Gamification is a valuable new trend in enterprise software as it contributes directly to the equity value of a SaaS business by reducing churn rates and improving upsell.
Gamification affects important commercial factors in the usage of SaaS software. Firstly, it reduces churn rates. Gamification nudges users to be more engaged with the service, so fewer users leave at the end of their contract. Investors look at churn rates as a measure of customer acceptance of the product. If people stop using the platform at the end of their contract the business has to win new customers to replace them.
Secondly, gamification affects upsell. Engaged customers renew contracts for larger amounts, with more users and taking more functionality. If a customer with a contract value of 100 renews the contract for the value of 110, this increases overall revenue growth by 10%. This revenue is earned almost for free as you don´t have to sell this extra 10%. By improving upsell the value of a business grows significantly – for example, a business with €1m EBITDA could add a few million euros to its equity value because revenue growth rate is such an important factor.
Customer performance
Thirdly, gamification increases benefits for customers of SaaS businesses as it improves their employees’ productivity. It uses a range of techniques to motivate employees such as challenges and rewards, creating competitions between team members and social experiences so users can compare performance, share knowledge and ideas. Gamification also encourages employees to make full use of software and to explore areas outside their comfort zone – further improving upsell.
Young people are very familiar with gaming techniques and understand the concept of rewards and badges online. They have grown up with consumer websites which use gaming techniques extensively – Facebook’s Like button, Twitter’s retweets, Ebay’s seller ratings and Foursquare’s badges – all motivate users by providing recognition and status among peers.
Meaningful rewards
To keep end users interested companies must offer meaningful rewards. Virtual badges should be linked to something that gives status or leads to tangible rewards such as time off, first choice on work shifts or points that can be redeemed for merchandise. It’s important to understand the employee’s role in the organisation, their business objectives and what motivates them. While a sales team is likely to be motivated by competition and financial rewards, a research and development team will be more motivated by collaborating to solve problems for the benefit of an organisation.
I believe the market will move away from generic rewards such as points and badges to providing businesses with the ability to customise reward schemes in a way that fits their culture. However, it’s still relatively early days for gamification. A major challenge for vendors will be ensuring they can be flexible and relevant to individual businesses.
A sense of community
Eloqua’s Topliners community site is another great example of gamification. The community has thousands of members who are encouraged to share tips on marketing and become community experts. Gamification allows users to see their rank in the community and awards badges to members when they complete activities.
The site is extremely practical and while you don’t have to be an Eloqua customer to join, members do share tips on how to make the most of Eloqua’s software. As a valued community, Topliners has boosted Eloqua’s conversion of new users to fully paying customers. And because the community and the software improve users’ professional development they are more likely to tell others about it, leading to more widespread use of both.
Vendors can’t afford to ignore gamification as it will play an important role in shaping the future of the modern enterprise. Users engaged for the long-term will form more productive teams for their employers and enable the SaaS vendors they use to grow revenue and ultimately drive equity value.