Gamification for Startups

Gamification implies the use of game mechanics to startups. We use the mechanics of traditional games to increase startup metrics such as customer retention.

Acquiring new customers is expensive. Hence startups are increasingly looking to increase their customer retention rates and reduce churn. This is where gamification has emerged as an important tool. The metric which most startups look to target using gamification is the Lifetime Value(LTV) of a customer.

Startups give users incentives (generally monetary) to engage more with the product. This generally affects users in 2 ways – it gives them an incentive to use the product more due to a monetary saving and it also tends to hit on their competitive instincts while competing with other users.

Incentives can be in multiple forms.

Points – which increase with the engagement level of the user with the product. Points can be redeemed for discounts or at times act merely as a score to compete with other users.

Targets – which when achieved lead to the unlocking of a host of benefits for users.

Gamification must be used well by a startup. It does not always add value. For it to do so, the game setup must be relevant for the business, must highlight the product benefits and must be able to add to the customer experience. Without all this, a gamification effort might end up irritating customers.

Keep your Churn Rate Low

Churn Rate is an annualized percentage at which a business having recurring customer base (customers hooked onto a plan offered by the business such as subscriptions etc.) loses its customer base. For example, a churn of 5% means that the business loses 5% of its customer base during a year.

So why it is important? This is going to happen in any business and we can always get new customers.

This thinking is wrong and can prove expensive for the business. We focus so much on customer acquisition that customer retention tends to get ignored. It is a proven statistic in any business that acquiring a customer is much more expensive than retaining your existing customers. Hence it becomes important to focus on customer churn. Rather than spending all of our marketing budgets in acquiring new customers, we should look at spending a significant amount on retaining the existing ones. A business cannot get onto a sustainable high growth trajectory merely on the basis on new customers.

How do we reduce churn?

To retain customers, we need to look at customer experience and feedback. Customers will keep coming to you if you build trust first and can subsequently offer a service which is equal to/better than your competitors. Focus on how users interact with your product, what they like, what they dislike, and use these metrics to keep enhancing their experience over time.