How Licious Leveraged Gamified Rewards to Double Customer Retention

In the contemporary digital landscape where competition is rampant and nearly every application comes replete with contests and challenges, Licious chose to take a different route. They introduced the concept of gamification to their platform, promising rewards and the thrill of achievement without demanding much effort from their customers.

Similar to strategies employed by other successful businesses like Starbucks with their rewards program or Duolingo with their language learning challenges, Licious focused on enhancing customer retention and monetization. As analytics expert Tom Davenport suggests, "Companies that are successful in analytics, particularly in e-commerce, create stickiness...they create an environment where the customer wants to stay."

Customer retention has become more vital than ever for a brand's success. Licious has managed to skillfully navigate this challenging landscape. They have mastered the art of customer retention through an enticing strategy - the introduction of a gamified rewards system. This strategy has fundamentally altered their relationship with customers and has led to a significant increase in customer loyalty and repeat purchases.

Identifying Potential Loyal Customers

The journey of this initiative began with the astute identification of potential loyal customers, a task that laid the very foundation for Licious's innovative strategy. This identification process was of paramount importance as it enabled Licious to zero in on a customer segment that had a higher propensity to respond positively to the rewards system. The method employed for this identification was far from arbitrary. It required an in-depth, rigorous data analysis that delved into various aspects of customer behavior, their purchasing habits, and order patterns.

The process encompassed a close examination of the customer's past interactions with the brand, their frequency of purchases, and even their preferred products. The goal was to create a comprehensive profile of customers who would not only be interested in the rewards system but would also actively participate in it. This phase was strikingly similar to the customer segmentation strategy that successful businesses like Amazon and Netflix employ. These companies harness the power of data analytics to provide personalized recommendations to their customers, thereby enhancing their user experience and fostering customer loyalty.

Designing Enticing Rewards and Challenges

Upon identifying their target customers, Licious moved to the next crucial phase - the creation of captivating rewards designed to pique customer interest and prompt recurrent purchases. This represented a bold departure from the normative methods employed by traditional loyalty programs. Instead of adhering to the routine practice of offering fixed rewards, Licious chose to innovate.

They introduced an intriguing mix of rewards that were both fixed and variable in nature. This approach added an element of surprise and anticipation, thereby keeping the customers engaged and looking forward to the next reward. Furthermore, these rewards were artfully presented as unexpected pop-ups or small quests, providing customers with a sense of adventure and achievement.

By intertwining the reward system with elements of gamification, Licious successfully transformed the rather mundane process of earning rewards into a fun and exciting experience. This strategic move not only enhanced customer engagement but also fostered a sense of loyalty towards the brand. As customers embarked on these quests and achieved their rewards, they experienced a sense of satisfaction and accomplishment, further solidifying their relationship with the brand.

The 'Aha Moment' and the Value Proposition

Licious drew a considerable amount of inspiration from the gaming world, specifically harnessing the concept of 'side quests'. These quests, offering players bonus rewards upon completion, serve to heighten the overall gaming experience. In the context of Licious's reward system, these quests were meticulously designed to be engaging, drawing customers into a deeper interaction with the platform.

But there was more to these quests than mere engagement - they were also strategically designed to guide customers towards what product management expert Nir Eyal coined as the 'Aha Moment'. This moment represents a pivotal point in a customer's journey where they experience the inherent value of a product, leading them to continue using it.

By skillfully weaving this concept into their rewards system, Licious aimed to drive customers towards this realization - the understanding of the tangible value they were gaining from their purchases and the reward system. It was this moment of clarity and appreciation that Licious sought to facilitate, as it signified not only a successful customer interaction but also the potential for a lasting relationship.

In essence, the 'Aha Moment' served as a key value proposition in Licious's customer retention strategy. It was a testament to the company's understanding of the customer's journey and their efforts to make each interaction meaningful, rewarding, and, ultimately, valuable. The achievement of the 'Aha Moment' represented a win-win situation, where customers discovered the value of the platform and Licious ensured customer loyalty and satisfaction.

Monitoring Key Metrics and Shifting Dynamics

With a budget of 60 lacs, Licious had a clear objective - to encourage customers to place more orders and to ensure that these orders contributed positively to the revenue. Much like how companies such as Uber track key metrics like the number of rides or Airbnb monitors the number of bookings, Licious kept a close eye on their key metrics. They compared the repeat purchase rate with the lifetime orders of a customer, effectively measuring customer loyalty and the effectiveness of their gamified rewards system.

As customers placed more orders, the dynamics of the rewards system changed. Licious incentivized customers with an abundance of rewards and redeemable offers, encouraging them to place orders rapidly, much like the nitro boost in a car racing game accelerates a player's car. This strategy aimed to capitalize on the momentum generated by the rewards system. However, after the sixth order, the goal subtly shifted from rapid order placement to maintaining customer engagement to ensure sustained profits.

Abandoning the Traditional Discount System

One might wonder why Licious decided to abandon the traditional discount system in favor of this innovative approach. The answer lies in the proactive nature of the rewards system. Unlike traditional discount systems that are reactive and provide discounts after a purchase has been made, Licious's reward system enticed customers to make purchases by offering rewards upfront.

The Proactive Reward System: Secret Sauce for Success

This proactive rewards system, coupled with the flexibility, scalability, and a touch of customization, flavored with real-time customer feedback, became the secret sauce for eliminating sticky customers while also driving profits. This is reminiscent of how companies like Starbucks leverage their mobile app to provide a personalized and proactive rewards system, thereby boosting customer loyalty and profits.

Effective Communication and Visual Engagement

A key principle guiding this initiative was effective communication. Licious strived to articulate their value proposition to customers in under 100 words, emphasizing the "less is more" philosophy. They also provided visually creative representations to enhance customer engagement, much like how Snapchat uses creative visuals to engage their users.

The Impact of Task Completion Rewards on Engagement and Sales

The principle of task completion is to claim a reward. This approach was designed to keep customers engaged and motivated to explore the platform further. A shining example of this strategy was the visual of an egg cracking used to enhance the gamification experience. This innovative tactic not only improved engagement but also remarkably boosted sales in the egg department. This approach mirrors the strategy used by game developers like Fortnite to maintain player engagement over extended periods, offering rewards for completing in-game tasks.

​How is Pricing a Fraction of the Value Captured?​

The Revelation: Claiming Rewards vs. Automatic Granting

These inventive changes underscored a significant revelation - user engagement was considerably higher when customers had the opportunity to claim a reward, as opposed to being granted it automatically. This insight aligns with findings from a study by Harvard Business Review, which showed that customer participation in a rewards program led to increased customer loyalty and repeat purchases.

Transforming the Traditional Discount System

Licious's transformation of the traditional discount system into a gamified experience succeeded in stimulating customer interest and encouraging repeat orders, all while adhering to their budget and strategic focus on retention. The shift to gamification mirrors trends in the industry, as seen with brands like Nike's Run Club app, which rewards users for achieving running milestones.

As customers progress towards their 'Aha Moment', Licious understood the importance of monitoring a converging metric that encapsulates scale, ROI, and expenditure. This method of tracking progress is similar to Google's Objectives and Key Results (OKRs) system, which helps teams and individuals align their efforts to the company's overall goals.

Licious also adopted the best practices of successful companies by maintaining a control group, which in this case was 10% of its users. This strategy is reminiscent of pharmaceutical trials, where a control group is essential for measuring the effectiveness of a new drug or treatment. In Licious's case, the control group allowed them to have a baseline to compare the effectiveness of their new strategies and initiatives.

The Importance of Measuring Incrementality and Continuous Innovation

Measuring incrementality and the business value at each step was a key part of this process. This kind of data-driven approach is common among successful businesses today. For example, Netflix uses complex algorithms and A/B testing to understand viewer preferences and to make data-driven decisions.

Licious recognized the importance of continuous innovation. They understood that to keep customers engaged and to drive business growth, they needed to regularly brainstorm and introduce new and engaging ideas for users to interact with. This philosophy is shared by Apple, a company known for its commitment to innovation and user experience.

Conclusion: The Success and Effectiveness of Licious's Strategy

The effectiveness of Licious's strategy is validated by the words of analytics professional Andrew Pole, who once stated, "The whole trick is to figure out what is the next most logical product for the customer to buy." By implementing a gamified rewards system, Licious has effectively managed to guide customers towards their next purchase. This strategy has proven to be remarkably successful, as evidenced by the significant improvement in customer retention and business growth.

Licious's story offers valuable insights for any business looking to improve customer retention. It underscores the importance of understanding customer behavior, the value of gamification, the need for continuous innovation, and the power of a data-driven approach. As the digital marketplace continues to evolve, these lessons will undoubtedly continue to be relevant for the foreseeable future.