

An example: Dapper Labs launched NBA Top Shot, a basketball-themed NFT platform where players could unlock, buy, sell, and collect influential “Moments” (video highlights of in-game plays). Many of these Moments were common, while others were extremely rare and worth more.

The thrill of opening up a pack of Moments (similar to the classic physical trading cards) kept customers engaged and coming back for the chance that they just might open a rare card.

Learnings for Loyalty: Sweepstakes, lottery programs, random rewards, or quests are ways brands can tap into the core drive of unpredictability and curiosity to keep their customers excited and having fun.

At Hang, we offer “Loot Box” features that allows brands to build customized random reward generators that can be free for customers to play (i.e. the customers get a free spin of a wheel each day).

As we mentioned above, the most successful games will include variable outcomes (the “best” reward available is super valuable, while the common low-end rewards are worth little to nothing); high frequency (meaning customers can keep coming back consistently); and a sense of control (meaning customers can play a small game or press some sort of button that gives them a feeling of agency over the event’s outcome).

8) Loss & Avoidance

What it means: The final core drive taps into what we typically call FOMO (fear of missing out). Studies suggest that we are more likely to act based on avoiding loss rather than making gains.

An example: An endless number of brands (especially retailers) utilize this tactic. “If you don’t sign up now, you’ll lose this chance forever.”

Major airline programs also require you to achieve a certain number of milestones each year to maintain your status. You may have heard of people who irrationally fly across the country at the end of the year to hit the minimum miles threshold to maintain their airline loyalty status for the following year. They fear losing their status and, as a result, continue to spend (a sort of sunk cost fallacy).

Learnings for Loyalty: Brands can offer certain membership features (like badges or statuses) in which customers must take actions consistently to maintain them.

In the Strava app, there is a concept of local legends (a limited status) that only one person can maintain. To obtain this status, someone must have completed a segment (ran a certain stretch of ground) more times than anyone else in the last 90 days. However, because the time period is bound to the trailing 90 days, the leader must continually keep completing the segments or risk losing their crown.

Brands’ relationships with their customers should not be purely transactional. With an increasing number of things competing for our attention, keeping customers engaged can be difficult.

By utilizing these eight principles of gamification, brands can build stronger relationships with their customers and keep them engaged.

At Hang, we enable any brand to create a gamified loyalty program that is not only built on modern web3 technology, but utilizes features of game design to keep the experience more fun and more valuable.

Get started today.