by Donna M. Airoldi | March 21, 2011

Badgeville. Sounds like FarmVille. And for good reason.

This new loyalty software company is using social gaming techniques to reward online users with real-time achievements while at the same time drive user behavior, achieve specific business goals, and measure and optimize user engagement.

The company launched in September 2010, at the technology startup showcase TechCrunch Disrupt in San Francisco. Within a few months revenues reached more than $1 million, and at least 25 clients signed on, including retail, media, and entertainment companies and online community sites. The addition of big online fashion site Bluefly.com was announced earlier this month. Maynard Webb, the former COO of eBay, is an investor; Loyalty Lab founder Mark Goldstein is an advisor. 

So what was the catalyst behind creating this type of company?

“There were two things: One, there are loyalty cards and programs everywhere in our offline worlds, but online there’s no sense of loyalty and getting credit for attention, engagement, or loyalty,” says founder and CEO Kris Duggan. “The car wash down street, the taqueria, they all have loyalty cards, and yet our favorite websites don’t.”

The second reason is that Duggan and his partners realized that companies and organizations are “all feeling major cannibalization effects from social media. The commoditization of the brand,” says Duggan. “Now people go to Facebook instead of CNN for news. Companies are realizing they need to create magnetic experiences to retain their audience.”

“We’re using traditional loyalty techniques with consumer behavior to drive retention and engagement on the web and to meet business goals,” says Duggan, the former senior director of enterprise sales at WebEx. “Only we’re incentivizing by status and reputation. Traditional loyalty programs are not inherently social. But once you make them social and status can be broadcast to others, you don’t need to have tangible rewards because the status and reputation benefits you can broadcast to your peers are far more valuable, and people are willing to work very hard to build that status.”

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For Bluefly.com, Badgeville’s social gaming technology will reward the site’s fashion-savvy shoppers for watching videos, creating wishlists, writing reviews, and reading blog posts, as they explore and interact with the site. The site will offer badges to players that highlight their status and draw attention to their fashion credentials within the Bluefly community. As players earn higher badges, they will receive rewards such as early access to products and special deals and discounts. Bluefly is one of the first fashion retailers to launch a social game platform.

Another client, Comcast SportsNet, was running sweepstakes to learn who its users were. Now it’s still doing sweepstakes, but to participate, users have to have a certain level of rank within the Comcast SportsNet online community. The Badgeville platform encourages behaviors such as watching videos or participating in picking winners on sports games. Users earn points for achievements, rising through the levels and ranks, and those translate to real-life privileges. 

“Can you imagine flying on a plane with [all-star athletes]?” says Duggan. “Those are the types of privileges you can bestow to your most loyal users.”

Going Beyond Page-View Analytics
The software can be installed onto any site or mobile device. Users can then opt-in either by signing up on the brand’s site or via Facebook Connect. The platform will start to call out actions or behaviors on the site using points spots, where users are notified that they can earn points and rewards by performing a specific behavior. 
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An early client, Philly.com, started at 100,000 monthly page views. After adding Badgeville, it recorded a 25 percent increase in monthly visits to the site and a 42 percent rise per user in page views. 
  
To retain audience members, however, Duggan says that companies need to start to move away from page-view analytics to loyalty or engagement analytics. 

“Google analytics and others give aggregate data, pages views, and bounce rates, but there’s a gap in the market around how you find your user-segmentation loyalty, which means understanding [and dividing] your users based on how often they perform behaviors on your site that directly align with your key business objectives (e.g., page views, comments, sharing links),” says Duggan. “Then use that [segmentation] to move people from one loyalty level to the next and drive their behavior.” 
  
“Our core strategy is to get insight into user demographics and behaviors and find out who these people really are, their social identity,” he continues. “We’re just starting and learning, but we’re trying to quantify things like the lifetime value of a customer. If we can start to give visibility on an individual basis around loyalty segmentation, to give value to users and their actions, that’s hugely valuable.”

As such, Badgeville tries to stay away from transactional data and focus on behavior data instead. The software can tell who were a client’s last users, who’s lapsed, who hasn’t been back, which users share the most, and who consumes the most. 
  
Online consumer rewards programs aren’t new, but Duggan says Badgeville is for those companies that don’t want to custom-build their own products. Its product also gives deeper insight into analytics than just community widgets, adds Duggan. 

As for Foursquare, which recognizes power users as “mayors” of locations they frequent, “I would argue that the mechanics they use are not true loyalty mechanics,” says Duggan. “They want to foster sense of competition to be the mayor. Maybe five people are willing to compete, the rest are not willing to do the behavior. You’re optimizing for the top 1 percent only. Our mechanics are how to turn medium-loyalty users into high-loyalty users.” 

For companies that already have loyalty programs in place, Badgeville doesn’t require the replacement of points systems, but rather acts as a social layer to make their current points strategy more social.

By adding achievements, milestones, awards, merits, and accomplishments, those can further drive behavior. 

“If you have an existing points program, make it social,” says Duggan. “Are they communicating to peers and friends? Are they earning achievements that can be shared on Facebook and Twitter?” 
  

“When asked if [users] want to share something, 30 percent say they do,” he notes. “Each time it’s shared with 150 Facebook friends on average. Turn the points program into free advertising and a way to drive traffic back to the brand. How are you driving the social comparison? Are you giving enough real-time feedback? Those elements would modernize the existing points program.” 

To learn more,see our March/April story on gamification.