Social Media Buys Loyalty With Virtual Goods

Social media firms are increasingly incorporating game-like mechanics including virtual goods, experience levels, and leaderboards into new products as a form of marketing, according to a report by CNET. The report points to virtual goods and virtual currency-like mechanics appearing in non-gaming social platforms including the discussion site Gravity, the Groupon-like deals site HomeRun, and even the news outlet The Huffington Post (which will offer virtual goods to users who participate in the site's comments section).  

The report's argument is that the popularity of the game-like mechanics in the location-based social network Foursquare is encouraging online imitators. In Foursquare, users earn virtual goods called "badges" that serve as virtual proof that they've visited particular locations a certain number of times. The badges are added to a user's profile, which allows friends to take in a lot of information about their traveling habits at a glance. 

Gravity and Huffington Post's virtual goods are similar badges offered to users who do particular things. Gravity offers badges to users when they upload their first photos. Huffington Post intends to offer badges to users who comment frequently, who frequently help moderate comments, and who are particularly well-networked with other site readers. In this way the virtual goods are being used to modernize the basic idea of the customer loyalty program for an age of digital media. 

In the case of HomeRun, the site's game-like features are meant to make the site more exciting to use. As users participate in the site they amass points of a virtual currency, which can in turn be redeemed for "private reserve" deals that include wine tasting tours and charity ball tickets. HomeRun also has an "Avalanche" feature, that lets users see the price offered by a deal drop in real-time as more users agree to accept it.  

The article speculates that virtual goods as loyalty incentives, or the "badge" phenomenon, will in time come to more closely resemble real-world loyalty programs like frequent flyer miles and referral programs. The argument is that eventually consumers will grow irritated by overly game-like mechanics. On this point, VGN must beg to disagree. 

By offering a virtual good to a user who has achieved something of interest, an online community makes it easy for a user to distinguish him or herself from others. That may not be a concern for the average consumer loyalty program, but it is extremely relevant to the way individuals behave in contexts like social networks, discussion forums, and group activities. 

Join us for App Conference – October 18-19, 2012 in Santa Clara