Leveraging Loot Boxes for Brand Loyalty Rewards
A game changing strategy
We’ve all experienced the anticipation of waiting for a spinning wheel to stop or a mythical treasure chest to open, especially in the world of video games. This excitement, derived from an element of chance and an unknown potential reward, is a powerful driver of engagement.
What if we could take this same feeling and apply it to our favorite brands to supercharge brand loyalty programs?
As we spoke about in a previous article, customer engagement is a core component of successful businesses in today’s market environment. Brands continuously search for creative ways to connect more deeply with customers, inspire repeat purchases, and foster a sense of meaning.
Welcome to the intersection of marketing and gaming – where loot boxes offer a game changing strategy for customer retention, giving the concept of brand loyalty an entirely new look.
Loot Boxes: A Primer
Loot boxes, a concept borrowed from video gaming, are virtual containers that, when opened, yield a randomized assortment of rewards. This element of surprise, coupled with the potential to win high-value prizes, creates a habit-forming loop that continually pulls users back for more.
Psychological studies have shown that the mechanics of intermittent reinforcement engender a more powerful response than consistent rewards.
Dopamine – the feel-good hormone released in association with positive rewards, is actually released in anticipation of the reward, rather than in response to the reward. Knowing this, if a customer knows they will receive some sort of reward more frequently (rather than having to save up points over time), they will enjoy an experience where they win a loot box every purchase more than the alternative trade points for rewards model.
While perhaps the best way to learn a new behavior is through continuous reinforcement (in which the behavior is reinforced every time it occurs), the best way to strengthen an already established behavior is through intermittent reinforcement (in which the behavior is only reinforced some of the time).
But how does this translate into the world of marketing? By injecting this element of unpredictability and excitement into a brand loyalty program, loot boxes can make brand interactions more enjoyable (not just transactional) and have the potential to increase customer engagement and, ultimately, a brand’s bottom line.
Loot Boxes and Brand Loyalty: A Match Made in Marketing Heaven
Traditional loyalty programs, typically based on a predictable point system, are becoming increasingly less engaging for customers. This is where loot boxes come in.
Imagine a loyalty program where instead of getting a standard reward after completing a specific action, like making a purchase, customers receive a loot box. Each box has the potential to offer a diverse range of rewards – from small discounts to significant prizes – adding an exciting layer of unpredictability to the loyalty program.
Example LA Grind mystery box
For example, consider our fictional coffee shop, "LA Grind". Instead of simply offering a free coffee for every 100 points, LA Grind introduces "Bean Boxes". Each Bean Box could contain anything from a free drink, to an exclusive pastry not available on the regular menu, or even something as high-value as an invitation to an exclusive coffee tasting event. One lucky customer could even win an all-inclusive trip to the coffee capital of the world, Melbourne, Australia.
The thrill of unlocking these unpredictable (and potentially extremely valuable) rewards makes the process of earning points and receiving prizes far more engaging for customers.
Why Are Loot Boxes Profitable for Brand Loyalty Programs?
At the heart of the profitability of loot boxes lies the concept of customer engagement and perceived value. When customers are more engaged, they are likely to interact more frequently with your brand, leading to increased purchases and greater customer lifetime value (CLV).
Increased Frequency of Interaction: The thrill of earning and opening a loot box can incentivize customers to engage with your brand more often (in whatever ways the brand chooses to reward them), in aim to earn another loot box. This increased frequency of interaction can lead to a substantial boost in engagement and, indirectly, revenue.
Enhanced Perceived Value: Loot boxes also enhance the perceived value of your loyalty program. A loot box, with its array of potential rewards, often feels more valuable than a single, predictable reward. This perception can lead to increased customer satisfaction and loyalty.
Differentiation in the Market: Loot boxes can help differentiate your loyalty program from those of competitors. In a market where consumers have numerous options, a unique and exciting loyalty program can be a compelling reason for customers to stick with your brand versus another.
Potential for Upselling and Cross-selling: The random rewards in a loot box give businesses an opportunity to introduce customers to other products or services they may not have considered. This increases the chances of upselling and cross-selling, contributing to profitability.
Customer Acquisition: Assuming your loyalty program is built on interoperable technology (like Hang’s platform), you can even offer partner brands’ rewards through your loot boxes. Similarly, your brand can offer rewards through partner loot boxes, creating seamless brand partnerships and an easy method of cross-promoting. Look at that – your retention/loyalty tool has now become an acquisition tool!
While integrating loot boxes into your loyalty program may sound complex, it doesn't have to be.
Hang is here to help. Our platform is designed to enable brands to build fun, engaging, and personalized loyalty programs, including the ability to utilize loot boxes.
With Hang, you can easily design the structure of your loot boxes, decide what rewards to include, and adjust their probabilities to understand what the cost of each reward will be for your brand.
By ensuring that every loot box offers value to your customers, you can maintain customer satisfaction and drive engagement, all while boosting your bottom line.
The innovative blend of gaming and marketing offers brands an exciting opportunity to invigorate their loyalty programs. In a world where customer engagement is paramount, this novel approach can both set your brand apart and boost profitability.
Interested in getting started? Witness the powerful impact of gamification on your brand loyalty program today with Hang. Let the games begin.