Kedar Parikh, Product Head, Netcore Cloud, caught up with Nir Eyal, behavioral design expert and author of ‘Hooked’ on “How to Build Habit-Forming Products” Martech Mashup 3.0du. The fireside chat focused on the patterns behind habit-forming technologies, and strategies companies should adopt to build addictive products.
Kedar: “You can buy growth, but not engagement.” That is profound, something to keep in mind for all of us. What if there’s a habit you want to develop with a customer and your competition has the same habit. What do you do then?
Nir: If you have a habit, well, lucky for you! But if you don’t have the habit and your competition does, you have a big problem because habits are a huge competitive advantage. As Warren Buffett says, it’s a competitive moat around your business.
Kedar: What do you do if somebody else has your consumers’ habit? What are the habit-forming hooks?
Nir: There are four things that you can do. Number one, you can increase the frequency of use. Whenever there’s a product that is used more frequently throughout the day, that’s when there’s an opportunity to recapture or capture the competition’s customer habits. It typically happens when there’s an interface change, and every time this happens, it necessitates a new opportunity for people to interact with technology more frequently than the incumbents.
For example, Facebook had to buy Instagram because it was founded before the iPhone and the App Store. It was built as a web-first site back in 2006. Instagram was founded after the iPhone, it was mobile-first, and Mark Zuckerberg astutely recognized that people check their phones way more often than their laptops and computers. So, frequency of use is a way to capture the competition’s habit. That’s why Zuckerberg had to buy Instagram. He bought it for a billion dollars. Today, it would be worth about $50 billion, if not more. It was the deal of the century, and he got a steal. Even though I remember when he bought Instagram, everybody laughed at him and thought, “Oh my God, a billion dollars for this stupid mobile app.” He understood the power of habits and that Instagram was a competitive threat to the Facebook scrolling habit. So, that’s number one, greater frequency of use.
The second opportunity is greater velocity of use. Frequency is how often in the day, while velocity is how quickly someone can go through the hook. This typically happens when there is an innovation in the action phase, when you can make a behavior dramatically easier by simplifying the steps and helping people go through those four steps of trigger action, and reward investment quicker than your competition.
The third opportunity is to make the reward more rewarding. This one is the hardest of the four to pull off because a Harvard Business Review study has found that to get someone to escape the habit that they’re currently using, the product can’t just be better. It must be nine times better, according to a study done on enterprise products. It’s tough to get someone to switch even if the product is not as good as the new guy; it must be way better.
Finally, the fourth way is to make it easier to enter the hook in the first place. A good example here is Microsoft Office, which was the number one enterprise software in the world 15 years ago. Today, it’s Google Docs. Microsoft lost to Google Docs because you had to pay money and buy a disc to get Office when this shift happened. Then Google Docs comes along, and it’s all free. It’s all in the cloud. If you are a college student who wants to write a term paper or an entrepreneur who wants to use a spreadsheet, it was way easier to get into the Google Docs hook in the first place than to buy Office.
Kedar: Make the reward more rewarding- this is not easy!
Nir: It happens, but it’s rare.
Kedar: What do you do if your product or service, by its very nature, is not habit-forming, which means the frequency of purchase or interaction is not frequent enough. Let’s take insurance, or maybe a better example could be travel, before COVID.
Nir: This is a common concern. A hook is a user experience that connects the user’s problem to your product with enough frequency to form a habit. The minimum bar seems to be about a week or less. If your user is not interacting with your product within a week or less, you have a problem. There are some exceptions, but by and large, it is tough to change a consumer’s behavior if it does not occur within a week or less—the more frequent, the better.
Part of the reason that social media, for example, is so habit-forming is that people are checking their home screen 150 times per day on average. More frequent is always better from a habit formation perspective. But what if you have a product like you ask that it’s just not used frequently?
Ways to trigger user actions
Travel is an outstanding category. So is insurance. Buying a trip will never be a habit. I see this all the time in e-commerce. People come to me, and they say, “we want to make buying a habit.” E-commerce companies are so committed to getting people to check out that they forget how to get people to check in. That’s the opportunity. Don’t make buying the habit. Buying, by definition, is not something people do with little or no conscious thought. We don’t spend money out of habit. Don’t even try to make it a habit.
What you can do is attach the three C’s – content, community, and conversation. If you can find a way to bolt on more frequently occurring behaviors like a content habit, where a community of people is consuming exciting content you’re producing, something people can engage with every day. And then, finally, a conversation. If there is one-on-one dialogue, they’re engaging in with your company, that’s an opportunity too.
These are three things that we would want to bolt on to non-habit-forming products so that the result of engagement is monetization. Let me say that again. Monetization is a result of engagement. If we can get people to engage, eventually, they monetize. It doesn’t matter if you’re selling kitchen knives or whatever you’re selling.
Kedar: Many travel apps invest heavily in content around travel so that when you start planning your next trip and hit that button, this is the app that comes to your mind first.
Nir: Exactly. Maybe people go on vacation once a year or every five years. However, they dream about vacation every day, and some people enjoy flipping through content and imagining how great it would be if they could go to some luxurious location, what they would eat, where they would stay, and where they might fly. If you are the company that can provide them with that content habit, where are they going to go when it’s time to buy? They go to you. Monetization is a result of engagement, not the other way around.
Kedar: At what stage of product building across different phases should product managers or entrepreneurs think about the hook model?Nir: The hook model is helpful in two stages. It’s super helpful in the early days before any code has been committed or designers are hired. For example, if you have a new idea for a mobile app and sit down and figure out the hook, you will save yourself so much pain, time, and money.
External and internal triggers
It’s useful as a diagnostic tool. If you look at your app, and for whatever reason, people aren’t coming back to it the way you wish they would, or if you have a low percentage of habituated users, ask yourself where your product is deficient, what’s missing. By the way, many Netcore products can help you improve your hook. Particularly in the investment phase, where you and Netcore do particularly well, is by finding ways to improve that hook by understanding – do we send a clear external trigger, is the action too difficult, is the reward rewarding, and do we have investments that increase the likelihood of the next pass, through the hook.
Kedar: Southeast Asia is a mobile-first market. How should product managers think when developing a new product or solving a problem that’s meant for this geography?
Nir: The rules don’t change. The book was published back in 2014, and it’s been a few years now. I’m constantly looking for how to improve the model. I primarily studied the US market because I was in Silicon Valley at the time. Today, I’m in Singapore, but I try to look for cultural differences, and I’m happy to say that there are none. There’s no difference in terms of the four basic steps of the hook. What does change from culture to culture, between sexes, or even between people and individuals is rewarding. What might be rewarding to one person is not going to be rewarding to another. In India, people might find cricket very rewarding and interesting, but very few people watch cricket in America. They watch American football, which might not be as popular in India. People have different preferences and tastes that will undoubtedly change. However, the overarching category of variable reward, which makes cricket fun to watch, is the same thing that makes American football fun – variability. We want to see where the ball is going to go. That’s what it’s all about.
Kedar: Besides notifications and emails, what are some great ways to place external triggers? Nir: There are many different kinds of external triggers. You can do owned triggers that you have the right to send somebody. You can do paid triggers where you do advertising. The important thing is to understand what makes for a great external trigger and what makes for a terrible one. The difference between an external trigger that feels like magic and one that feels like spam is one word. That word is context.
I’ll tell you a quick anecdote. Before COVID, I was on a long-haul flight, and I was on the aisle seat seated across a gentleman who was asleep. The flight attendant comes down the aisle, turns to him, and says, “Sir.” He does not hear, so she says it louder for the second time. He doesn’t wake up. Everybody’s looking around like, “Why does she want to wake him up?” She says it for the third time, “Sir.” He wakes up and says, “What is it?” She says, “Sir, what would you like to drink?”
It is such a great example of what we, as product designers, do to our users all the time. Did he want a drink? Yes, but not right now when he’s sleeping. He wants to drink when he is thirsty, but she interrupts him when convenient for her. We do this all the time. We send our users pings, dings, and notifications when it’s suitable for us, without considering when it serves the needs of our users.
When will it serve the needs of our users? The answer is when we can closely couple the external trigger with the internal trigger. Whatever the internal trigger, be it boredom, loneliness, fatigue, hunger, or thirst, when you can make it as close as possible to the time and place, people are likely to feel that internal trigger and respond to your external trigger. That’s when they will start forming that habit, as opposed to sending it whenever you feel like it.
Kedar: Great answer and a great example. Thanks a lot. I think this was absolutely engaging.We hope you found the conversation insightful. Check out the other sessions from Martech Mashup 3.0 here.