It’s easier to create than steal VIPs

I, and many others, have written multiple times on how important VIPs are for free-to-play games but one area that is opaque is how do you get VIPs. In most free-to-play games, VIPs (which I define as a player who spends over $2,000 lifetime but is genre and game dependent) represent less than 0.5 percent of all players but generate 60-80 percent of revenue. It is thus critical for a game’s success to find and nurture VIPs.

Given the importance of VIPs, many think the road to success is stealing VIPs from competitors. This technique works in land based casinos, to a degree, and some other industries, but should not form the foundation of your efforts. If you are focused on winning competitors’ VIPs, you are likely to fail in the long term. You will be disappointed in the number of VIPs you can steal and will find that overall your game is deficient. Instead, you need to focus on creating VIPs, as that will ensure long-term success.

Why you should not rely on stealing VIPs

There are many techniques to woo competitors’ VIPs in social games but they yield surprisingly disappointing results. You can recruit competitors’ VIP hosts, troll VIP forums, target players based on their level in competitors’ games, etc. Surprisingly, however, this strategy fails to have a higher ROI than traditional user acquisition, where you cast a wide net.

VIPs love the game they are already playing

The first reason that it is very challenging to win over VIPs is that, by definition, they love the game they are currently spending in. They are VIPs because they are highly engaged and thus willing to spend liberally. If they were not happy with your competitor’s game, they would not be spending large sums of money there. A typical new product has to be 9 times better than an existing product to win over a customer. A VIP is going to be even more committed to the existing product, so your game will need to be 10X or 20X better to prompt the VIP switch. It also has to be better in areas the VIP cares about because their needs are already served with their current game.

All games are different

Unlike with some businesses, all mobile and social games are different. While players and developers often lament the copycat nature of the industry, there are no identical products in the market. It may just be a different theme or user interface, but there is a difference between games. In social slots games, everyone has different slot machines. In match-3 games, there are different themes and animations even in games that are largely the same.

Some other industries, where VIP “stealing” is easier, do not have this differentiation. In land-based casinos, most high-end casinos have the same slot machines. With department stores, most stores targeting the affluent will carry Gucci. Thus, a VIP at an MGM casino is likely to go to the casino for a game they can play at Caesars or a customer at Nordstrom can find the same product at Nieman Marcus. Conversely, it you love the slots in Hit It Rich!, you cannot play them in Heart of Vegas.

Your spender is not my spender

One thing that has surprised me in the mobile game space is that a spender in one game probably will not spend in another. I have been part of or around multiple initiatives in major mobile gaming companies to move spenders and VIPs to other products. Sometimes we have tried because the games were being phased out or we thought they would continue spending in the existing game and start spending the new game. All of these efforts have failed. They have not failed due to cannibalization but almost always there has been no correlation between spend in one game and spend in other games.

This surprising result is probably due to the reasons a person monetizes in a particular game. As discussed above, someone will spend in a game because they really love that game. They are not spending to spend, they are spending to enjoy. Thus, they are no more likely to fall in love with the new game than any other (non-spending) player.

How you should build your VIP base

If winning over VIPs will not drive your VIP revenue, you need to create your own VIPs. Having a strong VIP base is critical to a successful game, and like most things that drive success; it requires hard work. These efforts range from developing products focused on fostering VIPs, treating your VIPs right and acquiring players most likely to become VIPs.

Building products to create VIPs

People become VIPs because they love your game, so you have to create a product with something for them to love. If your game is a weak copy of the market leader, why should they spend in an inferior lookalike (unless you are competing on price, which does not work in mobile gaming). Instead, you need to give players something unique so the 0.5 percent who could become VIPs has something to fall in love with. Give players unique content that they cannot find anywhere else, if you are in social casino, that means slot machines that are unlike your competitors.

Also, give them features that reward a huge commitment. Love is mutual, and if you are asking for their commitment you must reciprocate. Rather than having some superficial features that get boring after a few hours or days of gameplay, make very deep features that only a few players may ever get through but gives those few VIPs an incredibly deep and fulfilling experience.

Create an in-game VIP program that shows VIPs they are important and advancing. Airlines were the first to roll out frequent flyer programs; you need to have a program focused on rewarding your top players. A few months ago, I wrote about how to create a top in-product VIP program and the key is creating compelling differentiated benefits and experiences.

Treating your VIPs right

The second critical element in building a strong VIP base is to have an effective VIP host program. VIPs are very valuable (hence the V in VIP) and you need to treat them properly. Many game companies have treated a player who never spends exactly the same as someone who spends thousands. The cost, however, of losing someone who is a great customer is huge so the ROI on investing in keeping this player is also very high. A good VIP host program will proactively deal with its top customers, ensuring they are happy and anticipating problems before they arise.

Spend to reactivate

If someone loved your game at one point, there are likely still elements of the product they love. Rather than focusing on bringing in new players, also focus on bringing back your VIPs. If you have good VIP hosts, one of their priorities should be to bring back players. Spending part of your user acquisition budget to reacquire churned VIPs is likely to generate higher returns than hunting for new ones. Adding features or content that your VIPs wanted, and then letting those who left know what you now have, is often a better investment than creating generic new features.

Acquiring players who will become VIPs

Finally, although you are not likely to grow your VIP base through acquiring competitors’ VIPs, you can still increase the likelihood that your user acquisition will find future VIPs. You need first to recognize what it is about your game that VIPs love. I have found it very helpful to understand what is your North Star metric, the metric that indicates if a player will become a VIP (i.e. makes three purchases in their first seven days). You can then optimize your paid user acquisition on players that achieve this North Star metric, even moving to a CPA model where you only pay (though pay much more) for players who perform this action(s). You can also run lookalike campaigns that target players who look like your VIPs. Unlike targeting players who look like VIPs of competitors, your VIPs love something in your game and if you find similar players, there is a high likelihood they will also love it.

It’s not easy but it is worth it

There is no silver bullet in building your VIP base but it is critical for your success. Regardless of your available funds, you cannot just go out and buy your competitor’s VIPs. Instead, you need to focus your business on creating a VIP receptive product. From the product development to your marketing, you need to create a holistic experience that appeals to the customers who will drive your business.

Key takeaways

VIPs, less than 0.5% of all of your players, will drive 60-80 percent of revenue for a typical social game, so it is critical you have a strong VIP base.
It is virtually impossible to build VIP base by wooing your competitor’s VIPs as they already love the competitive product and thus will probably not like yours better.
You should focus on building a game that gives people something unique, something they can love, so they will become VIPs.

How to create a mobile gaming hit

One of the greatest challenges game companies face is the green light process, even for the most successful companies. Game developers continuously struggle with the question of how to create a hit and where should they allocate their development resources. the most successful game companies struggle with this challenge, even if they have told investors they have a magic formula. When I first started in social gaming, Playdom, Playfish, Crowdstar and Zynga were the dominant companies. Now, if you know any of those companies outside of Zynga you get a gold star, none of them were able to replicate their hits of 6 or 7 years ago (and Zynga has also found it a challenge). Hits define success in the mobile game space, so finding the right formula is a critical issue.

I recently read an article, Space Ape: Chasing a genre-defining hit that describes an approach worth attempting. In the article, Space Ape, a mobile developer generating over $50 million in annual revenue, discusses its strategy to move from publishing solid titles to creating hit games. Space Ape has realized that simply replicating existing successful games and adding some minor improvements can generating solid performance but is not enough to create a hit.

Do not rely on market analytics

The first key is that you cannot use market data to predict the next hit. By its nature, market data is backward looking and can only tell you what has already been successful. It can help you create a good copy of a successful genre but will not tell you what will be the next genre defining product.

User testing and focus groups suffer the same fate. They can tell you what customers already like and dislike, maybe even what they think they will like, but customers will not think of new genres or understand what will appeal to them until they actually experience it. Apple’s success is a great example of this concept, as people never knew they would want an iPad until they actually had an iPad.

From pipeline to funnel

The key for Space Ape, and what I think should be replicated, has been moving from a production pipeline to a production funnel. In the production pipeline, a company will agonize over what product to make, and then spend considerable time refining the concept and developing the game. Effectively taking one product from concept to launch.

What Space Ape is now doing is creating hundreds of ideas for games, pouring them to the top of the funnel, with only a few making it out of the funnel. They allow their teams to move freely between designing, prototyping and developing a proof of concept.

Avoid sunk costs influencing decisions

Most importantly to Space Ape, the team can kill an idea easily, despite how many resources have been invested into the idea. This point is critical; as I have seen many game companies (including projects I have led) continue to invest in games primarily because of the investment already made. Sunk cost, a cost that has already been incurred and cannot be covered, should never be considered when deciding whether to proceed. Instead you should focus on the future investment needed and the expected return on that investment. The sunk cost is gone and no longer should matter.

Structure appropriately

To support the production funnel, Space Ape has restructured its team. Previously, 25 percent of the company focused on the production pipeline, developing new games, while 75 percent focused on maintaining its live games. Now 75 percent of the work force is focused on developing a genre defining hit, while 25 percent support existing products.

By putting sufficient resources behind the production funnel, they can generate hundreds of ideas, prototype a good percentage, pushing the promising ones to proof of concept and then developing the top ones that survive. This process ensures that many different concepts get fleshed out and they not need guess what will be a hit.

The ratio of resources focused on live games versus new development depends on your company’s situation. If you already have one or more of these genre-defining hits (i.e. King or Supercell), you should continue to put sufficient resources behind your hits to generate billions of dollars in value. Conversely, if none of your games are doing much, why keep any resources focused on them (remember sunk costs). What is critical is that you have enough people dedicated to the production funnel so you can have a plethora of ideas, prototype a high percentage of them and take the promising ones to proof of concept.

What success looks like

Moving from a production pipeline to a production funnel is a big decision, it requires significantly more resources, and you may consider it a risk. Given the carnage you see almost weekly in the mobile game industry, however, it is more of a risk to manage new product development the traditional way.

Key takeaways

Creating a hit game is critical to success, even for company’s already with a hit, but it is one of the most difficult challenges you face.
The key is moving from a production pipeline, deciding what game to create and then building it, to a production funnel, generating hundreds of ideas, prototyping some and taking the best to concept and then market.
To support a product pipeline, you need to structure your company to support it and ensure you allocate sufficient resources to drive many ideas through the funnel.

Using color to drive growth

My team was recently working on a new product and one of the issues that came up was what color scheme would generate the best results. Rather than rely on our (great) designers and team’s overall understanding of the market, we looked into the literature of consumer behavior and the research on what behavior different colors generated. Reinforcing the value of spending time on your color choices is research that shows 90 percent of snap judgments on products can be based on color. While there is no magic formula (unfortunately make everything dark blue or yellow is not a silver bullet), you can apply consumer behavior to leverage your color choices.

Color and branding

The first area we looked to leverage color was in our branding, ensuring our logo and app icon generated a strong positive response from players. A good article on Entrepreneur, The Psychology of Color, explained that you initially need to ensure your choice of colors is considered appropriate for your product. What would be effective in a bar is very different than the colors you should use for a funeral home. Customers decide a brand’s personality largely by its color scheme. The colors also make the brand more or less recognizable (IBM is defined as Big Blue), and people prefer recognizable brands.

Color choices also can create a unique visual identity. This helps to differentiate the brand and make it more memorable.

The key to choosing the right colors for your brand are using ones that convey the personality you want people to associate with your brand. If it is excitement, colors like red and yellow generate that response. If it is trust, you are best going with a lighter shade of blue. Colors also mean different things in different contexts (green can be environmentally friendly or related to money).

Color and gender

You also need to tailor your color scheme to the gender of your target customer. Blue is popular with both genders while purple is the most polarizing (loved by women and disliked by men). In general, men prefer bold colors while women prefer softer colors. Men are also more amenable to shades of colors as their favorites (colors with black added) while women prefer tints of colors (colors with white added).

Color and conversions

The true impact of color on conversion (making sales) is that you should use color to make an item or monetization opportunity jump out. A red “Buy Now “ button is likely to work great on a predominantly green and blue page but not work as well as a green button on a page with a lot of red. The key is using color to highlight what you want users to consider purchasing. You should use color to leverage the isolate effect.

Think about color

The key to this article is that color is important on multiple levels to your business and should not be an afterthought. The right color choices will create the brand identity you are looking for, appeal to your target market and make customers more likely to purchase.

Key takeaways

Color is a very strong determinant of consumer behavior and you should spend time to make color choices with your brand, logo and product that drive the behavior you are seeking.
Color scheme needs to be consistent with your brand, creating the brand personality you are trying to build.
The key to driving conversions is using color to isolate the elements that will drive purchases, less important than the actual color choices is using colors that do not appear elsewhere on the page or app.

Using consumer behavior to design your leveling or challenge system

I came across an interesting article on how you can learn from consumer behavior theory to build an effective leveling system, Using Psychology to Design Leveling Systems
by James Madigan. Although there are some holes in the analysis, it raises a very useful connection between loss aversion and leveling and challenge systems in games. Although intended for mobile and video games, the lessons are also applicable to any gamified application.

Madigan starts by reminding readers that customers react differently to gains than to losses. If a player is rewarded with one bonus of 750 chips and an additional reward of 250 chips, they would be less happier than if they got a single reward of 1,000 chips (even though rewards are the same). People like gains lumped together. However, if a player gets killed in a game and has to use 750 chips and then 250 chips to keep playing they would be happier than having to spend a lump sum of 1,000 chips to keep playing. Players prefer losses that are spread out. This concept was popularized by Richard Thaler and won him a Noble Prize in Economics.

These findings are tied to the principal of loss aversion, the fact that people dislike a loss of X more than they appreciate a gain of the same X. They will thus avoid situations where they can lose compared to ones where they can win. This situation becomes an interesting opportunity in game design, Madigan points out, because you can bundle wins and losses. Since we give losses more weight, a 100 chip loss coupled with a 300 chip gain does not feel like a 200 chip gain, it feels closer to zero since the loss is overvalued. Slot designers have known this for centuries, most slot math couples lots of small losses (each spin) with some big wins.

This concept also is very relevant in product design, you do not want to take something away from your players. If a player has worked to unlock a level or a slot machine, locking it later in the game would feel like a bigger loss than the gain from unlocking it or another level/machine.

There are several key implications to optimizing your leveling system (or challenge system):

Rather than give small rewards each time you level up (or complete a challenge), have them build up to one big reward. This could be by combining your leveling or challenge system with a collection mechanic, you get a piece each level and then every 10 levels can turn it in for a big reward.
Spread the costs of leveling up out. Rather than forcing players to win a big costly tournament or defeat an uber-boss, have the player go through multiple sinks to gain access to the big leveling reward.
Ensure your rewards for either leveling up or completing challenges are meaningful. Players need something big to overcome the perceived cost of the activity.

Key takeaways

People, and gamers, place a higher negative value on a loss than they place a positive value on an equal gain.
People prefer that their losses are spread out but their gains are large.
You thus need to ensure big, meaningful rewards for leveling up or completing challenges to offset the costs (losses) of the activity. You can do this by creating a collection mechanic that leads to a large reward.

Algorithms are not humans

While I consider myself one of the most data-driven people in the gaming industry, I understand that quantitative data alone is not the optimal input for decision making. Combining analytics with qualitative data can often improve your decisions. You can think of it as a basic mathematic equation, if X is data and Y is qualitative information (ie. personal past experience), by definition X+Y will be equal or greater than X alone. An article by Bain & Co., one of the world’s leading consultancies, The Math, The Magic and the Customer shows how great marketers go beyond the data.

As the article points out, marketing departments now spend more on technology than IT departments. We have great tools not only to measure every marketing campaign, but each creative in the campaign, each channel we use and how each creative interacts with each customer in each channel. Often, however, we rely on this information without looking holistically at the customer or realizing that customers will not always behave consistently (or rationally). People make decisions emotionally as well as logically and as the article says, “great marketers have always known this, which is why they work hard to build an emotional bond with the customers they are targeting. They tell compelling stories about their brands through memorable messages and indelible images. At its best, this kind of marketing pops and dazzles, like magic. Marketing that ignores the magic and relies on math and science alone will be marketing that doesn’t work.”

Data and forging emotional connections are not mutually exclusive. Great marketers do not rely on just one. They use the myriad of data to create a holistic view of the customer and customer journey. The marketing is customer-centric rather than tool centric, all of the data and analysis comes down to what will be most effective in the future with the customer (not what the cohort did in the past). And as Bain writes, “contrary to the inclination of many marketers, moreover, they do not put measurement of ROI at the top of their agenda. When they can’t measure the ROI of an innovative effort, they are willing to let instinct guide their efforts—at least for a while.”

There are three keys to using data and the holistic view of the customer effectively. By combining a single view of the customer, understanding and tapping into their emotions and testing relentlessly you can replicate what is working for the most successful companies.

$math and magic graphic$

Paint a holistic picture of the customer

Most companies, not only online ones, have gigabytes of data about their customers. Data includes preferences, locations, device types, when and where they interact, purchase decision process, where they are browsing, what else they are doing online, etc. You can even see where your customers are and what they are doing at an exact time; you can interact on a real time basis. The information also comes from multiple sources and is stored in different locations.

The key to successful marketing is putting this data together for a single, real time, view of the customer. To achieve this goal companies must come together and the marketing team, IT team, analytics team — even finance — must all work together to share data and build systems to create a plan to build this complete view. Then the company needs to create a single customer record, where all of the information is held. While it sounds easy, this process can take years but in the interim data should be streaming into marketing so it can start looking at the customer holistically.

Encourage emotions

People are not algorithms or cells on a spreadsheet, not only is it immoral to treat them that way it is not good marketing. By understanding your customers’ journey, you can then tailor the experience to elicit the appropriate emotions at the right time. If it is a gambling game (either real money or virtual chips), provide excitement after a big win or help calm them down after a bad beat. By understanding your customers and potential customers emotions and encouraging the right one at the right time, you can make them more likely to choose and enjoy your product.

Stay nimble and be bold

You need to test many different approaches, as eliciting emotion is not easy. The important part of testing is learning from the results. Reinforce what is working and discard what is not, even if you were the advocate of the sub-optimal variant. Then think of new methods and promotions that will build on what you have learned and create even better results.

Moving forward you are not CFO

With the reliance on metrics and ROI in marketing, the marketing department is quietly becoming a mirror of finance. While metrics and ROI are critical to long-term success, so is generating emotions from your customers and potential customers. To become a truly great marketer, you need to understand how to connect to your customer as well as reading your daily dashboard.

Key takeaways

While data and ROI is critical to successful marketing, adding qualitative measures makes your marketing more effective as it is effectively additional data.
A key to successful marketing is generating the right emotion at the right time from your customer or potential customer, as emotions drive people, not data.
Continue testing different approaches and techniques, discarding what does not work and building off of what does work.

Lifetime Value Part 25: Why retention is THE KPI

Whenever I write about lifetime value (LTV), I always try to stress that the key to growing a high LTV is retention. I recently came across an article, The One Growth Metric that Moves Acquisition, Monetization, and Virality by Brian Balfour, one of the top experts on growth, that does a wonderful job of showing just how powerful retention is to your LTV. Balfour identifies four areas that retention impacts.

Acquisition

As you improve retention of existing users, you also acquire more new customers. A number of organic acquisition channels, such as virality and user-generated content (UGC), work when existing users take an action that introduces new users to your game or product (via inviting friends, sharing, word-of mouth, creating new content, etc.). A larger base of active users leads to better acquisition metrics. Players remaining in your game or product can invite new people to the product, so the more you retain, the more players who can send invites.

Monetization

Monetization is the second area impacted by retention. I get very frustrated when people, usually Product Managers, act as if there is a trade-off between retention and monetization. The reality is that retention drives monetization rather than damaging it. First, retention allows players to spend more frequently. If you retain a customer for three months rather than one month, they have 3X the opportunity to spend. Moreover, if your model is more robust than simply discreet purchases (either in-app purchases for a game or sales for a retailer), you also generate a longer stream of advertising or subscription revenue the longer the user is engaged with your product.

User acquisition becomes a competitive advantage

Paid user acquisition is one of the critical elements to growing a game or app, you need to have a positive return on ad spend to justify scaling your product. More importantly, since a bidding model drives user acquisition in the app space, with acquisition muscle you can push competitors out of acquisition channels, dominating a market and growing faster. As described earlier, your users are generating more revenue (they are in the product longer so spending more often and driving ad and subscription revenue), you can afford to outspend your competitors.

Payback period

Retention accelerates your payback period, allowing you to avoid raising additional funds or providing more free cash flow to funnel into acquisition. Payback period is the amount of time to pay for your full loaded user acquisition costs. As Balfour writes, “if you have a longer payback period, you either need to raise more money to fuel acquisition or wait longer to reinvest in acquisition. If you have a shorter payback period you will be able to reinvest the cash earned sooner in acquisition. Since improving retention drives monetization – meaning you make more money over a designated period of time – it also shortens your payback period.”

Build with retention top of mind

With retention driving so much value, you need both to create products that will retain customers or players and then the live services need to focus on improving retention. While it is sexy to try to boost ARPDAU, you will create the most value by strengthening your retention.

Key takeaways

Retention is the most important area to focus on, as it drives four areas critical to growth: virality, monetization, paid acquisition and payback period.
Retention generates more users because there is more virality, word of mouth, user generated content and an ability to spend more to acquire.
Retention drives revenue because players have more opportunities to make purchases and generate additional advertising and subscription revenue.

How to truly personalize and test

In 2018, if you are not delivering a personalized customer journey in your game or product you will fail. Personalization, for marketing, for customer experience, for CRM, for almost everything, is the current buzzword but it is still rare that companies have a comprehensive plan to create a personal experience. David Norton, former CMO at Harrah’s Casino group and architect of its Total Rewards program, discusses several ways companies can personalize effectively in his book The High Roller Experience.

Personalization is critical not only to a great customer experience but also to optimizing efficiency. As Norton writes, “personalizing the marketing communication approach will dramatically improve the efficiency of marketing spend both by eliminating activities that will not be fruitful and by improving response through more appropriate offers.” As your competitors are already optimizing, if you are not you will not be able to spend as many marketing dollars as they can, putting you at a fatal disadvantage.

How to create a personalized experience

Realistically, you are not going to have one-to-one personalization on day one, so you need practical planning to create a personal experience. A great way to start is replicate what Harrah’s did as a way to improve its marketing effectiveness, using a basic life cycle approach: new business, non-loyal, loyal, and defector. If you initially communicate differently with these segments, you will see an increase in overall ROI.

You also need to leverage the data you have on customers beyond the typical events. At Harrah’s, they looked at implied preferences based on all the information they had about their customers normal behavior, such as what customers did on their visits to our properties, including games played, offers redeemed, and nongaming activities, and then stored the preferences at a customer level for easy use in campaigns. They noted whether the customers preferred slot or table games, if they participated in gaming tournaments, if they most often came midweek or on the weekend, how often they redeemed offers when they came, what type of entertainment they preferred, which channel of communication they preferred, and a host of other factors. They used these implied preferences as inclusion and exclusion rules in campaigns. By excluding customers from programs that they had no chance to respond to based on their past behavior, they significantly improved response rates and cost savings. Most importantly, as Norton wrote, “we made our customers happier.”

Find the segments with high ROI

As alluded to above, you do not need to create hundreds of micro-segments initially but you do need to determine which segments you should invest in. Non-loyal customers represent a particularly attractive segment to target, as this is where you have the biggest opportunity to win market share. At Harrah’s, they targeted this segment by giving them increased value for more frequent visits, generating a significant increase in revenue from this group than they had predicted. In gaming, this creates opportunities, especially in the social and real money casino spaces, where players normally play three to five competitive apps.

Another segment rich with opportunity is defectors. Harrah’s found a way to identify those customers who had broken their typical visitation pattern as opposed to the standard inactive program practice of waiting 6 or 12 months to reach out to them, at which time they would have been long gone. This practice created lower churn and more value from this segment.

Treat VIPs extra special

I have written multiple times about VIP, and you need to ensure your personalization extends to giving VIPs a very special experience. This includes making sure you not only identify VIPs who make a large purchase in one product (or in Caesars case one property) but the ones who have the highest lifetime value. For an online company, the key is looking at number of transactions and adding across products to get the best picture of who your true VIPs are. You then need to treat VIPs in one product as VIPs in all your products. One of the biggest failures of personalization is when a VIP in one product or one retail location then goes to another and is treated as a standard customer.

Personalize all touch points

It is not just personalizing communications that is critical but you also need to personalize all the core functions. According to Norton, personalization needs to extend to brand, loyalty and customer service. As Norton writes, “if a company can execute against all three of these well, it is going to outperform its competitors….Customers increasingly want a seamless experience across touchpoints with a brand, and contact channels are often one of the greatest frustration points.”

Do not forget customer service (CS)

Given that you need to personalize all touch points, the one that companies most often miss is customer service. The service profit chain is not a theory but a powerful motivator and value creator.

It is absolutely essential, however, to think about the holistic customer service experience and understand the interplay among various channels. The call center and other contact channels are a valuable commodity. When personalized, CS can drive revenue and brand advocacy and provide valuable customer data. Norton writes, “I have always viewed customer care as a critical marketing channel that can build customer relationships, be a source of relevant information about the customer, and of course turn demand into revenue.“ Many of the product improvements that have led to the most revenue growth in my past two positions originated from feedback from our customer facing team members and VIP hosts.

CS is also an area for innovation, as you can improve your offering through technology. Customers may embrace technology before your company might, so CS can be a great vehicle to try new tools and channels.

To truly leverage customer service as a tool to improve personalization and the customer journey, you need to measure it at a granular level. This helps drive service improvement efficiently.

Testing is the key

You need to constantly test to ensure you are personalizing optimally. As Norton writes, “constantly testing and learning and holding out control groups is the best way to optimize marketing spend. This allows companies to find the most appropriate message and to spend .”

The first step is to automate the test process. If it takes months to evaluate what happened, the results become useless as the competitive landscape has changed.

It is also critical to have a control group for each campaign and program. While this policy seems automatic, there is often pressure to release what you believe is the optimal campaign or communications to everyone, as you do not want to leave money on the table. Holding out customers, however, from a specific marketing program is much more informative in determining which marketing activities drive the most incremental profitability, changing the customer’s behavior to spend more with you than with a competitor. This is also a better strategy than a universal control group, which does not show you the relative performance of different marketing programs.

As mentioned above, customer service is critical to personalization and measuring customer service with a significant level of granularity provides tremendous insight about the customer experience and helps identify areas for improvement. As Norton writes, “being able to correlate improved service to increased revenue, and developing a well-constructed incentive plan, leads to great outcomes for both a company and its customers— especially when there is innovation around challenged service touchpoints that drive overall customer satisfaction with the brand.”

Personalize, personalize, personalize

The key to success in the current business environment is personalization, your customers expect it, and if you do not deliver they will go to a competitor. And you need to deliver not only in communication but also in customer service and VIP. Then you need to optimize to ensure you are delivering a truly effective personal experience. This is not a secret to gaining competitive advantage, it is the cost of doing business.

Key takeaways

Personalization improves the efficiency of marketing spend by eliminating activities that will not be fruitful and by improving response through more appropriate offers
Think holistically about the customer journey. Ensure all parts of it are personalized, from the initial communication through the product to customer service and support.
Testing and control groups are the best ways to optimize your marketing and ensure your personalization efforts are creating value.

Hypercasual, the real next big thing in mobile gaming

There is a lot of buzz now about hypercasual games, and, for once, I agree with the buzz. There is a new big thing in gaming every year – a new console, technology, mechanic, etc. – that people expect to change the industry, investment flocks to it and a few years later it becomes an afterthought and a lot of people have to send out their resumes. I am usually skeptical of these fads, if you look at my posts there is not one about VR, blockchain, 3D, etc., but hypercasual is the exception

Hypercasual, is not a fad because it taps into what is one of the strongest drivers of building a successful product, simplicity. I have written repeatedly about how people gravitate to easy products that minimize cognitive load, and often use the example of Uber’s success to show that simple and straightforward can generate tens of billions of dollars of value. Hypercasual games tap into that formula for success.

A recent article, 100 Million Downloads: How Hypercasual Mobile Games Are Rewriting the Game Design Rulebook by Tom Kinniburgh, does a great job of both quantifying the success of the genre and pointing out key rules to building hypercasual games.

What is hypercasual

The first step to analyzing the hypercasual market is defining what is hypercasual. If you do not define it, you cannot build towards it. As Kinniburgh writes, “the term ‘hypercasual’ has become a collective way to reference games of this nature. Such titles typically have a single mechanic and a single goal, yet reaching a high score can be fiendishly difficult.” Effectively the core game loop is very straightforward, do one thing, get rewarded (so you can try again) and keep repeating to get a higher score.

The state of the hypercasual market

Hypercasual is not the next big thing that developers and investors are flocking to but an already established space in the game ecosystem with hundreds of millions of players. There are already tens, if not hundreds, of hypercasual games with over 100 million downloads. To put that number in perspective, 100 million downloads is more downloads than if everyone in Germany or France or the UK installed the app. These games include Agar.io, Finger Driver, Balls Race, Dunk and most of the other games at the top of the various app stores’ charts. The acquisition of Harpin, a one-person studio that built a solitaire game, for over $42 million also validates the hypercasual market, as companies usually do some due diligence before investing millions of dollars.

How to build a hypercasual game

The core game mechanic is even more important in the hypercasual space. As mentioned above, hypercasual games have a single mechanic that the player keeps repeating to get a superior score. Thus, the single mechanic needs to be fun, easy and compelling or else the player will not want to continue.

This core mechanic must also be easy for the player to understand quickly and provide for ever improving scores. Kinniburgh writes, “Great hypercasual are easy to grasp, but rely on players having a perfect run to succeed, and they measure that perfection with a score.”

By being easy to understand quickly, players recognize that playing more leads to better scores. If it is difficult to comprehend how to play, the score and activity would not be linked in the player’s mind so they would not be driven to keep playing. Also, if continued play did not yield higher scores, then the key incentive to more gameplay would not exist.

This simplicity exists throughout the game. Unlike other game genres, you do not introduce more features (complexity) as the game progresses. According to Kinniburgh, “great games in this genre rely on mechanics that provide everything the player needs to play from the start of the game, either with a single life on offer – such as Flappy Bird – or with multiple lives, like Ballz. In each case, however, the game ends when said lives count reaches zero.”

While the gameplay mechanic needs to stay consistent, the game must also scale so players do not get bored. If they can master the game, then the score is capped. Instead, you need to introduce variety by making higher levels more difficult (less time, bigger opponents, etc) or making the level more complex (a puzzle game with more area blocked). According to Kinniburgh, there are three ways to scale hypercasual games:

Changing the underlying environment
Changing the speed
Adding a PvP element

When designing, use one or a combination of these elements to keep the player engaged.

How do you make money

I, and most others, would not care about hypercasual if there was not a way to translate the popularity of these games into revenue. The most obvious answer is in-game advertising. Throughout the game space, advertising is becoming an increasingly important revenue stream. Players in games already see rewarded video as a benefit; adding watch to earn almost always increases your retention metrics. Machine learning now allows for more targeted advertising, creating a better user experience (you see ads you are actually interested in) and a better value for advertisers (you only pay to show ads to people who are really potential customers). These two forces are further driving ad revenues for game companies.

Hypercasual taps into this trend because of the sheer number of players you attract. With hundreds of millions of players, algorithms have more data on who to target with what, providing better advertiser and user experiences. And, with each player generating some revenue, hundreds of millions of players directly translates to more revenue.

In addition to direct advertising revenue, you can improve company revenue by using hypercasual as an acquisition channel. While the Harpin acquisition may be ROI positive based on advertising revenue, my guess is that the revenue it generates by driving players to Zynga Poker and other games with strong lifetime values actually is more valuable than the direct revenue from Harpin’s games. Using hypercasual as a portfolio play rather than a standalone opportunity further builds value.

Future opportunities for hypercasual

With many trends, by the time you read about it, it is too late to capitalize, but in the case of hypercasual there are still many opportunities. First, the underlying principle of a single, simple mechanic will always lead to a good user experience. My philosophy is simpler is better, and hypercasual is defined by simplicity.

Also, for those in the casino space, hypercasual has barely raised its head. While Harpin and several other hypercasual companies have built great businesses around solitaire or solitaire like apps, that is largely the extent of its penetration of the most exciting gaming vertical (social casino). There are no hypercasual games that target slot players, which represents about 80 percent of the social casino market. Same for table games (roulette, baccarat, etc), which seem to lend themselves perfectly to hypercasual.

The opportunity also is not limited to free to play casino, but the real money space can learn from it. The success of lottery products not only shows willingness to gamble on hypercasual experiences but a strong and continuing desire to do so. Also, the high customer acquisition costs in real money suggests the value of hypercasual as an acquisition tool would dwarf the benefits free to play companies get from these games.

Key takeaways

Hundreds of millions of people play hypercasual games; apps that have a single game mechanic where players keep returning to get a higher score.
Hypercasual games are a great opportunity in the free to play social casino market, as there is still no hypercasual games that target slots players, the biggest segment of that space
Hypercasual is also an untapped opportunity in real money gaming, as lotteries show players willingness to gamble on a hypercasual experience and they provide a way to offset the very high customer acquisition costs.

The ten most valuable business books I have ever read

A colleague recently asked me what ten books I would recommend to him and it turned into a much more difficult question than I expected. While it is relatively easy to rank books you read in the last few month or even year, picking the ten most useful at all time is very hard, a lot of books have contributed to my growth. After much thought, I came out with my top ten books and after going through the exercise I felt the list could be useful to everyone.

While I did not initially rank the books, given everyone’s limited time, I have now ranked them from one to ten based on how much value I derived from the book. Below are my top-10, with the most valuable one first (given that this is not Miss Universe, I did not think creating suspense by starting at number 10 made sense):

Thinking, Fast and Slow by Daniel Kahneman. Kahneman’s book about human behavior and decision making has influenced me more than any other work. It has helped me understand what drives others and mistakes I commonly made. The book will help you make better decision, understand your customers better, be a superior leader and create more compelling products.
Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Blue Ocean Strategy drives how I develop strategy everywhere I have had the opportunity. It starts by showing the superior results in creating a new market space rather than competing directly in an existing space and this leads to a framework for building long term competitive advantage.
Predictably Irrational by Dan Ariely. Predictably Irrational is my favorite book on the list, reading Dan Ariely is comparable to reading a Michael Lewis or even Tom Clancy book, a true page turner. Ariely’s work is in the same space as Kahneman, behavioral economics, or why people make the decisions that they do. In effect, people are not rational (which undercuts traditional economics) but their irrationality is not haphazard, it is predictable. Like Kahneman’s work, reading Predictably Irrational will improve your decision making, leadership and ability to interact with your customers.
Hooked: How to Build Habit-Forming Products by Nir Eyal. Hooked is the best book I have read about how to create truly compelling product. It provides a framework for building something that customers will engage with regularly, thus having a high lifetime value.
Smart Customers, Stupid Companies: Why Only Intelligent Companies Will Thrive, and How To Be One of Them. This book highlighted the value of personalization before it was cool. It anticipated the trend of customers expecting an experience tailored to them before everyone gave it lip service and still provides compelling evidence on the value of personalization.
The Signal and the Noise: Why So Many Predictions Fail–but Some Don’t by Nate Silver For those of you who are not familiar with Nate Silver, he is probably the best known US statistician because of his success predicting election results (though he did miss on Trump) and high profile sports analytics sight. The Signal and the Noise is fantastic at explaining in a very easy to understand way how analytics work, why they sometimes do not, and how you can apply them.
The Ultimate Question. The Ultimate Question is effectively an explanation of NPS (Net Promoter Score) and framework on how to apply it. I find NPS the most useful KPI after LTV (and a key driver of it) and this book helps you understand how to apply it correctly as it is often the most misused KPI.
Collaboration: How Leaders Avoid the Traps, Build Common Ground, and Reap Big Results by Morten Hansen. Hansen’s book made it into my top-10 largely because collaboration is so often misused to justify more meetings and design by committee, which destroys value. Hansen, instead, shows you how to collaborate to create increased efficiency and better results.
Contagious: Why Things Catch On by Jonah Berger. Contagious is in the top-10 because it is the only work I have ever read that really shows you how to make a product or marketing viral. Given the value of virality in LTV, this book provides core knowledge that will help your marketing, CRM and product decisions.
Moneyball by Michael Lewis. The tenth spot in this list was actually the hardest to fill, as I had to drop many other great books. Moneyball, however, changed the way I looked at the video game and digital entertainment ecosystems. It highlighted similar opportunities as Billy Beane saw in building a baseball club. And, like with Dan Ariely’s books, it was a lot of fun to read.

As I just wrote, there were a lot of contenders for the top ten and a lot of valuable books I would love to include. If you are looking for other great books to read, I also recommend (this time not in order):

Happy reading and also please post your suggestions.

Becoming truly customer-centric and personalized

Focusing and organizing your company around the customer, not functions or products, is the only way to become truly customer-centric. While loyalty and rewards programs are a great tool to increase engagement, they are only one part of becoming customer-centric. Not only does David Norton’s The High Roller Experienceprovide a roadmap for building a strong loyalty program, it also shows how Harrah’s/Caesar’s casino group created a truly customer-centric company.

Put the customer at the center

By definition, to be customer-centric, you need to put the customer at the center of your company. The leadership of most businesses build their organization around product line, business unit, or geography, which makes it quite difficult to take a customer-centric approach to running the company. The customer becomes a by-product of the organization’s design rather than the core around which the company revolves. As Norton writes, “customer centricity means that the customer is the company’s and not an individual business unit’s. It is an ability to interact with the customer cohesively and consistently regardless of which business unit the customer is dealing with.”

You also need to put the customer at the center of your data. Norton writes, “being able to truly understand the customer and present relevant content at the right moment through the right channel is the holy grail for which companies should strive in order to engender deep loyalty from customers. Data and technology can enhance the customer experience while simultaneously driving incremental profits for the company. “

To achieve this convergence of data and technology, you should build cross-functional task forces that include analytics, technology and the various functions that interact with the customer. These teams can then derive how to understand the individual customer behavior and integrate the results at each touch point so the customer gets the optimal experience for them.

It is more than loyalty

Being customer-centric is much more than loyalty. While Norton created Total Rewards, Harrah’s incredibly successful loyalty program, he writes, “loyalty is about understanding your customers in detail and interacting with them in a highly personalized way at every point of contact with your brand.” Loyalty is about more than a rewards program where customers are fixated on point accumulation and the company is primarily concerned about the cost of contingent liability. It is about interacting with the customer across their entire journey, at every interaction with your company.

It cannot be product specific

As mentioned earlier, you cannot be customer centric if you are focused on product lines or types. You need to look at the customer across all of your products. This focus also then allows you to help the customer find the products and experiences that are most likely to resonate with them.

Looking at the customer across products also enhances the lifetime value of the customer to the company. If you set up your data and organization around the customer and not product, you can predict who of the low-value masses has the potential to shop across products, largely by looking at demographic and behavioral factors. You can then target these customers so as not to confuse the individual product positioning in mass advertising.

Put the customer at the center

With customer now expecting a personalized and great experience, and getting it from the top companies (Netflix, Amazon, etc), you need to move from a 20th century company to a customer centric company. Blow up your organization and structure it around the user. Build your analytics and business intelligence so it tracks the customer journey and allows you to touch every player individually the right way at the right time. When you build your company around the customer, you build it to succeed.

Key takeaways

Being a customer centric organization is much more than having a great loyalty program.
You need to structure your organization around the customer, not along product lines or geography or channels.
Your data also needs to be customer centric, understanding the customer at all points of their journey and ensuring that it then feeds this data back to given the customer the best personal experience for them.

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The Business of Social Media

How to succeed on mobile and social platforms by Lloyd Melnick

Why you should not rely on stealing VIPs

VIPs love the game they are already playing

All games are different

Your spender is not my spender

How you should build your VIP base

Building products to create VIPs

Treating your VIPs right

Spend to reactivate

Acquiring players who will become VIPs

It’s not easy but it is worth it

Like this:

Do not rely on market analytics

From pipeline to funnel

Avoid sunk costs influencing decisions

Structure appropriately

What success looks like

Key takeaways

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Color and branding

Color and gender

Color and conversions

Think about color

Key takeaways

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Key takeaways

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Paint a holistic picture of the customer

Encourage emotions

Stay nimble and be bold

Moving forward you are not CFO

Key takeaways

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Acquisition

Monetization

User acquisition becomes a competitive advantage

Payback period

Build with retention top of mind

Key takeaways

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How to create a personalized experience

Find the segments with high ROI

Treat VIPs extra special

Personalize all touch points

Do not forget customer service (CS)

Testing is the key

Personalize, personalize, personalize

Key takeaways

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What is hypercasual

The state of the hypercasual market

How to build a hypercasual game

How do you make money

Future opportunities for hypercasual

Key takeaways

Like this:

Like this:

Put the customer at the center

It is more than loyalty

It cannot be product specific

Put the customer at the center

Key takeaways

Like this: