Loyalty 3.0: How to Revolutionize Customer and Employee Engagement with Big Data and Gamification: How Big Data and Gamification Are Revolutionizing Customer and Employee Engagement (BUSINESS BOOKS) - Hardcover

Paharia, Rajat

Hardcover

ISBN 10: 0071813373 ISBN 13: 9780071813372

Publisher: McGraw Hill, 2013

Synopsis

The New York Times and Wall Street Journal bestseller!

The new secret to driving LOYALTY THAT PAYS

Once revolutionary, loyalty programs designed todifferentiate products quickly became commoditized. And yet, billions of dollars are still spent every year on programs that are doomed to fail. These programs, it turns out, don't inspire long-term loyalty. Once a better deal comes along, customers will gladly defect. Can you blame them?

Silicon Valley start-up Bunchball, the pioneer and innovator in gamification, is light years ahead when it comes to the concept of loyalty--and using it to drive business profits and growth. Focusing not only on customer loyalty, but also the loyalty of employees and partners, Bunchball combines behavioral economics, big data, social media, and gamification to inspire loyalty that lasts--fromeveryone involved in the success of a business.

Now, in Loyalty 3.0, Bunchball founder Rajat Paharia reveals how you can use these same techniques to seize the competitive edge for your business.

Paharia shows you how to create a system powered by human motivation and digital technology that creates ongoing, persistent engagement among customers, employees, and partners. Loyalty 3.0 arms you with everything you need to know in order to build a loyalty and engagement program that drives a sustainable advantage for your business, including:

• The building blocks of motivation, big data, andgamification necessary for creating a powerful strategy that drives long-term loyalty
• Case studies from today’s most innovative companiesthat are already driving customer engagement, learningand skill development, and employee motivation withLoyalty 3.0 methods
• Step-by-step guidance on how to plan, design, build,and optimize your program

Now is the time to abandon your traditional loyalty programs and start taking all your stakeholders seriously--so they will take your company seriously.

Loyalty 3.0 is the game-changing leap you'vebeen waiting for. When you create true loyalty amongcustomers, employees, and business partners, you will generate a sustainable competitive advantageand win in your industry.

Praise for Loyalty 3.0

“Relationships are the single greatest asset for all organizations. Relationships with customers, relationships with employees, relationships with partners. In Loyalty 3.0, Rajat Paharia reveals the newscience of relationship building through big data and gamification.”―TIM BROWN, CEO, IDEO

"Loyalty 3.0 is filled with major insights and does a brilliant job of grounding the reader in fundamental concepts around motivation, big data, and gamification--building on these concepts through real-worldcase studies that bring the combinations to life. It finishes with actionable ideas and next steps that enable you to test and operationalize these ideas in your own workplace and personal life." -- BRAD SMITH, CEO, Intuit

"A fascinating insight into how companies are exploiting big data." -- MARK READ, CEO, WPP Digital

"Rajat pioneered the business use of big data and game mechanics to transform the customer experience. A decade before anyone else, he saw that the same techniques that video game designers had used for years--fast feedback, badges, competition, goals, and leveling up―were also incredibly powerful for motivating behavior outside of games, and an industry was born. This book shares his secrets." -- CLARA SHIH, CEO of Hearsay Social, author of The Facebook Era, and board member at Starbucks

"Rajat Paharia comprehensively explains how to create loyalty in the modern world full of data andconnectivity. If you want to learn how to motivate and inspire employees, you must read this book." -- DAVE KERPEN, New York Times bestselling author of Likeable Social Media and Likeable Business

"In this powerful and groundbreaking book, Rajat Paharia clearly demonstrates how big data, motivation, and gamification can be utilized to create true engagement and loyalty. We believe Loyalty 3.0 will be a game changer for our associates and guests." -- RAY BENNETT, Chief Lodging Services Officer, Marriott International

“The journey to Loyalty 3.0 is real. Rajat’s vision shows why right time relevancy and context will transform how organizations engage with customers and truly craft relationships.”-―R. RAY WANG, Principal Analyst and CEO at Constellation Research

“Adoption is a critical component when creating an exceptional customer experience or smarter workforce, and gamification has proven to be a powerful driver for success. The insights Rajat shares in Loyalty 3.0 will help guide the next wave of deeper relationshipsacross the enterprise.”-―SANDY CARTER, IBM Vice President, Social Business Evangelism and Sales

About this title

About the Author

Rajat Paharia created the gamification industry in 2007 as the founder and Chief Product Officer at Bunchball, which has been recognized as an industry leader and innovator by Fast Company, TechCrunch, MSNBC, Forbes, and many others. Prior to Bunchball, Rajat worked at the intersection of technology, design, and user experience at world-renowned design firm IDEO.

Excerpt. © Reprinted by permission. All rights reserved.

LOYALTY 3.0

How to Revolutionize Customer and Employee Engagement with Big Data and Gamification

By RAJAT PAHARIA

McGraw-Hill Education

Copyright © 2013 Rajat Paharia
All rights reserved.

ISBN: 978-0-07-181337-2

Contents

Acknowledgments
Introduction
PART 1: VISION
Chapter 1: May You Live in Interesting Times
Chapter 2: Whoever Figures Out Motivation Wins
Chapter 3: The Next Big Thing Is Big Data
Chapter 4: Gamification—The Engine of Loyalty 3.0
PART 2: EXECUTION
Chapter 5: Case Studies in Customer Engagement
Chapter 6: Case Studies in Skills and Learning
Chapter 7: Case Studies in Employee Engagement
PART 3: DIRECTION
Chapter 8: Planning Your Loyalty 3.0 Program
Chapter 9: Bringing Your Loyalty 3.0 Program to Life
Chapter 10: Forward in All Directions!
Appendix: A Loyalty 3.0 Sample Scenario: Engaging Attendees of a Tech 
Company's Annual Conference
Notes
Index

CHAPTER 1

May You Live in Interesting Times

The Three Faces of Loyalty

When you think of the word loyalty in the context of business, what comes tomind? If you're like most people, the first thing that will pop into your headis a typical loyalty program, where you earn points for your purchases and canredeem them for rewards. These programs are meant to drive customer loyalty, andaccording to studies, you're probably a member of 18 of them. And yet I'mwilling to bet that you're deeply ambivalent about all of them and, if given abetter offer by another business, would gladly defect. These programs, on whichbillions of dollars are spent annually, aren't generating loyalty to a business;they're generating loyalty to the best deal and so are completely failing attheir fundamental purpose.

What is that purpose? It's to give customers a compelling reason to continue topatronize the business and to resist competitive offers. If a new store opensacross the street or a competitor slashes prices, businesses with loyalcustomers won't lose those customers because they've elevated their relationshipfrom a transactional one to something more meaningful. They have engaged thosecustomers.

Now let's switch gears to employees, arguably a company's biggest asset.Shouldn't the same thinking apply to them? Managers want their employees to beloyal so that employees perform to the best of their abilities, do what's bestfor the company, and resist competitive employment offers. Yet, while businessesacknowledge that they want loyal employees, most are not actually doing anythingabout it. They spend billions attempting to engage their customers and afraction of that, if anything, on engaging their employees.

Finally, companies today rarely accomplish anything alone. You work withpartners to source critical raw materials, enhance product offerings, andamplify your sales efforts. The efforts of these partners are critical to thesuccess of your business, so you need those partners to be engaged. You needthem to be loyal. And yet again, we find that today's businesses generally haveonly rudimentary, if any, systems in place to drive that loyalty. And whatsystems they do have in place feel remarkably like the 18 loyalty programs thatconsumers are ambivalent about.

Clearly, something needs to change. And the companies that figure it out, thatcreate true loyalty, are going to realize a sizable and sustainable competitiveadvantage and win in their markets.

The Road to Loyalty 3.0

Loyalty 3.0 is about taking back the word loyalty and making it actually meansomething. It does this by combining the latest research on human motivationwith the big data generated by your customers, partners, and employees as theyinteract with you to empower your business to motivate, engage, and create trueloyalty.

But before we can understand where we're going, we need to understand wherewe've been.

Loyalty 1.0

We all know Loyalty 1.0 programs; they're the frequent-flyer programs, cash-backcredit cards, and "buy ten get one free" punch cards from the local sandwichshop that have been around for many years. These are purely transactional,completely focused on customers, and absolute failures at generating the kind ofloyalty that businesses actually want. For customers, at best, they're mildlypleasing, and at worst, when a business isn't living up to its brand promise,they feel like a way for a business to hold them hostage. For businesses, atbest, they're table stakes in an industry where everyone else has one, and atworst, they're a giant cost center eating into the bottom line and creating ahuge liability.

Loyalty 1.0 programs also suffer from fundamental structural problems. There'san exciting part at the beginning when you sign up for the program and dreamabout how you're going to earn spectacular rewards and another at the end (ifyou get there) when you actually redeem for a (possibly spectacular but maybenot) reward. In the middle is just a very long grind with no motivation, noengagement, and no loyalty being generated. There's a gulf of lost opportunityin the middle.

Loyalty 2.0

In the early 1990s, 1- to -1 marketing emerged, focused primarily on making theloyalty experience more targeted through segmentation and personalization, witha big emphasis on direct-mail and e-mail campaigns. Data had a bigger role hereas businesses took the information they were learning about their customers andused it to "speak to their interests." While this was effective for a while,open rates on these communications plummeted as the overall level of direct mailand e-mail increased. Consumers were overwhelmed by the sheer amount of noise,and the problem has only gotten worse.

Loyalty 3.0

After Loyalty 2.0, things got stuck for a while. Sure, new technology meant thatyou could now interact with your loyalty program from your mobile phone and thatyou could build a Face-book page for your brand, but nothing fundamentallychanged. Not until now, when the pieces have finally come together to enableLoyalty 3.0. Loyalty 3.0 has three major enabling components that, whencombined, are much greater than the sum of the parts:

1. Motivation. Recent social-science research has much more clearly defined whatcompels and motivates human behavior, and what causes people to do things or notdo things in life and in the workplace. Knowing what truly motivates people—andwhat doesn't—enables us to create stronger engagement and true loyalty.

2. Big data. Technology has taken over how we communicate, socialize, work, andplay. The amount of data that people are generating as they interact with thesesystems is exploding, and new technology is enabling businesses to capture thatdata with more granularity than ever before. Smart businesses can consume thisdata and use it to understand, engage, and motivate their constituents in waysnot previously possible.

3. Gamification. Game designers have been using data-driven motivationaltechniques for years. Our new understanding of motivation, combined with theemergence of big data streams, has enabled these techniques to be used outsidethe gaming world, where they can be powerful tools to drive engagement,participation, and high-value activity for customers, employees, and partnersalike. (See Figure 1.1)

By leveraging these three components together, we can make our customers,partners, and employees more engaged, more active, and truly loyal. We'll spendthe next few chapters in Part 1 covering the building blocks on the left side ofthe equation—motivation, big data, and gamification. In Part 2 we'll take a deepdive into numerous case studies of companies that have successfully used Loyalty3.0 in their businesses so that you can see exactly how it works in the realworld. And we'll finish up in Part 3 with a step-by-step guide that will walkyou through the creation of your own Loyalty 3.0 program.

The Four Tiers of Loyalty

Barry Kirk, my colleague at Bunchball and a veteran of the loyalty industry,wrote eloquently in Chief Marketer about the various tiers of loyalty thatpeople really experience. See if any of these sound familiar to you:

* Inertia loyalty. If a brand's loyalty strategy involves such terms as barrierto exit, it most likely falls into the inertia loyalty category—making itinconvenient to leave the program rather than irresistible to stay. Customers inthis tier stick around because it's too inconvenient to escape. Classic examplesinclude airline loyalty programs (where a lack of alternate flights producesloyalty) or banks and grocery stores (where loyalty is often proximity-based).With inertia loyalty, customers have no incentive to stay once a competitormakes it easy to switch.

* Mercenary loyalty. Just as a mercenary will swear allegiance for a price,marketers can pay or "bribe" customers for their loyalty. Most traditionalpoints- and discounts-based loyalty programs operate in this tier because ofpast effectiveness, but the industry now sees a leveling off of participationrates for this type of program. Yes, the tactic may work, but its major weaknessis that the loyalty generated is emotionally shallow—it's simply about gettingfreebies or a better price; these programs amount to a complex method ofdiscounting. Here, too, there's little to stop your competitor from takingcustomers simply by discounting or paying more.

* True loyalty. Brands reach this tier when a customer has a compelling reason—ideally,an emotional stake in the brand—to resist competitive offers. If a newstore opens across the street or a competitor slashes prices, a brand with trueloyalty won't lose customers because the relationship is based on a deeperconnection of trust and shared value. Good examples include Starbucks (people goout of their way to spend more for it) or Chipotle (which appeals to consumers'values around sustainability and humanely treated animals). All brands canattain true loyalty if they are committed to a win-win relationship with theircustomers.

* Cult loyalty. Ever see someone who proudly sports a brand logo as her favoritetattoo? Or maybe just a friend who consistently refers to himself as a "____guy" (fill in his favorite brand name). At the cult loyalty tier, the customerand the brand begin to merge so that rejecting the brand would be like rejectingyour own values. Customer commitment becomes a virtual lock at that level(congrats to Harley-Davidson, Apple, and Coca-Cola). Unfortunately formarketers, cult loyalty is next to impossible to artificially manufacture. Itemerges only organically—but once it does, it can be cultivated.

The goal of Loyalty 3.0 and this book is to show you the way to true loyalty,not just for your customers but for your employees and partners as well.

We Live in Interesting Times

While on the surface this sounds like a blessing (who wouldn't want to live ininteresting times?), it is in fact meant to be a curse. In a speech in Capetown,South Africa, in 1966, Robert Kennedy explained:

There is a Chinese curse which says, "May he live in interesting times." Like itor not, we live in interesting times. They are times of danger and uncertainty,but they are also more open to the creative energy of men than any other time inhistory.

Fast forward to today, and the world of business is experiencing its own "dangerand uncertainty." The rate of business change is faster than ever before,technology is disrupting everything, and companies are rising and falling atwarp speed. If you're looking at this maelstrom with the right lens, however,you can see that a series of important trends is converging and makingengagement and true loyalty essential to the success of any business. For thosewho can see the signs and steer their businesses in the right direction,opportunity awaits.

We're Living in the Age of Distraction

We are living in a crowded, 24/7, global marketplace—a "flat world." Yourcustomers are confronted with more competing messages, more options, and moredistractions than ever before—more websites, more social media platforms, moremedia vehicles, and more mobile applications, all aggressively fighting fortheir attention. Over a billion people now spend hours each day sharing,posting, tweeting, and commenting on social networks. And they're doing iteverywhere—at home, at work, at school, waiting for the train, and at the dinnertable. They are always "on."

Amid this never-ending cacophony, how do you earn and maintain customerattention? Because customers will buy from the businesses that most effectivelyengage with them, whereas disengaged customers will grow disinterested, delaypurchases, abandon carts, and wander off to competitors. Businesses need to cutthrough the clutter and engage their customers to prevent their messages andrelationships from being lost in the noise.

The Workforce Has Disengaged

According to Gallup surveys, 70 percent of people who go to work every dayaren't engaged in their jobs, costing the U.S. economy up to $350 billion peryear in lost productivity. These disengaged employees are unproductive and arejust as likely as disengaged customers to defect. And disengagement can beviral, spreading from one department to the next, leaving entire teamsfrustrated and unmotivated.

Engaged workers, on the other hand, can drive meaningful increases inproductivity, profitability, and product quality, as well as less absenteeism,turnover, and shrinkage. Given the benefits, it's imperative that businessesfigure out how to engage their employees in a scalable, cost-effective manner.

Social Media Have Changed the Power Dynamic

Social media have fundamentally changed how we interact with each other and withbusinesses. Sites such as Facebook and Twitter have ushered in a new era inwhich businesses no longer control the conversation. In the broadcast era,businesses controlled the means of transmission at scale, and all consumerscould do was to passively receive. In the social era, the rules have changed.Peer-to-peer conversations about a company and its products have become asimportant as the company's communications, if not more so. Recent Nielsenstudies tell us that 92 percent of consumers trust a peer recommendationcompared to a 29 to 47 percent trust rate for company advertisements.

Consumers now can have their own discussions about businesses and brands, withor without the brand's involvement, and can voice their opinions on a globalscale for everyone to hear. Opinion, kudos, and dissatisfaction all can spreadglobally, like wildfire, completely outside a company's control. As a result,companies need to engage their customers and work to make them advocates, notinstigators.

Corporate Information Technology Is Being Consumerized

The consumerization of computing and personal technology has been going on foryears—what started in the military made its way into business and then into thehome. Cheap, easy-to-access, easy-to-use PCs, tablets, and smart phones havespread to most corners of the earth.

What's new today is the consumerization of the corporate information technology(IT) landscape. For decades, we all used more technology at work than at home,and because of that, our expectations of technology were set by our experiencesat work. Technology vendors designed primarily for the work context, and ouremployers dictated the technology that we used in a top-down, command-and-controlmanner.

The balance has shifted in recent years, and now we're all using as much, if notmore, technology at home as at work. And we're bringing that home-basedtechnology into the workplace, where it's working its way into our companiesbottom up. What starts with an individual using BOX for cloud storage or an iPadfor mobile work quickly turns into teams, entire business units, and entirecompanies using these technologies.

And what happens when those consumer technologies, with their user experiencesdesigned for ease of use, simplicity, and delight, are contrasted with theexisting enterprise platforms for collaboration, expense reporting, and humanresources? The enterprise systems pale in comparison, and workers demand better.Functional isn't good enough anymore; business technology now needs to beusable, simple, and engaging.

Generation Y Is on the Ascent

The emergence of Generation Y (also called Millenials), people born from theearly eighties to the mid-nineties, as a demographic force is driving dramaticchange in education, technology, media, and most critically, at work. There arecurrently 80 million Millenials in the United States, and every day another10,000 of them turn 21. They make up 25 percent of the workforce today, and by2025, that number is expected to increase to 75 percent—three of every fourworkers globally will be from Generation Y.

Millennials are "digital natives." They live and breathe online—play, school,and now work. They're accustomed to cutting-edge technology and innovation athome and expect the same quality of technology in the workplace. They've grownup with and expect always-on instant communication coupled with real-timefeedback and responses to their creations and communications. They've also grownup in a time of rapid change, where new becomes normal overnight, so engagingthem requires evolving, changing, and constantly staying fresh.

(Continues...)

Excerpted from LOYALTY 3.0 by RAJAT PAHARIA. Copyright © 2013 Rajat Paharia. Excerpted by permission of McGraw-Hill Education.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Edition details

• Publisher: McGraw Hill
• Publication date: 2013
• Language: English
• ISBN 10: 0071813373
• ISBN 13: 9780071813372
• Binding: Hardcover
• Number of pages: 304