How to Build Habit-Forming Products?

Alparslan Kapani
Sep 5, 2018 · 7 min read

In this article, I’d like to point out one of the most important differentiation tactics in marketing and yet mainly forgotten. Customer Psychology.

When you establish a habit forming product, you gain a higher Customer Lifetime Value, Price Flexibility and cheaper Leads due to word of mouth effect.

In today’s market conditions, it is almost impossible to say that you have no competition.

For new entrants, it’s very difficult to change a customer’s former habit. Which means to stop using the product/service she has been using and to change it for yours. This needs trust between parties, cognitive effort from customers to learn your product, overcome ambiguity and a much better solution to a problem.

So, where do we start?

To build a habit, two basic elements are important. Perceived Utility and Frequency.

All humans have instincts that have evolved in hundreds of thousands of years. Like survival. For habit forming products, Nir Eyal the author of the bestseller book called Hooked describes it in four stages. Trigger, Action, Variable Reward and Investment. Lets examine this in a quick view.

1. Trigger:

Building a habit is not an instant process. It’s like planting a seed and looking after carefully to become a tree. But first you need to put a seed which we can interpret as Trigger.

Triggers can be external or internal. External ones are necessary for initial awareness (through paid ads, word of mouth, PR or so). They have to be a life span and need to give their duty for the internal triggers in order to create first bonds with your customers.

For internal triggers, you need to find people’s emotional pain and address it in a way that attaches them to your product. Best way is to put yourself into your users’ shoes. Creating user stories is a good place to start.

After understanding your customers negative and positive emotions, it’s important to design a great user experience into your product that directs users clearly and easily for the desired action.

2. Action:

Taking an action is best described scientifically by Fogg’s Behavioral Model equation.

We want our users to pass the right side of the Action Line. But first we need to have enough motivation.

Even though human-beings are quite complicated, still majority of our drives come from basic instincts, such as avoiding fear, seeking pleasure, social acceptance, recognition and so. These needs are best described in Maslow’s Triangle of needs:

If you examine some of the well-known brand commercials, you can easily find those pieces:

There are also some proven mental methods to effect our motivation.

- The Scarcity Effect: E-commerce sites sometimes use this method. (Airlines stating last 5 seats at the lower price, car dealers placing a “sold” tag even after somebody buys it, or a good time scarcity example “only today additional 10% sale is available!)

- Framing Effect: We interpret and react to things differently, the way that they’re portrayed to us.

You can frame half full glass of water as half empty or half-full.

Politicians use this method a lot. As an example:

Our export growth rate increases 30% as opposed to last year. But they probably won’t mention if import rate has increased 60%.

- The Progress Effect: Loyalty punch cards are a good example for this method. What would happen if retailers handed customers punch cards with some punches already given? That would probably motivate to complete the desired action. Right?

Lets assume we understand our customers’ emotional pain and decorate it with a right motivation. This is still not enough if the desired action is hard to take and is complicated.

As stated in the Fogg’s Behavior Model after Motivation comes the Ability.

Think about a website without a CTA(called-to-action) button. Even if you have enough motivation to take an action, without a CTA it’s practically impossible to do so.

In order to achieve Ability, simplicity is important. If you have hard to find and long forms that are required then motivation needs to be higher.

Fogg describes simplicity in six elements:

- Time: How long it takes to complete an action

- Money: Cost of an action

- Physical Effort: Amount of work involved

- Brain Cycles: The level of mental effort

- Social Deviance: How accepted the behavior is by others

- Non-Routine: How much the action matches to the existing routines(if any).

3. Variable Reward:

Rewards reinforce the stimuli to take an action. Actually, studies revealed that what draws us to act is not the sensation we receive from the reward itself, but the need to alleviate the craving for that reward.

Unfortunately, once we predict the experience, we’re getting less excited about it. However, when a break occurs in the usual cause and effect pattern, we become excited again. Gaming companies, movie studios excel it perfectly.

Randomness, variability of the reward system keeps customers using the product longer. If the reward system is predictable and finite then engagement with your product most probably is also finite. There are three variable reward types according to Nir Eyal.

a. The Tribe:

Our brains are adopted to seek rewards that make us feel accepted, attractive, important and included.

It’s not a surprise that social media has exploded in popularity.

Facebook has been mastered in this art. When you post something to Facebook you do not know what kind of comments you’ll get and how many likes whom you’ll receive from. Same as your Facebook Wall. Every time you open it, you will find different posts. The uncertainty keeps you coming back.

b. Rewards of the Hunt:

To acquire objects has been hardcoded in our DNA’s since the beginning of our evolution. Hunting animals for food has been evolved into money, information…

c.Reward of the Self:

These are more personal forms of gratification. The satisfaction of successfully completing something, such as finishing a book, puzzle or a video game. The satisfaction increases more and more if the success comes in a harder way.

Recently, gamification becomes a hot topic, such as earning points, badges and leadership board rankings. But they play a role only if they scratch a user’s itch. When there is a mismatch between the customer’s problem and companies’ perceived solution, then no amount of gamification will help spur the engagement.

One very successful example is the Q&A website Stackoverflow. Almost everybody involved in software development knows this website. A staggering five thousand answers to questions are generated per day by the site members. But why do so many people spend so much time doing all this work for free?

It’s because Stackoverflow identifies its members itching points well. Social recognition is a very powerful motivation for this kind of work.

Unfortunately, there is no one-size-fits-all solution.

4. Investment

We irrationally value our efforts. Small investments change our perception and the value of a product. Like Stackoverflow website, developers make investments by writing long technical answers. Even though social recognition is the driving force, small investments you make by writing, make you more attached.

Amazon Prime main success is also similar. By paying 99$ for a year membership to get a free two day shipping along with other benefits, you’re unconsciously making a small investment by paying in advance. You want to get repaid by increasing the number of shopping for your free two day shipping. As a result you increase your frequency to the website and form an habit.

Elon Musk’s Tesla Model 3 reservation system is another brilliant example. By paying 1.000$ in advance, customers make a small investment to the product and reserve it. This also increases the chance that the full amount is eventually paid by these customers when the production begins.

Investment to a product or an idea is very powerful because we want to be consistent with our past behaviors. We change our preferences to keep away from cognitive dissonance. Whether we realize it or not, our daily life is full of these kind of conflicts. One way to avoid this dissonance is by rationalization. We change our beliefs and attitudes to adapt psychologically. Rationalization helps us to give reasons to our behaviors, even when those reasons might have been designed by others. In fact, reality might be different.

As a conclusion, first you need to have a very good product that should solve one or more peculiar problem. Then understand your customers by talking, surveying, creating user stories… finally applying tactics that I’ve implied above to form a habit.

Wish you the best!

Alparslan Kapani

Consultant

Follow me on Linkedin

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