Published April 8, 2024 in Strategy • 9 min read • 
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You might be familiar with Nike’s Run Club app, a GPS-powered running companion that meticulously captures each stride as you exercise around your neighborhood. Beyond basic tracking, the app immerses users in the Nike running community through gamification, social integration, and live feeds. Celebratory achievements mark milestones, while run levels inspire more miles, transforming every run into a rewarding activity. Through this interaction, Nike collects user data, personalizing experiences and driving three times more spending from app users than guest customers. With over 100 million users, Nike Run Club exemplifies how gamification shapes engagement and market impact.
Organizations have increasingly embraced gamification – the use of game design elements in non-game contexts – as a tool to engage with existing and prospective consumers. With the digital gaming industry poised to reach a projected value of $521bn by 2027 and a user base of 3.1bn, the strategic infusion of gaming elements across sectors such as banking, retail, and music streaming has emerged as a compelling avenue for boosting revenues and fostering brand loyalty. Yet, the journey towards effective gamification is riddled with challenges, as seen in the struggles of tech behemoths like Google and Facebook. On the flip side, success stories like Duolingo and Alibaba show the profound business impact that well-crafted gamification strategies can have.Â
My research colleagues Michael Jacobides, Dalbert Ma, Vasilis Vassalos and I sought to unravel the secrets of successful gamification in a business context to offer best practices to enhance business value and minimize the risk of failure. Through an examination of 40 significant corporate gamification projects, presented in The business value of gamification, a research article for California Management Review (co-authored by Michael Jacobides, Dalbert Ma, Vasilis Vassalos and myself), we identified key design elements that are crucial for goals such as customer retention, new customer acquisition, and reshaping user perceptions: virtualization, social comparison, and tangible rewards. These three design choices offer diverse paths for businesses to pursue their strategic objectives, depending on their priorities.
The transposition of real-world elements into a virtual format. Examples like IKEA’s AR-based home dĂ©cor app and Duolingo’s virtual language-learning space showcase how virtualization can create an immersive and engrossing experience.
Comparing desirable user identities. Social comparison, when centered on appealing user identities, enhances user retention. Nike Run Club’s badges and scoreboard exemplify how strategic social comparison strengthens user commitment.
Offering tangible rewards for desired behaviors. Points-based loyalty schemes – prevalent, for example, in e-commerce – motivate users with extrinsic rewards. However, our study emphasizes that successful gamification goes beyond merely throwing money at users.
“With over 100 million users, Nike Run Club exemplifies how gamification shapes engagement and market impact.With over 100 million users, Nike Run Club exemplifies how gamification shapes engagement and market impact.”
Our research found that organizations using gamification to successfully retain customers, attract new ones or to transform user perceptions and preferences utilized these three key design features in specific pathways and combinations.
We found three pathways for achieving this objective. Firstly, virtualization plays a pivotal role in customer retention, as demonstrated by Duolingo’s success in crafting an immersive experience that goes beyond language learning to become a source of entertainment. With consistent updates, it maintains user engagement, contributing to a marked decline in churn rate. In contrast to rival language learning apps, Duolingo’s user base displays exceptional loyalty, affirming its distinct position in the market.
A second pathway to customer retention is focusing on social comparison to cultivate desirable user identities, but without offering “rewards” outside the game context. For example, Nike Run Club taps into members’ desire to compare their performance with other app users.
The third pathway focuses on the traditional gamification approach of offering tangible rewards in return for desired behaviors, for example, through points-based loyalty schemes.
When it comes to attracting new customers, our findings also revealed three pathways to consider.
The first approach offers tangible savings and rewards without integrating social comparison and focusing user motivations on extrinsic rewards. Examples include digital loyalty programs – combining purchases with accumulable points exchangeable for future physical goods (e.g., Starbucks Rewards). Another approach involves chance-based mechanics like “Spin the Wheel” or dice rolling, offering cash or credit-equivalent rewards.
The second pathway combines virtualization and tangible rewards, where users compete in virtual environments to win real-world benefits. Take, for example, Pinduoduo’s Duo Duo Orchard, where users collect (or steal) virtual droplets to water virtual fruit trees, eventually leading to real-world home delivery of fruit.
Finally, a sole focus on social comparison (without the other two design features) can prove effective, but only when the desired user goal is linked to self-improvement, as illustrated by fitness apps such as Nike Run Club.
In pursuit of transforming user perceptions, our investigation revealed just one pathway to success: the combination of virtualization with social comparison to promote desirable user identities, such as Tencent Music’s artist ranking system based on donations and Ant Financial’s Ant Forest, where virtual gardens and social comparison mechanisms promote environmentally friendly behavior. In addition, Ant Forest’s gamification initiative enhances user engagement and brand perception and provides valuable data insights, showcasing how gamification can create multifaceted value for a financial services company.
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Even if other crucial design features are in place, gamification will likely fail if the integrated social identities it seeks to promote are unappealing to users. Google News misjudged the mood of its audience, deploying gamification that emphasized the quantity of news consumption over how well readers understood what they were reading, resulting in poor retention compared to, for example, The New York Times. The latter successfully engaged users through quizzes that rewarded learning, not the volume of news read, creating a more appealing social identity. Similarly, Facebook’s gamification efforts to reward members of user groups with publicly visible “loyalty” badges failed because the social identity associated with spending excessive time on the platform was undesirable.
Failure to incorporate any of the three crucial design features of virtualization, social comparison, and tangible rewards can be fatal for gamification efforts. Zalando’s Lounge tried to gamify online retail by nudging users about “expiring” shopping bags without using any of the three, which resulted in uninspired users.
A thoughtful and nuanced approach is essential for managers embarking on the gamification journey.
With digital disruption influencing online and offline behaviors, gamification reveals a landscape rich with opportunities but fraught with challenges. Therefore, a thoughtful approach to gamification that considers both strategic objectives and design features becomes imperative. By understanding gamification rules, businesses can shape the customer experience and carve out some competitive advantage in the ever-evolving digital arena.
“Upon the maturation of a virtual tree, Ant Financial undertakes to plant a real tree. ”
A mini–game integrated into Pinduoduo’s e-commerce application that features individual virtual gardens for users. Each purchase made on Pinduoduo generates virtual droplets to nurture virtual fruit trees in the garden. Failure to use the droplets promptly results in other community members being allowed to steal them. Mature virtual trees can be exchanged for actual boxes of fruit delivered to the user’s home address. Available in China.Â
The music-streaming platform has introduced gamification to redefine the connection between artists and their fan communities. Instead of relying solely on conventional metrics like stream counts or downloads, Tencent Music evaluates artist rankings by considering the volume of microdonations received from fans, with the platform earning a commission from these contributions. Available in China.Â
A mini–game integrated into Ant Financial’s payment services application, where each user possesses a virtual garden. Engaging in environmentally friendly activities, such as using public transportation or renting an e-bike, generates “green energy” points. Users can utilize these points to cultivate virtual trees. Upon the maturation of a virtual tree, Ant Financial undertakes to plant a real tree. Available in China.Â
Interactive news quizzes by The New York Times assess readers’ knowledge of current events, spanning diverse subjects such as politics and culture. Through multiple-choice questions, the quizzes aim to engage and educate readers. The dual-purpose tool enhances awareness of significant events in an enjoyable way.
AI revolutionizes business approaches to gamification by leveraging its predictive capabilities to enhance customer engagement through behavior analysis and goal alignment. Duolingo has partnered with OpenAI to integrate GPT-4 technology to improve the app’s language learning experience. For example, a role-playing feature lets users interact with an AI persona, such as a barista in a Parisian cafĂ©, which adapts to the needs and level of its human counterpart as they interact. For Singles Day, China’s major shopping event on 11 November, Alibaba incorporated AI into its gamification initiatives, focusing on luxury consumers. The platform collaborated with luxury brands such as Gucci and Ralph Lauren to deliver personalized experiences for customers engaging with Tmall Luxury Pavilion.
In February 2024, Google DeepMind unveiled Genie, the first generative interactive environment whereby playable worlds can be generated from synthetic images, photographs, and even sketches.
While previous studies have demonstrated the effectiveness of game environments in AI agent development, the availability of suitable games has often been a limitation. Interactive, playable environments such as the ones generated by Google DeepMind’s Genie foundation model hold promise for training generalist AI agents within an infinite variety of newly generated worlds.
In human-machine collaborations such as training AI models, reward elements are instrumental when users engage with AI-based applications. Take, for instance, the efforts to address safety concerns in OpenAI’s ChatGPT and Google’s Gemini large language models (LLMs). These models incorporate reinforcement learning via human feedback (RLHF), employing a reward framework to generate responses that better match user intentions. The models are guided toward desired behaviors by rewarding positive responses, enhancing safety and alignment. Continuous refinement based on human-provided rewards allows OpenAI and Google to achieve more refined and contextually appropriate language generation.
Gamification can also help shape the quality of collected data. Take Synesis One, a web3 platform employing gamification in acquiring AI training datasets through a train-to-earn model. This enables businesses, irrespective of size, to scale their AI solutions by involving a diverse community of contributors. With businesses encountering challenges in using publicly available data for AI training, gamification has emerged as an alternative method for creating robust AI datasets.
This article is based on research originally published in the February 2024 edition of California Management Review. Michael G. Jacobides and M. Dalbert Ma of London Business School and Vasilis Vassalos of Athens University of Economics and Business co-authored the original research paper “The Business Value of Gamification” with Konstantinos Trantopoulos.Â
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