Actionable Gamification

by Yu-kai Chou

  However, if you study behavioral psychology, gamification, and/or Human-Focused Design, you will find that there is another side to the story. As it turns out, Scarcity is another driving force of consumer behavior. In economic theory, scarcity is well understood, but only in the sense of objective limits matched against the consumer’s utility derived from a purchase.

  This is different from the Scarcity we are discussing in this chapter, which is related to Perceived Scarcity instead of Objective Scarcity. Sometimes objective scarcity is present without a person ever feeling or knowing it. At other times there is a sense of perceived scarcity without a true limit being present.

  The difference here is that neo-classical economic theory starts off with three key assumptions166:

  Consumers behave rationally

  Consumers have full and relevant information

  Consumers try to maximize their utility (or happiness derived from economic consumables)

  But in the real world, the first two assumptions almost never hold true - people are often irrational and never have perfect information. Sometimes they react to pricing in another, more surprising way: the more expensive something is, the higher the value (utility) is placed on it. This leads to increased demand. As a result, sales may actually increase with pricing.

  Normally, if an item were free (the extreme right of the demand curve), everyone who would want this product would obtain it for free. Say hypothetically, 100 people want this product for free. But in certain scenarios, if the product is unusually expensive, people who previously didn’t care might suddenly desire it. Now sales may exceed 150 items! Because of this scarcity effect, a modified demand curve in some products might produce a C-Shape instead of a diagonal line moving down to the right.

  Scarcity works because people perceive something to be more valuable if it is more expensive or less attainable. Because people don’t have “perfect information,” they generally do not fully know their utility for a certain good. Therefore, they rely on cues - such as how expensive or limited something is - to determine its value. If everyone wants it, it must be good! This goes hand-in-hand with the last chapter on Core Drive 5: Social Influence & Relatedness.

  Of course, at some point, the C-Curve needs to curl back towards the left (zero in quantity) as the item becomes exceedingly expensive beyond anyone’s wealth, producing a reverse S-Shape on the graph. Objective Scarcity (of money) ultimately still wins over Perceived Scarcity at large extremes.

  “This guy’s not expensive enough.”

  I’ve personally seen numerous examples, both first and second hand, where increasing the price actually allowed people to sell more.

  In 2013, one of my clients was trying to choose between two Public Relations service providers, one who charged $8,000 per month and the other $10,000 per month. I informed him that I thought the $8,000/mo provider would deliver better services. However, my client remained doubtful, feeling that the $10,000/mo provider must be more competent to charge that price. I told him that just because one service provider has the audacity (I used a more vulgar term) to charge more doesn’t mean he is better. But my client still couldn’t decide.

  Ultimately my client decided to use both of the services for a period of three months. Though expensive, this was great for me personally because it allowed me to gather valuable data on their actual performances and draw comparisons. After the period was up, it was clear that the $8,000/mo provider was exceptional, while the provider at $10,000 per month proved to be very disappointing. My client fired the $10K guy and retained the $8K guy after that.

  What’s odd is that if the weaker service provider recognized that he was less suitable for the project and only charged $6000 instead of $10,000, he might not have been given a second thought. His aggressive pricing strategy yielded him a new opportunity and $30,000 more! Of course the ultimate lesson here should be to focus on creating strong value for your client- so you don’t lose your job after 3 months.

  On another occasion, I had a client that needed a Cost Per Click (CPC) campaign audit. I contacted a friend from Eastern Europe who was the best in the industry. Since I had done some favors for him in the past, I was able to persuade him to help my client with a free audit, for which he normally would have charged thousands for.

  Though my client was excited about the arrangement, he hesitated and moved very slowly. I pressed my client on this and he said, “What worries me is the free price … is he really as good as you say he is?” He had perceived that my friend’s service was not really valuable because it was offered for free. That’s why it might have been more advantageous to charge a smaller fee such as $500 for the audit, instead of providing it pro bono.

  “I Don’t Feel Good When My Pocket Is Too Full After A Purchase”

  This situation doesn’t just happen with high-end services. In the book Influence: Science and Practice, Robert Cialdini also describes a story of a friend who ran an Indian jewelry store in Arizona that tried to sell some high quality turquoise pieces during the peak tourist season167.

  Despite her constant efforts to promote, cross-sell, and emphasize these pieces to shop visitors, no one seemed interested in purchasing them. Finally, the night prior to an out-of-town buying trip, the owner concluded that she needed to lower the prices and make the pieces more attractive to her customers. As a result, she left a note for her head salesperson with instructions to reduce the prices by “x½.”

  However, the salesperson misunderstood the note, and mistakenly doubled the price instead. Upon returning a few days later, the owner was pleasantly surprised to learn that all the pieces had been sold. Doubling the price on each item had actually allowed her to sell more because their perceived value had increased.

  Since you don’t do anything with jewelry other than show it off to others (or yourself), the value is usually based on perception as opposed to functionality. You may quickly dismiss the value of an ugly and cracked pottery piece on the shelf, until someone told you that it was made 1,200 years ago for a historically significant event. The pottery itself did not functionally or aesthetically become more valuable, but its perceived value immediately went up due to the principles of scarcity.

  Up to this point, you may have observed that the high-price principle within Core Drive 6 works powerfully for luxury items that serve little functional purpose such as jewelry, or expensive services that provide essential expertise. Surprisingly, it also works with everyday functional items.

  Just a week prior to writing this chapter, upon realizing my knee pains were getting worse, I decided to visit a sports utility store. I wanted pick up some knee braces for hiking or when I’m walking up and down the stairs during phone meetings. When I entered the store, I saw that there were two types of braces, one for $24.99 one another for $49.99.

  I thought to myself, “Well, my knees are very important to me. I better not spare a few extra bucks and end up with busted knees down the road.” As an extension to this thought, I reached out for a pair of $49.99 braces and bought them.

  It didn’t occur to me until writing this chapter and searching for examples, that I automatically assumed that the more expensive knee braces were better than the cheaper ones. I didn’t even bother to carefully read the product descriptions. If you were to ask me how the $49.99 one was better than the $24.99 one, I wouldn’t be able to give you an answer. I would likely say something along the lines of, “Well, the $49.99 one is more expensive, so I’m sure it offers better protection for my knees or feels more comfortable. Probably both.”

  This was very powerful because, in my head, I was not thinking about the actual differences between the two knee braces. I was simply thinking whether I wanted to, “save money and get lower quality,” or “not skimp and invest in quality goods for my long-term health.”

  Daniel Kahneman, author of Thinking: Fast and Slow, refers to our brain’s neocortex as our “System 2,” which broadly controls our conscious thinking168). Since the processing capa
bilities of our brain’s neocortex are limited, we regularly rely on mental shortcuts, known as heuristics, without noticing them. In this situation, the mental shortcut was that “expensive equals quality” when it may not have necessarily been the case.

  Another mental shortcut can be, “The Expert said it with confidence - I will assume it to be true without looking too deeply into it.” Sometimes people let pass some obvious blunders and oversights simply because the authoritative expert or scientist said so. They let their “System 2” become lazy and simply become motivated by Core Drive 5: Social Influence & Relatedness.

  Perhaps I am alone in my silliness and financial irresponsibility in buying knee braces simply because they were more expensive. But the chances are, at some point in your life you have also taken mental shortcuts based on assumptions that may not always hold true. Perhaps you have purchased a bottle of wine or detergents based on very little information other than the price, and disdained some selections simply because the merchant labeled it at a low price.

  Game Techniques within Scarcity & Impatience

  You have learned more about the motivational and psychological nature of Core Drive 6: Scarcity & Impatience. To make it more actionable, I’ve included some Game Techniques below that heavily utilize this Core Drive to engage users.

  Dangling (Game Technique #44) and Anchored Juxtaposition (Game Technique #69)

  Many social and mobile games utilize game design techniques within Core Drive 6: Scarcity & Impatience to heavily monetize on their users. One of the more popular combinations among games are what I call Anchored Juxtaposition (Game Technique #69) and Dangling (Game Technique #44).

  For instance, when you go on Farmville, you initially may think, “This game is somewhat fun, but I would never pay real money for a stupid game like this.” Then Farmville deploys their Dangling techniques and regularly shows you an appealing mansion that you want but can’t have. The first few times, you just dismiss it, as you inherently know it wouldn’t be resource-efficient to get it. But eventually you start to develop some desire for the mansion that’s constantly being dangled there.

  With some curiosity now compelling you, a little research shows that the game requires 20 more hours of play before you can afford to get the mansion. Wow, that’s a lot of farming! But then, you see that you could just spend $5.00 and get that mansion immediately. “$5 to save 20 hours of my time? That’s a no-brainer!” Now the user is no longer paying $5 to buy some pixels on their screen. They are spending $5 to save their time, which becomes a phenomenal deal. Can you see how game design can influence people’s sense of value by alternating between time and money?

  The humorous part about this phenomenon is that most of these games can be played for free, and yet people are spending money, just so they could play less of the game. In this sense, it is hard to determine if the game itself is truly considered “enjoyable” or “fun.” As opposed to Core Drive 3: Empowerment of Creativity & Feedback, this Black Hat Left Brain Core Drive is more about being persuasive and obsessive, but users don’t necessarily enjoy the process.

  An important factor to consider when using the Dangling technique is the pathway to obtaining the reward. You have to allow the user to know that it’s very challenging to get the reward, but not impossible. If it is perceived as impossible, then people turn on their Core Drive 8: Loss & Avoidance modes and go into self-denial. “It’s probably for losers anyway.”

  For example, if the banner of an exclusive club is dangled in front of you, but you find out that the prerequisite to join is that you must be a Prince or Princess through royal blood, you might not even look at what the organization does. Instead, you may think, “Who cares about a bunch of stuck up, spoiled brats.” Because there is no chance of qualifying, it activates Core Drive 8 as an Anti Core Drive – the drive to not execute the Desired Action.

  However, if the banner said, “Joining Prerequisite: Prince/Princess by royal blood, OR individuals who have previously ran a marathon.” Now you are motivated, and might even ponder the effort required to run a marathon. As long as there is a realistic chance to get in, the Scarcity through exclusivity is enough to engage you. Interestingly, at this point you still haven’t even determined what the organization actually does! Without any information on its actual function, the human-focused motivation of scarcity is compelling enough for you to consider running a marathon.

  This leads to a game technique I call Anchored Juxtaposition. With this technique, you place two options side by side: one that costs money, the other requiring a great amount of effort in accomplishing the Desired Actions which will benefit the system.

  For example, a site could give you two options for obtaining a certain reward: a) Pay $20 right now, or b) complete a ridiculous number of Desired Actions. The Desired Actions could be in the form of “Invite your friends,” ‘Upload photos,” and/or “stay on the site for 30 days in a row.”

  In this scenario, you will find that many users will irrationally choose to complete the Desired Actions. You’ll see users slaving away for dozens, even hundreds of hours, just so they can save the $20 to reach their goal. At one point, many of them will realize that it’s a lot of time and work. At that moment, the $20 investment becomes more appealing and they end up purchasing it anyway. Now your users have done both: paid you money, and committed a great deal of Desired Actions.

  It is worth remembering that rewards can be physical, emotional, or intellectual. Rewards don’t have to be financial nor do they need to come in the form of badges - people hardly pay for those. In fact, based on Core Drive 3: Empowerment of Creativity & Feedback principles, the most effective rewards are often Boosters that allow the user to go back into the ecosystem and play more effectively, creating a streamlined activity loop in the process.

  With Anchored Juxtapositions, you must have two options for the user. If you simply put a price on the reward and say, “Pay now, or go away,” many users will go back into a Core Drive 8 denial mode and think, “I’m never gonna pay those greedy bastards a single dollar!” - and then leave. Conversely, if you just put on your site, “Hey! Please do all these Desired Actions, such as invite your friends and complete your profile!” users won’t be motivated to take the actions because they clearly recognize it as being beneficial for the system, but not for themselves.

  Only when you put those two options together - hence Juxtaposition, do people become more open to both options, and often commit to doing both consecutively as time goes by. But does this work in the real world, outside of games? You bet.

  Dropbox is a File Hosting Service based in San Francisco that has obtained extraordinary popularity and success. When you first sign-up to Dropbox, it tells you that you could either a) pay to get a lot of storage space, or b) invite your friends to get more space. In the beginning, most people started with inviting their friends.

  Eventually, many of those users who are completing the Desired Actions decide that inviting/harassing their friends is a lot of work, but they still need a lot of storage space, so they end up becoming paying users (just like I did). Again, because of the Anchored Juxtaposition, users commit both the Desired Action, and pay for the full product.

  Dropbox’s viral design, along with a great seamless product design, accelerated the company’s growth to a point where it reportedly raised over $300 million, with a valuation of around $10 billion and revenues above $200 million in 2013. Not too shabby for a company that didn’t exist seven years prior to that.

  Magnetic Caps (Game Technique#68)

  Magnetic Caps are limitations placed on how many times a user can commit certain Desired Actions, which then stimulates more motivation to commit them.

  When I consult with my clients, I often remind them that they should rarely create a feeling of abundance. The feeling of abundance does not motivate our brains. Scarcity, on the other hand, is incredibly motivating towards our actions. Even if the user committed the ultimate Desired Action by paying a lot of mon
ey, a persuasive system designer should only give people a temporary sense of abundance. After a few weeks or months, the feeling of scarcity should crawl back again with new targets for the user to obtain - perhaps after they have used up all of their virtual currencies and needing to purchase their next batch.

  A great system designer should always control the flow of scarcity, and make sure everyone in the system is still striving for a goal that is difficult, but not impossible, to attain. Failure to do so would cause a gratifying system to implode with users abandoning it for better grounds.

  This plugs nicely into Mihaly Csikszentmihalyi’s Flow Theory169, where the difficulty of the challenge must increase along with the skill set of the user. Too much challenge leads to anxiety. Too little challenge leads to boredom.

  There have been many interesting studies showing that by simply placing a limit on something, people’s interest in it will increase. If you introduce a feature that can be used as much as people want, often few will actually use it. But once you place a use limit on the feature, more often than not, you will find people enthusiastically taking advantage of the opportunity.

  In Brian Wansink’s book Mindless Eating: Why We Eat More Than We Think, he describes that when a grocery store just displays a promotional sign that says, “No Limit Per Person,” people often just buy a few of the promoted item170. However, if the sign were to say, “Limit 12 Per Person,” people will start to buy more – in fact, 30% - 105% more, depending on other variables. That’s another odd characteristic of scarcity: by drawing limits, we’re drawn towards the limit.