How to create a product or a service that can become so essential and form a habit in the life of the customer?, To put it in business terms, how does one achieve minimum churn for one’s service or subscription model? This question is the focal point of Nir Eyal’s book Hooked: How to Build Habit-Forming Products.
Using his background in the video gaming industry, Eyal developed a four-step circular model for getting customers “hooked” on a product:
Eyal starts his book with the description of how strong user habits can be cultivated. Modern IT- systems and cloud-based technology facilitates the forming of habits by means of a convergence of data, access to the data and speed of said access.
The key objective for a business is to come up with products or services that fall into the so-called Habit Zone, characterized by a high usage rate as well as high perceived utility from using the product. Some products or services can be thought of as “pain killers”. However, as the usage rate increases and the habit forms, the product may become a “vitamin pill”, thus enabling the manufacturer or service provider to raise prices.
According to the “hooked” model, the first step is to develop the so-called “trigger”. There are two types of triggers, external and internal, both intended to lead the customer to take action. External triggers – advertising, e-mails, and relationships – are those which contain information the customer intakes and registers. Later, internal triggers, manifested as emotions, take over and help form the desired habits.
The second step is to move from the trigger towards the desired action. Here, Eyal uses a behavioral model which represents Desired Behavior as the function of Motivation, Ability, and strength of Trigger, or B = MAT. The likelihood of desired actions taking place can thus be increased by attempting to reinforce any of the other three factors.
Variable rewards are then the extent to which potential customers feel that they benefit from a given action. There are three types of variable rewards:
Tribe – which has to do with whether a customer feels that he/she is benefiting from connectedness with other individuals, typically other users.
Hunt – which implies that the customer will get material resources and/or information.
Self – which has to do with how an individual gets satisfaction from mastering, added competence and/or seeing the completion of a given task.
The final step in the “hooked” model has to do with investing in a product by making regular use of it, thus increasing the anticipated rewards in the future. It is important to try to ensure that this investment follows a similar pattern as the past behavior. If, however, the pattern of past behavior is not followed or is broken, new habits should be amended.
After describing the steps, the author then discusses how one can use the “hooked” model and offers what he calls a “manipulation matrix”. The matrix helps analyze customer behavior with two questions:
Does the product materially improve the user’s life or not?
Does the producer use the product him/herself or not?
Based on the above, four archetypes of products are identified:
“Facilitator” products. These products are used by the producer and improve the users’ life. This type of product is the most likely to reap benefits from the hooked model approach.
“Peddler” products, where the producer does not use the product him/herself, but the product instead delivers positive benefits to the user. This is the second-most favorable archetype.
“Entertainer” products, where there is no benefit to the user, but the product is nevertheless used by the producer. Products of this archetype benefit much less from the hooked model.
“Dealer” products are the least attractive, as they bring no benefits to and are not used to the producer.
Finally, Eyal offers two case studies which illustrate how the hooked model seems to be working. In the book’s final chapter, he discusses various aspects of consumers’ habit testing. Three recommendations are given:
Identify how people are using a given product.
Isolate users who are driven by strong usage habits.
Modify the given product so that more users might be converted into developing strong usage habits.
Eyal’s book raises conflicting emotions in me as a reviewer. On the one hand, it is revealing to get exposed to how products might be designed to allow for stronger consumer habit forming, and to how one can effectively “hook” a customer. On the other hand, there is perhaps a fine line between a genuine effort to come up with better products and manipulating customers. Are we seeing examples of such devious manipulations? For a detailed discussion of this dilemma, please see my review of Brad Smith and Carol Ann Browne’s book, Tools and Weapons.
But despite the reservations above, the book clearly has important messages to offer. With the dramatic proliferation of the subscription-based service business models, developing products with reduced churn propensity is more important than ever.
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