Gamification creates unique opportunities for small businesses to create innovative loyalty programs that are on par with large brands. 

For 200 years, enterprising small and medium businesses have been experimenting with loyalty programs. From the 1890s mercantile to the organic coffee shop in your neighborhood, the dominant thinking around small-business loyalty has been to offer buy ten, get one free.

This model has been so successful that over 90% of loyalty programs by sheer number are buy-ten-get-one. 

Simplicity rules the day in small business, and the punch card couldn’t be easier to produce and manage (VistaPrint will even give you cards for free). Consumers also immediately understand how the program works, and each stamp or punch is an opportunity to reinforce the store’s message. 

But while a 10:1 program is easy and cheap to both implement and manage, small businesses leave a lot of opportunity on the table when they issue punch cards.

Unlike the large-scale airline, hotel, credit card or merchant loyalty programs they emulate, small business loyalty often lacks the critical engagement rewards that users value so highly: a set of benefits I call SAPS: Status, Access, Power and Stuff. 

Of course, punch card programs have the free Stuff, but Status (hierarchy markers), Access (rewards they otherwise could not get) and Power (control over others) are stickier benefits that not only cost a fraction of what free stuff does.  

As an example, while airlines can offer users access to priority lanes, lounges and better call centers, at minimal incremental cost, a cafe has historically had more limited options. Until now. 

With the advent of Gamification, or the use of game thinking & mechanics to engage audiences, an exciting crop of new techniques and services have emerged that level the playing field for small business.

For the first time the cafe, auto-parts shop and small restaurant chain, can deliver engaging loyalty programs that rival the big guys. While loyalty programs still don’t come cheap, they certainly are a lot easier than ever before.

Here are a few great Gamification “hacks” that marketers of all sizes can use.

Foursquare has pioneered the small business loyalty program, offering individual shops a simple way to identify and reward their most frequent visitors. This is accomplished by signing up as a Foursquare merchant partner, and for a small fee they will let you present offers to your “mayor” (most frequent checked-in user) and others who appear regularly.

While this kind of program is gamified and more fun than a punch card, it’s limited in scope and reach (there can only be one mayor), still mostly gives away free stuff, and is limited to the Foursquare crowd. Yelp offers a similar solution to partners, and Facebook places/deals is likely to follow suit.

MyTown, which runs a mobile social network similar to Foursquare (but more fun), also partners with merchants to produce a more sophisticated mobile social loyalty program.

In MyTown, users can earn points (and merchandise) by checking in just like Foursquare, but they also offer a challenges system that can encourage and reward users for completing real-world tasks.

For example, in the Taco John example below, consumers are rewarded with bonus points for taking a photo of themselves with their breakfast and posting it to Facebook or flickr. This challenge-based approach is a lot more fun, changing regularly to create interest and alignment with business objectives through targeted campaigns. 

If you’ve been exploring Gamification’s core principles for your business at a workshop or online master class, and it has your creative juices flowing, why not roll your own customer-facing solution?

Companies like BigDoor, Badgeville and BunchBall offer fully customizable gamified loyalty-style programs that can be adapted to suit any need and include the SAPS concepts I described earlier.

They will be less “just add water” than Foursquare, Yelp or MyTown, but the extra power and flexibility can be a huge bonus if you have product-market clarity. While their solutions are not as cheap in the short term as the other options, in the long term, this may pay substantial benefits as you retain full customer ownership. 

Once implemented, a gamified loyalty program will help you learn more about your customers,both in terms of contact information and buying behavior. You will be better able to target campaigns and product/service offerings, drive viral customer growth (punch cards rarely bring in new users) and you can drive down the incremental cost of customer loyalty by using non-stuff rewards.

But in order to take advantage of the possibilities, you’ll need to embrace the promise of Gamification and leverage the amazing world of mobile, social rewards. 

No matter what option you choose, the era of the punch-card loyalty program is likely coming to an end. Although these little cards are simple, cheap and easy to administer, consumers increasingly expect more engaging interactions, small businesses want more customer info and touch points, and the Gamification technology and services to make this happen are cheap, flexible and ubiquitous.

No longer the province of the big guys, sophisticated, engaging and fun loyalty will soon be part of every consumer interaction. Are you ready?