What is Gamification?

Gamification… the buzzword is all the rage and one thing I can’t help but observe is that it means different things to everyone you talk with, even though the core concept of creating incentives for users of an app or service to do specific tasks is pretty well accepted.

Here’s what the functional breakdown means to me. This is not a complete list, please add as you see fit by posting a comment.

Challenges: Defined missions to complete or goals to accomplish, with awards or virtual items earned upon completion.

Points: Basic virtual currency. Points can be spent on virtual items or simply accrued.

Avatar System: When people create something it’s uniquely theirs and it expresses their individuality, which reinforces their connection to the app or service. Avatars are the most basic mechanism for doing this… and are a virtual good that can be acquired with points or currency.

Avatar Catalogs: Enable a user to buy virtual goods and customize an avatar.

Trophy Case: Show a user all the available awards, the ones that they’ve completed, and their progress.

Levels: Enables users to earn defined experience or level status and attain rankings to demonstrate their status within the community.

Leaderboards: Enables the app or site to keep track of, and publicize, the activities of end users based on statistics determined by app.

Canvas: Enables users to place graphical assets in a 2D space and customize a virtual representation or space, such as an avatar, or virtual room.

Groups: People like being part of something bigger than just themselves, and competing with small groups of individuals or as teams. Group activities compliment individual activities and can be used in combination in order to achieve new level status.

Competitions: A way to allow users to compete against each other, and mini-challenges that users can create and send to each other. 

Gifting: Enable users to buy each other gifts for their avatars, digital canvas (virtual spaces).

Trivia: Embed a multiple-choice game widget into a site, and spin up new games on any topic you like. Slideshows are another example, increases clicks and drives simple engagement with content submitted by users.

Friends: Encourage selective participation and promote. Friends have denote strong and weak connections to other users on the system, inform group participation, and provide audience for user submitted contests and challenges.

Social Network Connectors: Enables users to enable/disable posting to, for example, Twitter and Facebook from your site, and displays “missions” for users to complete on respective social networks.

Star Rating: Enables users to rate pieces of content and see the average rating by other users.

Comments: A comment wall on your User’s profile pages. Asynchronous communication gives users additional reasons to check back to see how the conversation is evolving.

News Feed: Enables a continuous feed of the actions of various end users.

Notifier: Provides feedback and notifications to end users, such as to alert users to points that can be earned or, challenges that can be undertaken, or site features that should be investigated.

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2012 Predictions

It’s the time of year when predictions are thrown out left and right, so in keeping with the spirit I have put together a list of things I would like to see happen in the year ahead.

  1. The Business of Social Networks: We have seen a coalescing of business models form around social networks and not surprisingly the vast majority of them are evolutions of advertising models. This will work but as companies demand more (see next prediction) the ad driven model will evolve in ways not previously seen. What that will be I do not have a clue but sponsored tweets and ad campaigns simply cannot be anything more than a starting point.
  2. Brand Marketing Meets PPC: In most companies marketing exists in two forms, brand management and promotional marketing. On the latter we have seen a revolution in how companies advertise, increasingly around the notion of pay-per-click (PPC) that provides immediate and detailed performance metrics upon which ROI can be calculated. This level of performance management has not existed on the brand side but it’s coming because brands have an inherent desire to manage brand metrics to the degree that they measure online campaigns, and social factors into brand benchmarks as much as campaign objectives.
  3. Social as a Service: If you are a SaaS application there is an increasing portfolio of services that you can plug into your application to bring social capabilities as a layered service. There is another very nuanced view of this that speaks to the increasing sophistication of analytics services that measure social activities that contribute to application success in the market.
  4. 3 Mobile Form Factors: If you follow the mobile space you have no doubt paid attention to the rise of the super-size smart phone with 4.3″ and larger displays. For app developers there will have to be a standardization around template sizes and simply saying “tablets and smartphones” isn’t adequate. My view is that 10″ tablets, 4.3″ smartphones to 7″ tablets, and sub 4″ smartphones will co-exist as separate UX development paths.
  5. Integration Layers Matter: When it comes to social and SaaS applications a big challenge for consumers and developers alike is integration of activity streams and social services across platforms. Somebody will figure this out and deliver, to developers first, a service layer that normalizes and routes social activities across services based on rules and contexts.
  6. Customer Support is (increasingly) the New Marketing: Okay, this one is self-serving but dovetails nicely with some widely held views about how company-to-customer engagement is driving more than just customer sat but also revenue. Leaders in every business segment are figuring out that competitive leadership is directly linked with how they sell more stuff to the customers they already have.
  7. Loyalty Programs and Virtual Currencies: Everyone is familiar with the concept of loyalty programs, and their shortcomings. Virtual currencies are gaining in awareness and consumption inside games but there is a convergence happening with loyalty programs whereby points exist as just another currency with an exchange mechanism.
  8. SoLoMo: Social Local Mobile is on for 2012. The proliferation of location aware mobile devices and a service layer that enables mobile apps to take advantage of these capabilities is creating an entirely new technology segment that valuable companies will arise from.
  9. Messaging Explosion Continues Unabated: With Facebook giving companies a private messaging capability to reach fans we see yet another vehicle through which people-to-people and company-to-people communication will take place. If nothing else what this suggests is that people like talking on a phone less than ever.
  10. People Will Buy Stuff Through Facebook: Actually this prediction speaks very broadly about how retail is moving outside of a purely web experience. Facebook commerce is going to be a big deal, and mobile already is so there is no reason to expect that retail channels will consolidate… the opposite is more likely, multi-channel retail will become mega-multichannel.

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Freemium Mechanics

I read an interesting blog post by Ruben Gamez titled Why Free Plans Don’t Work. If you are interested in freemium business models or any of the variations on the theme, this is well worth reading however I take issue with a couple of points.

First and foremost, Gamez uses a statistics breakdown (in %) to highlight the disparity between free and paid plans. Whenever someone does this they invariably open the door to the question about what their customer numbers because a percentage breakdown without knowing what the denominator is will lack the proper context. Knowing that 1% out of 100 customers are paid versus 1% out of 100,000 is a fundamentally different discussion to have… and there is no discussion about the cost to serve free product customers.

Gamez points out a number of well known freemium companies and the transitions that they have made between free products and free trials. This is an interesting discussion and the body of work that can be studied is relatively small and fluid given the immaturity of freemium as a business model. However, a couple of things are increasingly apparent for people who are running these businesses.

You can have a freemium business that depends on a free trial process instead of a free trial and a free product option at signup, there is no debate about this, and you can have an exclusively paid product that depends on a free trial process for acquisition and onboarding. This is a smart decision in my opinion and at Get Satisfaction we are constantly tinkering with and evaluating the options relative to placement and purchase path for the free product. The idea here is to route every website visitor who becomes a prospect into a funnel that exposes them to the full product before downgrading them to a free product.

In 2010 we relaunched our website with a new “plan picker” page, which over the course of the year went through 2 significant updates that are very relavent to this analysis. Initially we had Free placed as a promo box on the sidebar, separate from the monthly subscription plans but highly visible nonetheless… this is the control group as best I can provide one because with each subsequent change to the plan picker page we changed more than just Free product placement.

In April of this year we elevated placement of the Free product to equal standing with the monthly subscription plans. Almost immediately the number of new communities created through the free product jumped substantially (and for the record, I am not going to disclose actual customer numbers so I’ll do my best to avoid putting up percentages, following my own advice above). At the same time the number of new trials created for our monthly subscription products remained flat and in some months declined materially, however the number of free-to-paid conversions for customers who were net new (not a previously paying customer who canceled) went up.

The net result was still a decline in new customer conversions and our churn rate (turnover of all paying customers in a single billing period) stayed constant or declined slightly so I would have to say that elevating Free to first world status did not improve the business.

In August we changed the plan page again and pretty much hid the Free product option. The resulting decline in Free product signups was dramatic but offset by the trial signups and associated trial conversion rate, however churn went up as well so the net effect was offset by customer cancelations in the first 90 of total life.

Churn is a really important consideration in freemium models and not just because of the financial impact. The raw churn number is obviously important because that represents the size of the hole you need to fill each month before you can start adding customers, however when churn happens is often overlooked.

You should be doing a cohort analysis each month on cancelations to determine what the survival curve is for each customer segment, which graphically represents how quickly cancelations are happening in the customer lifecycle as represented by the 25th, 50th, and 75th percentile groups.

This first example is basically a bad curve because it shows that over a proscribed period of time a large percentage of your customers fall off. It’s basically telling you that you are attracting the wrong kind of customers and you are going to invest disproportionately in replacing lost customers.

 

 

 

 

 

This next curve is a pretty good one, the drop is initially steep but then levels out and after 12 months you still have over half of the customers you acquired in any single cohort. What this curve is telling you is that you are losing customers who are not a good fit for you very quickly and then cancelations stabilize.

 

 

 

 

 

In the context of freemium this information is very valuable because it is a consequence of how prominently you are positioning free vs paid product options. If you are hiding free in order to stimulate take-up rates on paid, then you have to expect that cancelations rates will go up as a result of people converting to paid that otherwise would not if presented with a prominent free option.

This leads to the next topic I want to discuss, which is the methodology you embrace for the trial process. In the interest of being honest and transparent, the way we do it at Get Satisfaction is not the optimal way to do trials because we provision trials as a time based variant of a specific product instead of having a single trial where everything is turned on and then have the prospect select the product they want to convert into at the end of the trial process.

The second problem we created for ourselves is that we require the web visitor to create an account and give us their credit card information in order to create a trial account. This is an obstacle for trial creation first and foremost but also orients the trial experience to people who are pre-disposed to buying you before they even enter the trial process… so in effect you are giving them a free period of service for something they would pay for.

We are going to make changes to the trial process to address the two issues I raise, however I can’t do much about the account creation requirement simply because my product requires a named user to be the administrator of it… no user registration would mean I would have no account to attach the administrator rights to. My recommendation to you is that you create a free trial process that downgrades to a free product at the end of the trial period if someone doesn’t enter their credit card details and select a plan, instead of offering a trial experience in addition to a free product.

Annual billing options are a game changer in the freemium model, arguably the single most effective strategy for reducing your churn rate. Typically the way that annual billing is presented is 12 months of service for the price of 10, a 16% discount.

You can also use a buy-it-now option to bypass the trial process, offering something like a discount or promotional offering in order to pull forward demand that exists in the trial pipeline, and in the process isolating true prospects who are won or lost in the trial. I’d like to do this at Get Satisfaction as part of our structural changes to the trial process.

Having a freemium business model is dependent on a number of strategies but one that often gets overlooked is how well you identify potential demand and feature marketing inside the free product for free to paid conversion and inside the various monthly subscription products for paid-to-higher-paid conversion.

Ultimately the freemium model is a strategy that increases the catchment of leads as a result of using your product as the primary marketing vehicle through which you deliver a funnel to. Take care to structure your website so that every aspect of the content you are creating is designed to deliver a site visitor into a product experience or isolate them for followup through a traditional enterprise sales process.

It’s also worth pointing out that if you have a product that you are primarily selling to businesses, and the product itself has a multistep onboarding process, then you really have to have a higher touch sales process where you are nurturing the free and trial accounts at a higher level than if you were, for example, Evernote.

For me the mechanics of a freemium business are some of the most interesting to be involved with in a modern software as a service company. The implications of billing and provisioning system dynamics, how you structure your website content, surface funnel analytics, build upselling cues into your application, and manage high volume sales nurturing processes are incredibly complex but increasingly normal for the B2C and even B2B markets.

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BabbaBox Fun for Children

The nice folks at BabbaCo sent my children a BabbaBox, which is a giftbox stocked full of projects, reading, and activities built around a theme.

Targeted to 3-6 year old boys and girls, the BabbaBox is well put together and features imaginative projects and storytelling activities designed to stimulate and engage young children on a values based theme. This month the theme is gratitude and the activities include drawing and painting activities as well as a really neat camera that kids can use to take pictures of the things they are grateful for, assembling the images in a “gratitude journal” that they can share.

All of the included items are very high quality and reflect thoughtfulness in their selection. The box itself is fun and my youngest son, in the target age group, was very excited to open it.

Available as monthly subscription, several options, and as a gift option the BabbaBox is clever and imaginative. There is also a tie-in to games and apps that you can download.

Evernote Specialized Apps

Evernote is launching an app called Food that people can use to capture the meals and recipes they love. This is smart, wicked smart.

The app isn’t just a better recipe app, which would require a backend service like AllRecipes, Food is a way to capture the experience of food in multiple dimensions, including what you actually ate, the wine you enjoyed, who you shared it all with and in the case of a restaurant, where you were. This is fundamentally and disruptively different than a better recipe application, but oh yeah, it also allows you to capture and build recipes… which is what a lot of people, like me, use Evernote for already.

We are seeing Evernote enter a new phase where they build on the extraordinary success of their platform and synchronization capability to deliver functionally specific applications that increase the time we spend in the Evernote world and entrench the company as a key player in the mobile to fixed computing ecosystem.

Available on iOS, I am anxiously awaiting their release of an Android version.

 

Forrester: Enterprise Social Software Market Sizing

Forrester recently released a report that, among other things, forecast the size of the enterprise social software market to grow to $6.4b in 2016. Here is a link to the original publication, however a summary of the research can be found here.

I tend to follow these markets and research like this is interesting to me. I don’t have issues with the methodology that Henry Dewing used, it is appropriate for the problem he is attracted to, which is quantifying and defining the evolution of web 2.0 technology in the enterprise… but it’s still wrong because the problem is being defined too narrowly.

By a wide margin the most interesting macro trend in enterprise software is what is actually happening to the definition of enterprise software. For decades the market has labored to deliver software that employees of a company used to facilitate business processes, in fact the very essence of business software as a category is intrinsically rooted in business process automation. In recent years the focus has shifted from exclusively being driven by the business processes that a company uses to facilitate business objectives to how employees work with each other and how network technology can achieve employee-to-employee collaboration objectives that also delivers benefits to the company in the form of innovation, productivity improvements, better informed employees, and ultimately business process efficiencies as a result of all the collaboration soft benefits.

One thing has not changed as a result of all this great collaboration technology permeating the enterprise, which is that the employee is still the center point for the technology. Businesses buy the technology and employees use it, rarely, if ever, does a customer enter the equation.

It has taken a generation of social technologies available to employees in their role as consumer to bring about a more fundamental shift in the enterprise software market. Often referred to as “consumerization of the enterprise” this is phrase is as old as web 2.0 and misses the point it’s not about how people in a business will procure technology and what their expectation of business software is from a user experience standpoint; it’s much more fundamental than that and goes to the nature of how employees and customers interact together to facilitate shared objectives.

This is what Get Satisfaction was founded on, a notion that customer have a vested interest in a company they care about succeeding and when presented with an opportunity to support other customers, or tell the company how their products and services can be better, or when the company does something good that they should do more of that… customers will do exactly that.

Enterprise social software is not exclusively about how employees and companies interact, it’s also about how customers are brought into the conversation. Today’s enterprise social software market is merely scratching the surface of what is possible and previous generations of CRM and enterprise collaboration systems can be updated and instrumented with customer facing technologies to deliver far more ROI than is possibly if the focus is centered exclusively on an employee.

Communication Shapeshifting, the USPS, and Atos Banning Email

I read this morning (and heard on the news while driving in) that the USPS is asking Congress to let it relax the requirements for first class mail delivery. Aside from the obvious observation that the USPS being tethered to Congress is in no small part a factor in their deteriorating financial condition, the other thought I had is why this is getting so much attention.

If the reason that the USPS is suffering an irreversible decline in their mail delivery business is that people are sending less mail, then obviously fewer people would be impacted by a slowdown in the first class mail delivery timeline. So my Christmas cards will arrive a little later than in years past… I’ll live.

Slowing down mail delivery to save costs is logical because for matters that are time sensitive the USPS’s customer base has already moved on to electronic delivery, which is instant and costs less than mailing anything. Move over to bill paying, as a representative example, and the integration of consumer bill paying with banking services offers a convenience that the USPS would never achieve. Done. Over.

Ordinarily I would not have given this much thought but last week another story made the rounds about a French IT company banning email (complete with a picture of a mailbox… bonus points!). If there are two things I have learned from my years of blogging it is that if you write a post titled “Britney Spears Nude Pics” you will get a lot of search hits and if you declare email is dead the traditional media will descend on you like a plague of locusts… I know because I’ve done both with the attendent results, in the case of the latter it went on a for years and even included CNN calling me to be on a program (I declined… was tired of talking about email at that point).

The story about Atos banning email is not about Atos banning email at all… it’s about communication in different forms and when the history is written they will find that nothing has changed, ironically, for the inverse reason that the USPS is in a state of decline.

Sending a letter is an act of communication, one which has a cost associated with it, while sending an email or an IM or a Facebook message or a Twitter DM or even an SMS, in most cases, are also communications acts but ones that do not have cost associated with (costs directly conveyed to the consumer). As a result there has been explosive growth in electronic communication, and services have been built on both the convenience and the cost advantage that electronic enjoys over traditional mail.

However this is not a zero sum equation, we do all of the above and not one of the above to the exclusion of all others. This is where the Atos story goes off the rails, the company has already said two things, the first being that for customer communication they will still rely on email, and the second that for employee communication they will use IM and Facebook messaging. In the case of the former they are clearly acknowledging that email is here to stay and in the latter they are doing nothing to reduce the volume of messages or make information easier to find… they are using a different communication technology in place of email but email will still be used.

People like to say email is broken. It’s not and in the history of technology few things could be highlighted as well as email that demonstrate incredibly precise product-to-problem fit while delivering a service longevity and extension. Email is brilliant, how we use it is a challenge even in that case we have developed highly evolved behaviors around prioritizing, sorting, organizing, and attention which only serve to demonstrate how ideally suited general purpose email is to a wide range of communication needs.

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