Game On for CPGs
By: Oscar Leon & Dan Hernden
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
Consumer Packaged Goods (CPG) brands are struggling with declining sales in developed countries. The US, for example, saw a slight volume decline in 2012. Yet, CPGs are fixated on pursuing typical marketing strategies. A Booz & Co. survey of CPGs found that 83% of respondents plan to increase investments in shopper marketing, with 55% ranking it as their number one investment. CPGs must recognize the changing habits of their consumers. Services like PVR and Netflix have enabled 70% of television viewers to avoid television advertising altogether. Online ads are also becoming less effective; 68% of consumers surveyed by Adobe have described advertising as “annoying”, illustrating consumer desensitization to the messages conveyed by traditional marketing. CPG companies clearly need new mediums of communication to engage consumers and spur sales growth.
The Game is Afoot
Key among a number of untapped opportunities for CPGs is the emerging field of gamification. Gamification is the application of game design techniques and game mechanics (points, levels, achievements) to non-game activities such as education, fitness, and healthcare. In the context of marketing, gamification helps brands develop a loyal consumer base, leading to repeat purchases and improved product differentiation. Although gamification is a relatively new concept in marketing, several successful gamified campaigns have been released to date. In 2006, Nike released the Nike+ iPod application, which tracked the distance and pace of a person’s run with the help of proprietary equipment. Nike experienced a 13 percentage point market share increase in the running shoe market in the first two years of this campaign. Another example is Right Guard’s Total D MVP campaign, a Facebook app that encourages users to challenge their friends with online sports trivia and casual mini games. The campaign increased the sales growth rate of Total Defense 5 antiperspirant from -3% to 15% in three months. These game-centric campaigns show the potential to engage consumers on a much more intimate level.
Who Are the Players?
Gamification is not restrained to youth-oriented brands; any generation can find a game experience appealing. Recent studies have discovered that middle-aged women are one of the fastest growing demographics among mobile phone and tablet gamers. Female focused apps lead male focused apps in the top 10 grossing iPad game chart, with female iPad ownership outstripping male ownership in 2012. CPGs could benefit from tailoring gamified advertisements to a wide range of demographics including middle-aged women, the largest purchaser of consumer goods for the home.
Gamified campaigns are most effective when applied to brands that already have existing customer awareness; they are highly effective at increasing the emotional connection between a brand and its existing users but struggle to develop initial brand awareness. As such, gamified campaigns can increase customer loyalty and decrease churn rate, supporting the development of brand ambassadors.
Brands with the highest potential for success are those which (1) educate the consumer or (2) are based on recurrent activities. Febreze represents a brand that could benefit from a gamified campaign focused on educating consumers on the effectiveness of their products and encouraging users to find new uses for their brand extensions. CPGs’ entry point into gamification however should come through the latter. The most successful campaigns – i.e. Nike+ – have succeeded through the promotion of recurring activities, such as an active healthy lifestyle. In this sense, conglomerates like Nestle could implement a gamified campaign targeting the health conscious movement to establish a deeper interest in their products and consequently drive up sales.
Making Games a Reality
Designing
Poor design is one key reason gamified campaigns fail. As such, CPGs should hire advertising agencies that have a team of interactive designers, such as Tribal DDB, to build gamified campaigns. Other gamification specialized firms such as Bunchball, BigDoor or Badgeville offer similar services and provide unique insights to develop games that will appeal to consumers.
Retailers
Retailers have a monopoly over direct consumer communication channels and might see gamification as a threat since it reduces their influence over the customer, limiting loyalty to the retailer’s brand. To avoid damaging distribution relationships, CPGs should collaborate with retailers in designing unified gamified campaigns. For example, Nestle could partner with select retailers to create a gamified campaign that would offer exclusive brand recognition to the partnered retailers. A retailer inclusive campaign provides incentive for the retailer to advocate consumer adoption.
Playing
Social media should be an integral part of any gamified campaign because it enables the quick development of a community. Brand managers can capitalize on the resulting positive networking effects and brand awareness created through referrals, comments, “likes”, “retweets”, etc. Additionally, social media exposure is one of the most effective ways to engage players. With these insights, Nestle could create a campaign that encourages people to complete recipes using Nestle products and post their creations on Facebook, Pinterest, and Instagram. Integrating these actions into a campaign enhances the chances of successful gamification.
Return on Investment
Companies have a tendency to focus on extrinsic rewards when designing gamified campaigns. These rewards can effectively attract customers to a campaign and establish positive relationships between the game experience and the product itself. However, offering excessive extrinsic rewards can devalue gamified campaigns by causing an overemphasis on reward capture that undermines the simple enjoyment of playing the game. On the other hand, intrinsic rewards allow players to focus on playing the game, which is vital for the deep customer engagement required to build brand loyalty.
A healthy balance between intrinsic and extrinsic rewards is required in order to attract customers and keep them engaged with the gamified campaign. Considering Nestle, players could have levels of mastery when it comes to the use of a certain brand or product to satisfy the need for intrinsic rewards. To drive sales and actually increase customer preferences, extrinsic rewards, like coupons or product prizes should be introduced. This combination of rewards ensures both engagement and increased product sales for the campaign, two key goals for any gamified campaign.
Another consideration is the metrics used in the judgment of success for gamification. Brand managers are often rewarded for maximizing brand recognition, but this narrow focus sometimes causes valuable market opportunities to be missed. This is especially true for less tangible measures such as customer engagement and community development. CPGs could therefore introduce broader measures of engagement such as growth in user generated content and number of actively involved users to measure campaign success. Adding such non-traditional metrics to brand manager reward systems would align personal motivations with successful gamification development.
Game On
Gamified campaigns offer a channel for CPG brands to interact with consumers at a level of intimacy they have never achieved before. CPGs have been hesitant to apply gamification techniques to their brands because of the structural changes required to implement them. CPGs would need to provide training across all management levels in areas such as non-traditional media channels and implement alternative performance metrics. In addition, to successfully apply gamification, its implementation cannot be an afterthought. Brand managers must think about gamification during every stage of their market planning process, from early conception to segmentation, positioning, and implementation. Gamification does, however, provide significant upside and is not a field CPGs can afford to ignore.
