Creating Loyalty 3.0 at Work | with Rajat Paharia of Bunchball [Transcript]

by Joe Sherwood on August 2, 2013

Link to podcast episode:  Creating Loyalty 3.0 at Work | with Rajat Paharia of Bunchball

Jesse Lahey: Welcome to the show, Game Changers.  This is the show for CEOs, HR Executives and other business leaders to learn about internal gamification.  Over the course of the series, you’ll hear examples and pitfalls, discover how to assess when it’s an appropriate strategy and learn to evaluate gamification partners and game design ideas.

I am Jesse Lahey and our guest today is Rajat Paharia, the founder and Chief Product Officer of Bunchball.  He is the author of Loyalty 3.0, How to Revolutionize Customer and Employee Engagement with Big Data and Gamification which is scheduled for publication in June 2013 and is available for pre-order right now.

Back in 2005 when almost no one had heard of gamification, Rajat Paharia founded Bunchball.  Since then Bunchball has helped engage customers and motivating employees at a wide variety of companies including Toyota, T-Mobile and ESPN.

Rajat, welcome to Game Changer.

Rajat Paharia: Thanks, happy to be here.

Jesse: Rajat, you have been around longer than almost anyone I’m aware of in this still emerging space called gamification.  What kinds of changes have you seen since 2005 when you really got serious about it and in 2007 when you launched Bunchball?

Rajat: The industry has transformed dramatically.  Right back in 2007 when we first created our Nitro gamification platform and we’re selling it to people, it was really hard sell.  We had to be very evangelical and very educational because nobody knew what we were talking about—number one.

Number two, everybody had other things on their priority list.  Usually, what happens is there is some kind of giant consumer example of something going on and everybody kind of rushes to that.  So, MySpace explodes in 2005 and everybody wants social for their websites.

Then after a couple of years, that stuff actually makes its way into the enterprise.  Then, a couple of years later, YouTube explodes and then everybody needs video.  So, these big explosions in kind of technology in concepts caused everybody to put those things at the top of their list.  Gamification wasn’t on anybody’s list because nothing had exploded for those for several years.

It wasn’t until 2010, when Farmville and Four Square exploded that all of a sudden gamification got on people’s lists.  They said, “Okay, clearly this works.  We’re seeing it motivate hundreds and millions of people; we should understand this and figure out how to apply it to our business.”  So, then you started seeing more and more stuff happening in the consumer space.

Then what happened in the late 2010, early 2011, my company Bunchball which has been really kind of at the forefront of pushing this methodology into new areas, started focusing on employee motivation.  Taking this stuff not just on consumer sites to motivate members of loyalty programs and fans of TV shows and people engaging with marketing campaigns and community members.

They said, “Let’s take it into inside the company and use it to motivate sales performance and Help Desk performance and Training and collaboration and compliance.”  All these things the companies are buying software platforms in order to enable and drive among their employee base to help them be more effective and perform better.

Gamification can help amplify the effects of those software programs — things like Salesforce.com and Jive and IBM connections and SAP and others like that.  So, we’ve started doing that in 2011, we actually built an app on the Salesforce.com platform on best new app on the Force.com platform that year and it since then purchased by a bunch of major companies.  After that it kind of had started the ball rolling, and we started signing great partnerships with companies like Jive and IBM and others.

So, kind of the big transition point that had happened in 2007, we created this; nobody knew what we were talking about, nobody cared.  In 2010, all the sudden that hits and Farmville and Four Square — all of a sudden a lot of people started caring about it especially in the consumer space.  Investors started pouring money into this space — there’s been over a hundred million dollars poured in at this point because they see opportunity.

Then in 2011, we pushed it into the enterprise for employee motivation and that’s actually kind of the fastest growing part of our business right now.  We still have a great business in the consumer space but in this employee space, we’re finding a tremendous amount of interest and traction.

Jesse: Yes, and that’s particularly interesting to our listeners on Game Changer because it’s totally focused on employee gamification.

Rajat: Yes.

Jesse: How did you ever talk to business leaders about this topic back before 2010?  Were you already using the term gamification back then?

Rajat: When we first started, we had then a social gaming company that had transitioned or pivoted, that’s the word — the word de jure — we had pivoted into the gamification company.  So, we were trying to get people away from this concept that we were a company that was about games.  So for a while, we tried not to use the word game in anything we talked about.

We’re talking about this driving behavior, about motivation; I tried to coin this term web catalytics.  That was like, analytics is about analyzing behavior; catalytic is about driving it and none of that stuck.  So, then after a couple of years we figured people have forgotten that we used to do games and we started using game mechanics.

Then I heard a guy named Barry Kirk who used to work at a loyalty company but now works here with us.  He was using this term gamification and I was like, “That’s interesting, I like that” because game mechanic sounds like it could be a person, it could be a thing.  It’s a noun and it’s hard to understand what that really is.

Also, it has like multiple meanings.  A game mechanic can be, I bid that I’m going to get a certain number of points at the beginning of the hand and if I get it, I win — that’s a game mechanic.  So, I heard this term gamification and I’m like, “Wow, that’s really interesting,” because number one it implies a transformational process that something already exists and now that’s being converted and transformed.

Number two, it’s not a noun, right?  It is this transformational thing.  So, we started using that.  I bought the domain name, gamification.com for nine bucks because nobody was using it in 2009.  We started using that term and then [inaudible 00:07:06] Gabe Zichermann who’s been doing [inaudible 00:07:08] in writing books.  He started using the term and then that’s the term that’s stuck and that’s the term that’s taken off and so it’s been an interesting ride.  Honestly, it’s kind of a double edge sword of a term like any term that tries to capture an entire kind of methodology or concept.

The key thing to know about gamification is, it’s not about games at all.  Games are something that you start with a blank slate and you create something which sole purpose is to entertain and that’s not what we do in the slightest.  Our goal is driving business results using the data driven motivational techniques of video game designers.

So, there’s something to be learned from games and transported over but it’s not the entertainment part, it’s not the fun part, it is the data driven motivational techniques that they used.  Smart companies have been doing this forever, like in loyalty programs and in education, like anywhere and so, it’s not new.  What is new is the fact that we’ve transitioned more and more of our lives online and because of that all our activities is trackable.

It can be used, the raw material for a loyalty and engagement program as opposed to the old days when it just used to be kind of purchased data or you have this whole kind of black box of work that happened very ad hoc and informally in paper and in e-mail.  Now, it’s all happening in systems like Salesforce, Jive, SAP and IBM and can be tracked and therefore can be utilized to motivate people.

So, that’s kind of the huge thing that’s the shift that has occurred that has enabled all these to happen right now.

Jesse: So, you’re saying the work world has used game principles for a long time but there’s a difference in how it’s being applied today.  I’ve also heard you talk about how some of those differences are the ability to scale and to be automated but now, the way you’re talking about being data driven, that’s an interesting difference today, too.

Rajat: Yes, exactly.  I mean we’re all leveling up in our workplace.  I started out as a Junior Software Engineer, and then Software Engineer and then Senior and then the Director, like we’re leveling up; we’re competing for scarce resources.  We celebrate major milestones with parties, or t-shirts or certificates.  I got employee of the month.  We have a score which is our salary.

It’s already using all the stuff that’s used in a very ad hoc manner, and so what this stuff does is it automates it.  All those data is there now for the taking.  I mean, think about this, like this blows my mind that Amazon knows more about your employees than you do.  Netflix knows more about your employees than you do, and Facebook knows more about your employees than you do.

That’s because they look at everything that those employees are doing when they interact with our systems and they use that data, that user activity data in order to drive value for the business, in order to make the customer experience better, in order to increase the lifetime value of that customer.

All they’re doing is using this user activity data that people generate as they interact with the site and then you’d put them to the workplace where you’re going to get like orders of magnitude, 100 times as much value out of this person who is working for you 10, 12, 14 hours a day — whatever.  They’re working in your systems and all that same data is being thrown off and it’s going into the ether.

Nobody’s looking at it; nobody’s paying any attention to it and nobody is using it to make that employee perform better, to drive their lifetime value to the company, to drive more revenue for the business and to make the work experience better for the employee.  Huge, huge opportunity, and so gamification takes all that data, makes it visible to everybody and then gives you the tools to drive behavior change around it. There is a massive opportunity in the employee space for gamification.

Jesse: Yes, that’s interesting when you think about the examples you say, Facebook and Amazon and Netflix, people get nervous when they think about the fact that those companies are collecting data about them.  But you ultimately decide, “No, it’s still worth it to me because I can see that they are serving me better as a result.”

Most people probably right now don’t trust their employers enough to have tons and tons of data on them.  But I think as we move forward and as companies make the right decisions on how to use data properly to benefit the employee and basically make their work better and their work life better, probably a lot of those fears will be eased.

Rajat: Yes, the data is already there.  It’s just not being utilized, like at work we have a collaboration system we used, we have a Salesforce automation system we use, we have an expense report system we use, and everytime I use it, it’s storing up data.  Our company just happens to be ignoring it because they don’t really know what to do with it.

So, there’s no new data being tracked, as we do more and more of our work online, it’s just a by-product of that, is that it’s all trackable now.  But I think, absolutely what you’re saying that if companies can demonstrate that they can take that data and use it to make everybody’s life better — managers, employers, the company — then there are huge benefits to be gained.

Jesse: Now, one of the things that makes Bunchball different from other gamification solutions is you are a platform provider as opposed to a vertical solution that let’s say, just has a wellness application.  Your products are available across the board and some of those products aren’t really being used by other software, website companies to gamify the applications that they make available to customers.

But tell us what you have available for an employer to actually purchase from Bunchball?

Rajat: Sure.  So, we have our core and Nitro platform which is basically a really flexible web services engine.  It can be integrated into anything that can talk to the internet and so we sold that primarily in the consumer space because in the consumer space, there isn’t any kind of well established platform that anybody builds on.

But also in the employee space because people have customer LMS’s that they’ve built; custom Salesforce automations, custom internet portals that they built on SharePoint and they need something that they can integrate with those really quickly and easily.  So, that’s our base offering, this core platform which is a set of web services, APIs, widgets and rules engine and a studio where you can configure all that kind of stuff.

Then on top of that what we built is prebuilt integrations into several very popular enterprise offer platforms.  So we prebuilt an integration into Salesforce.com called Nitro for Salesforce and that is available for purchase off the app exchange and you can download it and install it in minutes.  Like we’ve prebuilt all the hooks and all the integration.

The same thing with Jive software, so we’ve embedded with them and their sales team sells it as the Jive gamification module and Jive customers can turn it on and it’s just up in running with all the prebuilt integration done and out of the box set of missions to drive activity and reputation in the system and customers achieve great results with that.

Eloqua, recently announced that in their top liners community, their customer community they saw an immediate 55 percent lift in activity; they saw more people answering each other’s questions and so an increase in call deflection and a bunch of other good results.

Then we’ve integrated with IBM’s connections platform, their social collaboration platform and several others on deck.  So, those are almost like turkey, you can buy them and get them deployed in any work like minutes to hours as opposed to we’re giving you this web services engine and you’ll need to figure out how to integrate it and where that could take weeks essentially because there’s development work involved.

Jesse: Just a quick pause from this interview with Rajat Paharia from Bunchball, to tell listeners about a game we’re playing to have some fun throughout the series.  First, we’re giving away a copy of Rajat’s book, Loyalty 3.0, How to Revolutionize Customer and Employee Engagement with Big Data and Gamification.

To enter to win the book, go to the LinkedIn group for Game Changer and provide a comment on the discussion I’ve started about Episode Eight featuring Rajat and Bunchball.  To make it easy, we’ll automatically direct you to our LinkedIn group if you go to EngagingLeader.com/group or follow the link in our show notes.

We’ll pick a winner at random from the first to 50 commenters.  You can leave any comment but you’ll look really cool if your comment mentions the approximate year that you first had any awareness of gamification and whether you’d prefer hard copy or a Kindle E-Book if you win.  Also, this episode’s clue for the Game Changer series price is the letter T, as in tango.

There will be other tasks and clues in each of the first 14 episodes in the Game Changer series as well as in Engaging Leader podcast Episode 38 featuring Kevin Werbach.  From those 15 clues, if you can be the first person to guess the secret phrase, you will win a $100 gift card from Amazon.  Everyone who guesses it correctly will be honored on our Game Changer genius board.

Let’s say we’re looking at implementing it for a company’s learning management system or their internet or SharePoint as you talked about.  What is that experience like for the user?  What are they going to see that’s different from having the learning management system without Nitro?

Rajat: They’ll basically see their existing content but it will be wrapped in this layer of gamification and that layer will help motivate them and move them through the content and make it more engaging and compelling.  So, an example I can give you — this isn’t an LMS but it’s a good example of the concept.

Adobe has this part called Photoshop and very complex piece of software, also relatively expensive piece of software for consumers.  During the 30 day free trial, they knew that a lot of people were getting stuck right away.  You’d open up Photoshop and you’d see kind of this blank white canvass and 10,000 panels, menus and buttons and you’d have no idea what to do.

So, then what was the likelihood that you would buy it at the end of your 30 day free trial when you’re in the middle of the desert, and it wasn’t where they wanted it to be.  So, we worked with them, created this plug-in for Photoshop called Level up.  So, this is an opt-in, plug-in that people could download, and basically it walked people through learning.

The hypothesis here was if we can get people exposed to 12 key pieces of functionality in Photoshop — red eye removal, object removal, teeth whitening, et cetera — getting them a sense of mastering in fluency in using the tools and getting them to learn by doing, rather than just reading or watching videos, then the likelihood that they will buy at the end of the 30 days will be much higher.

So, we worked with them and said, “Okay, let’s create these 12 missions, each mission you have to learn one of these key pieces of functionality.  You are earning points as you do those; you unlock badges when you hit some milestones.  These 12 missions are split across three levels and you can’t do any of level two missions, until you do level one.  It’s your gaming access to relevant content and you’re continually doing that.

What this does is, all of a sudden it frames this learning into something completely different and something that compels people.  They want to do it, level one, mission one, like remove red eye from a photo.  You do it, you feel good, you get the immediate positive feedback and reinforcement.  You see the progress bar move up, you unlock the badge, you’ve earned some points, like, “Great, I can keep going and I can do this.”

Nearly 40% of the people opted into this program and made it all the way through all the levels and they saw our Four X increased the number of people buying the product at the end of the 30 day free trial.  So, as a way of taking existing learning content, they’d always have videos and tutorials but people just weren’t going through it because it wasn’t compelling, number one.

Number two because I think kind of the existing learning models kind of broke in, it’s typically a “learn and then do” model.  Like go through the training course, read the manual and then at some future point maybe apply what you’ve learned and this swoops it around, it becomes the “do and then learn” model.

Here is your mission, remove this object from this photo, and we’re going to give you some instructions here, try to do it; if you can, great, if you can’t, click here we will take you to all the tutorial and video content that’s always been there.  But that wasn’t compelling to go through, but now you’re doing it in a very directed fashion.

This learning that you’re doing right now is helping you accomplish a goal and because of that it’s much more powerful and much more sticky.  As an engineer, when I learn a new programming language, I don’t just like pick up the python book and read it, I have a project in my head and then everything I’m learning is in service of how do I get this project done.

So, therefore it becomes much more sticky and it feels like I’m accomplishing and achieving something as I’m learning.  So, it’s not about changing the core content at all, it’s just about wrapping it in this frame that makes it much more interesting and compelling to go through.

Jesse: That’s really helpful to understand how the user will experience it.  Now, how about the administrator, that sort of configuration that you’re talking about, is that something that an administrator eventually is able to do on their own or does that require a Bunchball employee or a consultant working with them?

Rajat: No, it doesn’t require us at all.  We have a really great product on Nitro Studio which we just released.  So, we’ve had something called the Nitro administrative console for years which is where our customers went in and configure things.  It was good; it was very functional but it was also very kind of a tech looking issues. It’s just very form based and developers loved it, business people take look at the training and they got on it.

We’ve recently announced Nitro Studio which is basically, completely rethought that whole thing, made it super slick easy to use, Dragon up, HTML five, responsive designs and work on iPads and stuff and it’s made a drop dead simple to go in and create a manager on program.

The whole goal there was more and more our product is being embedded in other people’s products.  We’re not going to a company and selling the gamification engine to use kind of on its own.  They’ve bought Salesforce.com and they want to drive sales behavior.  So, now the user is the VP of Sales and the head of sale ops.

They bought Jive and they wanted to drive participation and collaboration quantity in their customer community, and so now we’re working with the community owner or with the travel manager or you’re working with the community manager.  Whoever it is, those people don’t want a complex tool, they want something which is really easy so they can get up to speed with the minimal training.

So, we have this Nitro Studio which all our customers have access to, where they can go in and really quickly create the rules, create the rewards, create the real time feedback, all that kind of stuff and it’s immediately live on the site.

Jesse: What’s the cost structure for an employer who wants to implement that?

Rajat: Typically, it’s kind of a per user per month type thing.  What we’ll typically do is align — it depends on what we’re selling, but if we’re selling one of those turnkey products, we’ll try to align with the platform vendor’s pricing, so it becomes really easy.  Like, if you’re paying x amount of dollars per year for Salesforce while we’ll tack on 10% to 20% of that or for Jive or for IBM, whatever.  So, then it becomes really easy to buy.  If we’re selling our just platform into a company, then it will be on some sort of like per seat or per user per month type of pricing.

Jesse: Okay.  Can you give us a sense of what that’s like so our listeners can know if this is in the right ball park for them?

Rajat: Yes, so typically we go after the Fortune 1000 companies.  We’ve experimented in the SMB space and that hasn’t been fruitful for us for various reasons — we’re still learning.  But right now we’re targeted more on bigger accounts and so I think, I could be wrong here.  I’m not involved in all the pricing discussions but I think our minimum pricing is in the $15,000 a year range.

Jesse: So, that’s really helpful, and then also if someone is thinking about implementing a program that where Nitro is a component, if it’s one of the turnkeys solutions that you’re talking about, it’s likely going to add maybe 10% or 20% to the cost.

Rajat: Yes, exactly.  There the pricing varies depending on the partner and how they charge.

Jesse: Do you have any other data or case studies or stories that you can share to help make the business case?

Rajat: Yes, I mean it all depends on the use case, where people are actually using it for, so whether it’s a contact center or whether it’s sales performance application.  Some of the stats — Aberdeen just did a study on gamification in sales teams.  They saw that companies that use gamification in their sales teams saw an increase in annual revenue versus ones that didn’t and increase in average deal size and an increase in leave rates and increase in leave conversion rates.  They saw customer newer rates were higher, more reps were achieving quota, and sales cycle dropped.

Sales person time to productivity was lower and churn was lower as well, so kind of across the board with the good results on sales teams and that’s from a neutral third party.  There’s also a company called Live Ops, a distributed call center company.  They recently wrote an article on management exchange where they talked about some of the results they have seen so they have 20,000 work-at-home call center agents that are answering calls or making outbound calls for various customers.

After they introduced gamification, they saw service levels improve by about 10%, time to handle a customer inquiry decreased by almost 15%; sales performance improvement of 8% to 12% and they decreased on-boarding time from four weeks of classroom training to 14 hours.

So, we have a great customer roster now and we’re a subscription business.  Our customers have to renew every year and they only renew if they’re seeing results and so we have a lot of good case studies results at this point as well.

Jesse: Rajat, you have a new book that’s just about to be released, Loyalty 3.0.  What is the gist of that book?

Rajat: We’ve been thinking about this a lot and gamification as we talked about earlier, not about games at all.  So, games are kind of the wrong frame to look at this industry through.  Whenever we have the wrong frame, that always makes things hard.  The analogies don’t work, the metaphors don’t work or strategies don’t work.  So, the game frame, you’re talking about fun and about entertainment, and that’s not what your business is about.

So, the right frame after having done this now for six years, the right frame for this market is the loyalty or at least the word loyalty.  That has its own issues though and that the word loyalty has been kind of bastardized and come to mean something that is not loyalty.  When you think about loyalty, you think about like frequent flyer programs or buy 10 get one free punch cards.

What those do is number one, they’re focused completely on customers and number two, they generate loyalty to the deal, not to the actual business.  So, if somebody’s going to give me 2% back on my credit card, somebody else is going to give me 3%, like I’m gone — I’d go for the 3%.  I have no loyalty to the business; it’s purely a transactional relationship.

So, Loyalty 1.0 kind of the existing state of things is this gigantic failure, even though companies are spending billions of dollars on it.  It’s like kind of table stakes in our industry.  Loyalty 2.0 came out in the 90’s and that was basically one to one marketing, so now let’s take some data about our users, interests that we can determine based on things that they polled us from magazines that they subscribed to and use that to try and focus our message much better.

That was primarily implemented via direct mail and e-mail marketing and that works for a while but then the volume of all that stuff increased to such a level that none of us could pay attention to it anymore.  So, all that stuff now are just drowning in noise and lost in the onslaught.

Then after that like nothing really happened and so what Loyalty 3.0 says is, look, come on, it’s time to take back the word loyalty and actually make it mean something, which is to mean that you’ve transcended the transactional relationship with somebody and made it something more.

You’ve engaged them and so they will resist competitive offers, they will continue to patronize you and your business whether they are customer, an employee or a partner, so that’s number one.

Number two is let’s take these three forces that are colliding here.  One is this kind of latest understanding of what motivates people, so there’s a whole chapter in the book on human motivation and what drives that.  Number two, this big data on user activity that is now available.  Loyalty 1.0 programs were all about transactions; one data screen coming in, one constituent being served which was customers.

Now, we have big data on everybody’s activity, not just your customers but your employees and your partners anytime they do anything and that can be the raw material of a next generation loyalty program that serves all three constituents—employees, partners and customers.

Then finally combining all that data and the slightest understanding in motivation with the data driven motivational techniques from games which is gamification, and all of a sudden you have this really powerful engine that you can use to drive activity participation, engagement, loyalty and a competitive advantage for your business.

So, that’s what this book is about and so that’s why the title is not a gamification book, it’s about loyalty and about taking back that word and using it to actually generate true loyalty to your business using all these data that you now have available.

Jesse: That’s really interesting.  Do you think that the employee-employer relationship has also gone through three generations of loyalty?

Rajat: I don’t know, that’s a really good question.  So, when we were kind of coming to 3.0, we were mostly thinking about consumer.  So, I don’t know, I’d have to think about that but that’s an interesting question about how that has transitioned or changed over time, too from kind of the “you work here for life” type mentality to a much more “free agent, I’m jumping around” mentality, to a point where we’re now, the competitive advantage is going to be that companies that can keep the institutional knowledge in their company, so it doesn’t walk out every two years.  Keep those people resistant to competitive offers, continuing to do the best that they possibly can and to think what the company’s best interest in buying.

So, I think actually that’s a good kind of parallel model to think about.

Jesse: Yes, I would agree.  I was about to start saying some of the same things you just said about how the relationship has changed and gone from where it was a lifetime contract to where it’s similar to the consumer being loyal only to the deal, there’s definitely been a long time where employees have only been loyal to the deal, which we will call the employee value proposition.

When you look at the best companies today, you see a lot of employees who wouldn’t leave even if a really great offer came to them, and similarly, the company wouldn’t want to let them leave.  It’s such a win-win to stay together.

Rajat: Yes, exactly.

Jesse: Rajat, how can someone find out more about Bunchball and Nitro or take the next step?

Rajat: Yes, visit our website at Bunchball.com and you can also follow our Twitter account @bunchball and there are a lot of great white papers and videos and other great materials that we put together to help educate customers and prospects on this field.

Jesse: Rajat Paharia is founder and Chief Product Officer of Bunchball.  He is the author of Loyalty 3.0, How to Revolutionize Customer and Employee Engagement with Big Data and Gamification, scheduled for publication June 2013.  Rajat, thank you for joining us on Game Changer.

Rajat: Thanks for having me.

Link to podcast episode:  Creating Loyalty 3.0 at Work | with Rajat Paharia of Bunchball

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