Close

    IMD business school for management and leadership courses

    Brain Circuits

    The business value of gamification: Pathways to customer retention

    by Konstantinos Trantopoulos , M. Dalbert Ma, Vasilis Vassalos, Michael G. Jacobides Published December 18, 2024 in Brain Circuits • 3 min read

    Customer retention is a long-term endeavor. By securely locking customers into a game, firms can generate more value from them and gain a crucial competitive edge.

    Tangible loyalty programs such as air miles and store cards are not the only way to retain customers and forsake the addictive appeal of games. Merely offering extrinsic rewards such as cash eventually reduces intrinsic motivation, whereas gamification – the use of game-like elements such as points, rewards, and challenges in non-game activities – can greatly aid customer retention.

    Two pathways to customer retention

    1.Virtualization

    Virtualization is the transposition of real-world activity and elements into a virtual form through avatars, profile spaces, and augmented/virtual reality.

    • It allows gamification initiatives to retain users regardless of other design features.
    • By creating an immersive parallel universe that users can mentally inhabit and explore, virtualization seems to engross players in and of itself.

    2. Social comparison

    Activities and games that are centered on the user tracking their behaviors and performance have a fairly weak ‘lock-in’ because users do not have much invested in the platform and can easily switch to another one. Including an element of social comparison can boost retention, even though it doesn’t offer any rewards beyond those built into the game itself.

    • The user identities involved must be desirable and aspirational.
    • Users need a credible and sizeable existing community onto which they can project their identity (this can be just friends and family).
    • Awarding badges and competitive ranking points that gain social value over time will keep users more tightly bound to the activity.

    Key takeaway

    Businesses must persuade users to engage frequently over a long period and commit time, attention, and money along the way. Through gamification, they can turn their game into a firm fixture in users’ daily routines that they will habitually turn to as a behavioral “default” and help boost customer retention.

     

    Further reading

    The Business Value of Gamification

    Play to win: Enhancing customer engagement with gamification

    Beyond subscription models: recurring revenue-generating patterns

    A marketing playbook for sustainable products

    Authors

    TRANTOPOULOS Konstantinos

    Konstantinos Trantopoulos

    Research Fellow at TONOMUS Global Center for Digital and AI Transformation.

    Konstantinos Trantopoulos is a Fellow at the TONOMUS Global Center for Digital and AI Transformation and a Senior External Advisor at D ONE, a leading consulting firm focused on data and AI. His work spans cutting-edge research and client advisory, helping organizations to develop effective strategies, unlock new growth opportunities, and navigate an era of rapid technological disruption.

    M. Dalbert Ma

    Dalbert is a PhD candidate in the Strategy and Entrepreneurship department at London Business School. He has a Masters in Management from IESE Business School, a Master of Laws with a specialization in competition law from Erasmus University Rotterdam, and a Bachelor’s in Philosophy, Politics and Economics from the University of York. Before academia, Dalbert was involved in financial technology research at China’s central bank and in infrastructure project financing at Deloitte Financial Advisory.

    Vasilis Vassalos

    Vasilis Vassalos is leading the Information Processing Lab and is the Director of the MSc in Data Science at the Athens University of Economics and Business. He has received numerous awards and has been Principal Investigator for over 15 funded research and advanced development projects since his arrival at AUEB. He is the author of over 70 technical publications and two US patents. He received a Diploma in Electrical and Computer Engineering from the National Technical University of Athens, and his MS and PhD in Computer Science from Stanford University.

    Michael G. Jacobides

    Michael G. Jacobides is the Sir Donald Gordon Professor of Entrepreneurship & Innovation and Professor of Strategy at London Business School. He studies industry evolution, value migration, firm boundaries and organization design. He is the Chief Expert Advisor on the Digital Economy at the Hellenic Competition Commission and a co-author of the WEF’s white paper on digital platforms and ecosystems. He served on the Global Agenda Council of the World Economic Forum and has presented at the Davos Annual Meetings.

    All views expressed herein are those of the author and have been specifically developed and published in accordance with the principles of academic freedom. As such, such views are not necessarily held or endorsed by TONOMUS or its affiliates.

    Related