Gamification and service marketing

Marketing perspectives

The marketing literature reveals negligible evidence of academic research on gamification (see Herbig 1991; McAfee and McMillan 1996; Vargo and Lusch 2008; Lusch et al. 2007; Donato and Link 2013; Terlutter and Capella 2013). In this section we review existing published literature in marketing and extend our review to the information interfaces literature. Finally, we conclude with a review of trade publications and newsletters that address gamification. Initial research on gaming appeared to combine game studies with social sciences that had few business applications. Most research related to educational contexts, social networking, and commercial gaming. Terlutter and Capella (2013) reported on gamification in advertising and analyzed research directions of In-game Advertising (IGA), Advergames and Advertising in Social Network Games. Although the term “Gamification” appeared in the title of their article, the term did not reappear elsewhere and the authors did not address gamification concepts as defined in this current paper. Advergames was described as gaming “specifically designed and created to promote a brand, product, service, or idea” (Terlutter and Capella 2013:96). Their analysis did not include marketing concepts or service marketing connections. They concluded that researchers should add a category of research on advertising in digital games and encourage more research on advertising in social network games.

In early marketing literature on gaming theory, Herbig (1991) provided a comprehensive overview of game theory and asserted that gaming delivered a useful and appropriate tool to define and explain marketing problems. McAfee and McMillan (1996) addressed business competition and game theory and concluded that gaming could be valuable to marketing. They suggested several ways to prove value: motivating a sales force with the design of new selling methods, providing a supplement to the traditional survey approach for assessing the value of new products and new product design, and providing insights into subcontracting and purchasing methods, such as overcoming the disadvantages of sole-source negotiation when competition is possible.

Huotari and Hamari (2012) examined service marketing and gamification in terms of enhancing value in customer service. They defined gamification as “a process of enhancing a service with affordances for gameful experiences in order to support user’s overall value creation” (Huotari and Hamari 2012:22). We adopt this approach and agree with Huotari and Hamari on how this definition anchors gamification into existing service marketing concepts such as service packaging, value in use, and service systems. Huotari and Hamari (2012) attribute, for example, the success of mobile services such as Foursquare to gamification. They define it as a form of service packaging where a core service is enhanced by a rules-based service system that provides feedback and interaction mechanisms to the user with an aim to facilitate and support the users’ overall value creation.

The American Marketing Association introduces gamification as “the process of applying the psychological and sociological factors that drive intense game play to consumer measurement” (Donato and Link 2013:40). The authors suggested four broad guidelines for those implementing gamification when reporting on a pilot study measuring consumer behavior and attitudes of those viewing television on smart phones: “(1) game mechanics should drive competition and reward achievement, (2) techniques work differently across populations, (3) gamification appears to work better with a long-term panel survey than a one-time survey, and (4) techniques should motivate consumers to achieve the measurement tasks but not to drive or change the behavior or attitudes that are being measured. We have incorporated these guidelines in our study except for the long-term panel survey. We assume differences across populations and cultures respond more favorably to gaming techniques than older adults (Terlutter and Capella 2013; Donato and Link 2013).

From an Information Interfaces perspective, Deterding et al. (2011a) believe the term “gamification” originated in 2008 in the digital media industry and became widespread in 2010. They define gamification as “the use of game design elements in non-game contexts” (p 10) and demarcate the concept from playfulness, playful interaction, or design for playfulness, instead referring to a complex of terms as gamefulness, gameful interaction, and gameful design. Thus, business applications may prefer to frame gamification in terms of gameful interaction rather than playful interaction. Goehle (2013) distinguishes gamification from video games in the educational context and Cohen (2011) argues that online social games may soon replace textbooks in schools. These education trends may prepare employers to incorporate gamification processes in their business processes.

Finally, a search of trade publications and newsletters, including advertising, finance, computer technology, entrepreneurship, and banking, reveal hundreds of short articles, most of which were published from 2011 to 2013. Many of these publications report positive results in revenue growth after the adoption of gamification software in the enterprise. Port (2013), for instance, wrote how Conductor, a New York City-based technology company, had demonstrated a track record of 6,700 percent revenue growth between 2009 and 2012. The challenge was to continue the incredible momentum. The company reported “record revenue growth for the first half of 2013 and a 126 percent annualized increase in sales” after incorporating gamification software and implementing it via the Salesforce.com CRM platform (Port 2013). These types of stories proliferate throughout the trade literature.

In summary, we agree with a caution that “we’re really missing out on some of the elements that make real games compelling when we just boil it down to the leaderboard and achievement levels and badges. If you don’t have the fun factor in there, I’m not sure it really qualifies as a game” Technological Horizons in Education Journal Magazine (2013):33). Thus, we included a questionnaire item addressing “having fun” while on a business website. Gaming also may refer to digital games that have learning objectives. Gamification is digital and will involve points or tokens, badges, levels, rewards, or competition, the same characteristics as gaming, and gamification must also involve fun for the consumer. Gamification differs primarily from gaming in that it involves the customer service experience end-to-end while engaging on a company’s website. Consumer loyalty develops via psychology and game design to change consumer behavior in favor of company objectives. However, if gamification platforms lack novelty and creativity or unexpected twists and difficulty choices for the consumer, they may not endure over the years. They may prove to lose consumers’ interest over time. With gamification, consumers benefit by engaging among themselves about products and services and receive rewards.

The implementation of gamification platforms in business appears to be gaining acceptance as investments in the software programs show high return on investment and greater customer engagement and monetary results. Before briefly discussing service marketing with gamification, one other important distinction must be introduced. The applications of gamification platforms seem to be developing in two different directions. First, numerous organizations are using gamification techniques internally to motivate employees in their performance. Gamification engages and encourages employees to earn vacations and rewards and compete with other employees and is used primarily used with sales personnel. Second, gamification techniques are used externally with customers. Our study focuses on the external dimension of new and returning customers. Before we introduce definitions of gamification and define the concept, we address the context of service marketing.

Service marketing

We assume gamification is closed connected with service marketing. In this section we build on our review of marketing and information interfaces literature to address service marketing. Broadly, service marketing is defined as those “deeds, processes and performances” that a person or entity provides to another person or entity (Zeithaml et al. 2008). While we agree with this definition, we also acknowledge that the history of business service has evolved to consider all economic activities whose result is not a physical product. Service marketing provides added value in forms that are essentially intangible from that of its first purchaser, and we make a clear reference to gamification and its intangible properties. Four major distinctions between tangible goods and services can be identified and apply to our current study. We assume services are considered intangible because (1) they cannot be inventoried, (2) they cannot be patented or easily displayed, (3) they cannot be communicated easily, and (4) pricing of services is complicated. Services may also be described as “heterogeneous”, implying that service delivery and customer satisfaction depend on the actions of the employee and the customer. Customers do not buy gamification; it becomes vehicle for the customer to engage with the company.

Thus, the quality of service of gamification depends on uncontrollable factors. There is no accurate prediction that the service delivered corresponds to what was planned and promoted. Another heterogeneous factor assumes the production and consumption of service is simultaneous. Customers participate in and affect the transaction, drawn in through the gamification platform, interacting with each other. Employees also affect the outcome of the service and adaptation of the company. Decentralization must be essential and there is no mass production. Gamification services have a perishable nature as it is difficult to synchronize supply and demand services because they cannot be returned or resold.

We make one other point about measurement of gamification services. Gamification platforms and services have high levels of expertise and credibility properties, which make them difficult to evaluate particularly before purchase. Normally, the consumer faces three stages in the process of acquiring services. First, consumers recognize their need through information they have received about the company or product. They search for information and evaluate alternatives before the purchase or engagement. Next, the consumer experiences the service. Finally, the consumer evaluates the service after it has been experienced. One goal of gamification is to draw the customer through these three phases and provide an enjoyable experience. These steps require the provider of the service to reflect on the consumer because their active involvement when seeking the service must be considered in each stage. The end result will mean having customers who are willing and delighted to commend the service to others and who become loyal to the service.

Thus, customers interact with employees and often people outside the service environment to produce the final service. We consider gamification a vehicle that engages consumers in the service marketing process. This view is consistent with Vargo and Lusch (2008); Lusch et al. (2007) that participatory customers, embracing the service dominant logic of marketing, promote the idea they are always co-producers of value. Effective participation of customers may increase the likelihood that their needs are met and that the benefits they seek to achieve, in services like health care, education, weight loss, and others, depend on their engagement. Gamification will play an essential role in their participation. Thus, unless customers perform their functions in service marketing effectively, the enterprise cannot get the desired service result. With this characterization of service marketing in mind, we transition to a section on principles of gamification. The following section examines definitions, processes, and elements of gamification.

Principles of gamification

Various definitions of the gamification concept have been offered by practitioners and published academic literature (Herbig 1991; McAfee and McMillan 1996; Vargo and Lusch 2008; Lusch et al. 2007; Reeves and Read 2009; Donato and Link 2013; Terlutter and Capella 2013). The business advisor for JD Supra Buzz offered a glossary of terms and defined the term as “a business strategy which applies game design techniques to non-game experiences to drive user behavior” (Pierce 2014). The Wall Street Journal described top disruptive technology trends in 2014 (Burris 2014) and described gamification as “a fast-moving hard trend of using advanced simulations and skill-based learning systems that are self-diagnostic, interactive, game-like and competitive–all focused on giving the user an immersive experience.” Badgeville, a Redwood California-based company established in 2010 and identified as the number one provider of gamification platforms today, defined gamification as “a proven business discipline that takes the techniques that make games engaging, fun, and compelling, and applies them to technology investments” (Badgeville Vimeo Video 2014).

Furthermore, Badgeville creates platforms for Global 2000 businesses and provides gamification software for such enterprises as Philips Electronics, Kendall Jackson Winery, American Express, Citrix, Bell Media, and Ask.com. The company characterizes gamification as a behavior platform for community engagement (Badgeville 2014). Significant statistics emerge about the positive effect of gamification software on interaction with customers. Badgeville states that 54 percent of customers are inactive in loyalty programs and 69 percent do not use a company’s online communities (Badgeville White Paper 2012). Furthermore, “on average, web-based communities never see more than a 30 percent login rate, while content served up on Facebook reaches only 16 percent of users (many of whom never click on it)” (Badgeville Marketing Campaigns 2014). Interestingly, the company demonstrates that implementation of gamification increases a daily return rate by 33 percent, improves retention by 50 percent, and increases customer advocates by four times (Badgeville Social Loyalty 2014). In summary, these definitions and statistics seem to indicate why gamification platforms are predicted to increase significantly in redesigned business processes and gain presence in Global 2000 businesses. Next, we turn to the gamification process itself and examine several elements that are involved.

Processes of gamification

Gamification differs from educational learning games and online gaming so prominent today because such activities are unrelated to business organizations and entities serving stakeholders. The gamification process differs from sales promotion programs in marketing that are designed to create brand loyalty with customers. Such frequency or continuity programs focus on customer behavior. Instead, gamification involves the total customer experience, including inward experiences and motivations that are integrated throughout the service marketing process. We offer three illustrations of companies that have incorporated gamification: Starbucks, Allied International Credit, and Samsung.

First, Starbucks illustrates gamification in service marketing with a program called My Starbucks Rewards (Rewards.starbucks.mx 2013). Gamification begins when customers receive a personal Starbucks card at no cost, once they have registered their personal data online. Afterwards, they can recharge the card for about US$4.00 which allows them to automatically move to the Welcome Level. At this level, they will receive a free welcome drink on their next visit plus another drink on their birthday. Once customers have used the card five times, they receive five stars and move from the Welcome Level to the Green Level. After the customers have earned 30 Stars in 12 months (25 additional Stars after starting the Green Level), they qualify for the Gold Level.

Starbucks has increased customer engagement, developed stronger customer loyalty, and increased sales as a result of My Starbucks Rewards. Gamification directs customers toward greater motivation and “to move to the next level”. The gaming process creates participation in the process itself and the game mentality begins. Customers may track their “stars” online by logging into their account. The exchange of any free drink or redemption, such as syrup or free milk, does not advance the stars program, but the gamification condition exists in that the service in the store has to be evident to invite costumers to go forward in obtaining stars and to go to the next level.

A second example illustrates gamification in financial services. King (2013) relates how a collections agency, Allied International Credit, a unit of Allied Global Holdings Inc. based in Newmarket, Ontario, motivates its customer service reps by using gamification. The company allows employees to earn points and prizes for routine job tasks through gamification. King explains how approximately 100 agents at Allied International “accrue points and badges and they can see where they stand relative to other call center workers. Sometimes, the feedback is just a fun badge when they call a new city for the first time. There is a maximum of 5,000 points that can be earned each day and a number of different prizes” (King 2013). Moreover, employees can win $5 coffee cards, time off on the Friday before a holiday weekend, dinner with the CEO, or golf with an executive vice president. Gamification helps motivate new employees who on average last only six months at the collection agency and help make collections more interesting for the more experienced employees.

Not all Samsung customer behaviors are treated equally. According to the company’s website, providing an answer in the Q&A is worth more than merely asking the question. The idea of points and rewards is to increase customer engagement and provide rewards for their behaviors.

Elements of gamification

Palmer et al. (2012) have distilled game-mechanics principles, behavioral economic theories, and current user experience design thinking into four gamification elements. They describe the elements and tools of the gamification process in the Figure 1 (adapted from Palmer et al. 2012:56).

Applications in service marketing

Many of these elements can be identified in gamification platforms. Although loyalty programs also are consumer oriented, loyalty differs from gamification because of its narrow focus on behavioral rewards. Typically, a loyalty program rewards customers who make frequent purchases with privileged access to various company services. These privileges may include discounts, special services, coupons, or free products, but they benefit the company by giving intense marketing information about the customer. In contrast, gamification involves the entire process of service marketing and emphasizes inward motivation through different levels. The Wall Street Journal pointed to how “Gamification isn’t just about scoring points—it allows for new ways of imagining, designing, and implementing solutions. As business becomes increasingly social, more opportunities are arising to augment performance and promote strategic objectives by embedding gaming mechanics into traditional processes” (Palmer and Hugo 2013).

We assume that elements 1 and 2 mean gamification behavior differs across demographics. Depending on the age of the participant, we must take into account the engagement techniques of frequent consumers. They obtain more from the firm and recognize in their environment how companies have to improve their marketing service for them to draw them in.

Research questions

Participants

Two populations of data were selected for our customer survey and we obtained a sample of respondents (N = 189). The first population were registered users of Amazon’s Mechanical Turk (MTurk) web service that makes available approximately 500,000 participants from 190 countries. According to Buhrmester et al. (2011), MTurk is a new source of high-quality, inexpensive data. They found “MTurk participants are slightly more demographically diverse than are standard Internet samples and are significantly more diverse than typical American college samples” (p 4). A convenience sample of respondents, who voluntarily and anonymously completed the questionnaire (N = 130), was obtained in June 2014. Individuals who chose to participate in the study received after survey completion a small monetary award, which was deposited into their MTurk account. This survey was posted in English. A second convenience sample of customer respondents (N = 59) was taken from our university campus student population during May 2014. The customer survey was posted online in Spanish for university student and professor access through a link on our School of Business Facebook page. An announcement was posted for professors and students asking them voluntarily and anonymously to participate in the study. The questions and scaling for both the MTurk survey and the Facebook survey were identical, differing only in language translation.

Survey development

Typically, assessment of gamification activities is based upon growth in sales revenue, retention of customers, or increased return of customers on company website. These particular variables are no doubt important to businesses, but each variable can depend on multiple factors. Sales revenue increases, for instance, may be based on product pricing or customer preferences rather than gamification. To date no published instruments or surveys appear in the indexed scientific literature that addresses or quantifies gamification. As a result, our study involved the development of a 20-item questionnaire measure that targeted customer engagement on company websites. Reliability tests on the combined samples of the customer survey revealed Cronbach’s α = .913.

Items first were pilot tested with young entrepreneurs associated with our university and who used a gamification platform on their websites. The 20-item questionnaire (see Additional file 1) asked respondents to consider their LAST experience with a business where they received a special promotion, a discount, or used a membership card to obtain a service at the business, and to write the name. The next three items assessed how often the respondent visited the company website, length of time as a customer, and how many times a month the respondent visited the web site. Following items addressed gamification-related topics, such as the experience of having “fun” while visiting the website, the presence of a special “feeling” toward the company while spending money, and obtaining additional benefits with purchases.

A second separate survey (Additional file 2) was developed to assess management perspectives related to gamification and the degree to which these managers believed they met consumer needs and delivered benefits. The 22-item instrument contained 19 items related to perspectives about loyalty of customers, resources available for implementation of new technologies, website attractiveness, and customer engagement. The analysis included questions 1–16, which used Likert-type scaling of 1 = strongly agree to 5 = strongly disagree. The survey items were developed from company publications about gamification available through website searches. Three demographic questions appeared at the end and addressed gender, age, and level of education. Managerial data were gathered (N = 15) through a paper survey distributed at a managers’ meeting of a local restaurant group in April 2014. Reliability tests revealed Cronbach’s α = .521.

Customer survey independent samples T-Test

Factor analysis

To identify possible underlying dimensions in the customer survey, factor analysis was conducted on the combined customer data sets (N = 189). Principal components extraction with Varimax rotation resulted in two components or factors emerging with an eigenvalue >1 and accounting for 61 percent of the variance. The analysis included questions 5–17, which used Likert-type scaling of 1 = strongly agree to 5 = strongly disagree. Thus, a total of 13 questions were analyzed, surpassing the 5:1 ratio of cases to variables requirement in a principal components analysis.

Our factor analysis revealed that business relationship, rewards, competition, and fun were fundamental driving dimensions in gamification. Interestingly, respondents did not indicate receiving different treatment (Q7), obtaining more benefits when spending money (Q8), receiving different treatment in that business with a card (Q9), feeling something special (Q10), and spending more money to receive excellent treatment (Q11) were important factors. We initially assumed that “special feelings” and “moving to higher levels” would emerge as key dimensions of gamification. Moreover, the final two questions, “I enjoy sharing my activities with my friends on social media” (Q16) and “The benefits that are offered are easy to understand” (Q17), did not emerge as significant items in the analysis. Although Q16 “sharing of activities” loaded at .500, we initially assumed respondents would indicate sharing on social media of stronger importance.

Crosstabs

Results from frequency analysis of visits to business (Q2); length of time as a customer (Q3); and number of days, weeks, or months using the company website, brought out key patterns of gamification. Over half of the respondents visited their business once a week or more (34%) or once every two or three weeks (20.9%). Another one-fourth indicated once a month. When asked how long the respondent had been a customer of the business, almost two-thirds (63.1%) indicated one year or more. Finally, when asked how many times a month they accessed the company website, 11.2% indicated once a day, 18.7% two or three times a week, and 15% accessed the site once a week. Thus, 45% of the respondents could be considered frequent visitors to their business web site. We assume frequency of visits and engagement would be instrumental in the gamification process.

Cross tabulations were conducted with each question item and each demographic variable. Results showed the Gender was significant with Relationship with the Business (Q5) at Pearson’s Chi-Square value 130.391, df 20, p < .000; Level of Education was significant with Relationship with the Business, value 67.020, df 24, p < .000; and Age, value 63.190, df 16, p < .000. These results again emphasize the importance of business relationship with gamification. Other question items having significant Pearson’s Chi-Square values (confidence level p < .05) on all three demographic variables were: having membership and frequent customer cards (Q6), more money equals more benefits (Q8), sharing my activities with my friends on social media (Q16), and benefits are easy to understand (Q17).

Manager survey results