Ray Wang of Constellation Research: Gamification Is On

According to Reuters, the video game industry pulled in a mind boggling $65 billion in 2011 and that number is expected to grow to as much as $72.1 billion by 2015. Clearly, the gaming industry has mastered the concept of community engagement. Small businesses can capitalize on this by incorporating gamification into their business processes. Brent Leary sits down for a chat with Ray Wang in this interview about the concept of gamification.

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Ray WangSmall Business Trends: Before we jump on this idea of gamification, can you give us a little bit of your background?

Ray Wang: I have had the chance to be an analyst, to be in project management marketing, and building products. I’ve had the chance to run marketing at different organizations and I think my whole background comes from being intellectually curious about technology. Helping people figure out how to use technology for business value.

Small Business Trends: Maybe you can tell us exactly what gamification is?

Ray Wang: I think the best way to think about it is really a set of design principles, processes and systems to go out and influence, engage, and motivate people.

This started out in the video game industry by creating different incentives and behavior management. It started to show up in the user’s experiences and it takes a lot of these gaming mechanics – things that we know work to get people interested – to get them engaged. Because at the end of the day we need people engaged to do things.

Small Business Trends: What is an example that can help folks understand where gamification can fit into some of the things they do?

Ray Wang: For example, there is this company in the UK called Giffgaff.  They are a virtual phone operator. What they are able to do is have their customers answer each other’s customer service and support needs.  Every time they do that, they get points for helping another customer out. The interesting thing is because of gamification techniques, they get points that are applicable to credit for future minutes. These points can be used and matched for a volunteer charity grant or they can get cash back.

They paid out over a million dollars last year using the system and what they’ve probably done is cut their customer service and support costs by 20% to 30%.

Small Business Trends: Are you seeing this specifically in B2B or B2C?

Ray Wang: On the B2C side, it tends to happen with the external communities getting many groups of individuals to participate. Another great example is in product development.  You see a lot of people put these contests together to build a new feature or the next product design.

The rewards are there. The hint is you have to focus on the non-monetary rewards.  You get a lot more bang for the buck. Literally the non-monetary rewards actually drive better incentives and better behavior outcomes.

On the B2B side that happens every day. You have partners you might be working with or other resellers and what you are trying to do is to get them to move into certain directions. This is where you can talk about non-monetary incentives out there that can drive this kind of behavior – recognition, access and impact.

Small Business Trends: Where are companies at in implementing this kind of approach?

Ray Wang: You always have the earlier adopters and I would say that the early adopters are probably 12 to 24 months into it.  These guys are making everybody else say, “Hey how do we jump into this?”

You have to go back and redesign what you want to influence. You have to figure out what you want to push the envelope on. Is it better collaboration? Do you want to get more responses in a community site? Do you want to get more revenue per engagement? Do you want to improve your loyalty or satisfaction?

If you mow that down, then you have to go back and figure out within the community – what do people want to do?

Small Business Trends: What is the best way for a company to get started building a gamification program into what they do in terms of engagement?

Ray Wang: Actually, an interesting case study happened with some of the casinos in Las Vegas. The casinos are an interesting business.  The meeting business of Las Vegas is about a 4.4 billion dollars business. They get “whales” to come in and spend a lot of money in the casino and meeting planners are the equivalent of these whales. They go in and they plan these big conventions. They pick the shows that happen year over year and if you can get their business and their referrals you are in good shape.

The first base is wedding planners, then there are the conference planners. These are two different types. By focusing in on how to get them to do the referral and to continue to book at least once a year – and get them to book two to three years out, that is where you get a lot of efficiencies because you have predictable revenue.

We then see gamification where they go out and get meeting planners to refer other meeting planners and they get points for doing that. They get points for actually booking multiple year contracts; they get points for having X number of meetings per year. Now what do they do with these points?

Let’s say they get 30 points. Casinos will make sure that they give them the usual comps, the better rate, a better spa. Then maybe they get a free trip for some other time if they get to 100 points. If they get to 200 points, the casino will actually help them get press and media coverage for that event.

Everybody’s outcome is geared to what they want. The incentives for the customers are slightly different.

Small Business Trends: Where can people learn more?

Ray Wang: A great place to go is the Constellation Research website or my blog, which is Software Insider.

This interview is part of our One on One series of conversations with some of the most thought-provoking entrepreneurs, authors and experts in business today. This interview has been edited for publication. To hear audio of the full interview, click the right arrow on the gray player below. You can also see more interviews in our interview series.

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This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.

Brent Leary Brent Leary is the host of the Small Business Trends One-on-One interview series and co-founder of CRM Essentials LLC, an Atlanta-based CRM advisory firm covering tools and strategies for improving business relationships. Brent is a CRM industry analyst, advisor, author, speaker and award-winning blogger.