What the IKEA hotdog taught me about E-commerce Gamification
Over the weekend, Akshay (SIG) and myself (Saison Capital) were talking about the future of social commerce — diving specifically into the difference between platform-led vs agent-led social commerce models. We ended up diving into the role of gamification on e-commerce platforms.
We wanted to nail down the value proposition of the gaming features on an e-commerce platform, and came up with:
- Retention
- Brand Perception
An analogy for the role of gaming on e-commerce platforms was the IKEA hotdog stand that is present in IKEA.
The IKEA hotdog gives people an additional reason to linger and increase the repeat visit rate as well as the average session duration at an IKEA store rather than viewing it as an ‘in and out’ perception that we take to for example doing our groceries.
The IKEA hotdog also contributed to the brand perception of IKEA as a price leader — i.e. that there was nowhere else to get quality products at that price — as customers would immediately be able to benchmark the quality and cost of the hot-dog relative to restaurants, and apply that perception to the IKEA furniture.
We roughly agreed that gaming could not be a go-to-market strategy, and was merely a retention tool. Using gaming as the main go-to-market strategy would be akin to a furniture startup believing that providing hotdogs were the main differentiation factor for a go-to-market.
After the call, I had a bit more of a think on two big questions:
- What are the nuances of deploying e-commerce gamification?
- What actionable steps can startups take?
To answer A, I returned to the IKEA example of the fundamental job to be done via gamification.
- Retention
- Brand Perception
This made me feel that the main challenge in emerging markets especially was exactly that — improving retention rates, building trust, and taking a cost-first approach.
This seemed to imply a much larger product-market-fit for embedding games into e-commerce platforms.
To answer B, I first thought about how e-commerce and games interact today and decided the answer was poorly.
E-commerce platforms largely treat gamification as a small feature associated with loyalty programs. Perhaps there are coins that are visibly issued in a celebratory manner, or deals are sent and won through small games like spinning wheels.
As a game, these were not games I would seek out. These were at best something resembled a game.
The best example of gamification I could think of was Robinhood (especially its confetti feature), but I was not satisfied with that example.
Perhaps then the thinking was skewed — gamification should be about games — not half-heartedly replication features of games.
Could we improve the way that games interact with e-commerce?
There is a whole world of embedded commerce and guerilla marketing, so I won’t touch on that piece.
Where I ended up was that e-commerce companies should go full-stack, acquire games or gaming studios that are genuinely interesting and link those gaming rewards directly to discounts.
You do not have to acquire the next Call of Duty or Riot Games. As a hardcore casual gamer, I know there are plenty of addictive casual games that roughly replicate the same dynamics but which are significantly more addictive than a wheel-spinner, and have standalone playability. Candy Crush, Tower Defence, etc.
Like the IKEA hotdog, this would help to improve engagement, since there would be an additional reason (gaming) to visit the shopping platform fo the purpose of gaming, even if there was no intent to shop.
The reward system would have to be altered. Just like where Groupon failed and PDD succeeded, the rewards cannot be supplier-push (as the quality of supply is not customer-centric/desired), but rather platform or customer-driven. This point is crucial and makes the main difference between Groupon and PDD.
Gamification should be used as a segue into popular products and discounts, as a way to truly add value to the gamification aspect of the business. This is as opposed to using it to incrementally increase conversion on bad products.
For the cost-conscious customer, the prize of discount codes also force a price-discrimination mechanism, as those with the time to play such games are given rewards that lead to further price reduction. This allows the platform to have their users self-select into segments, that allow the platform to target with their discounts/subsidies more effectively, building a flywheel effect for the most cost-conscious consumers.
The aim is therefore to have genuinely addictive games lead to emphasising a low-pricing brand position (through discounts/coins/tokens) for popular products, tracking metrics like DAU/MAU, Average Session Duration, K Factor (Virality), NPS, and organic sharing/growth of the app through the in-app game.
When you have a flywheel of addicted casual gamers who spend hours daily on relatively simple games, which lead to valuable e-commerce interaction, is when you truly build a gamified e-commerce flywheel.
Thanks to Ou Zhiqi, Gwen Sim, Shawki Shahin, Gijs Verheijke for their thoughts and comments.
Chia Jeng Yang, Principal at Saison Capital, dives into consumer, SaaS, and fintech investment trends across the U.S. and Asia, builds projects in the venture capital and public policy space, works closely with early-stage (Pre-A) founders and can be contacted at jengyang.chia@gmail.com. Previous work here: http://chiajy.com
