How To Create Winning Products

How do successful companies create products that people can't put down? Hooked (2014) was one of the first startup books I read and dives into the psychology of habit formation as applied to product.

How To Create Winning Products

How do successful companies create products that people can't put down? Hooked (2014) was one of the first startup books I read and dives into the psychology of habit formation as applied to product. Author Nir Eyal breaks down how to subtly encourage customer behaviour through product design using a four-step process he calls the Hook model. Hooked offers anecdotes and scientific studies to practically outline how companies can make their-products habit-forming while also being wary of the ethical issues behind using habit-forming techniques. It is a great entry-level, accessible read for anyone interested in human behaviour and habit formation.

“Companies that successfully change behaviors present users with an implicit choice between their old way of doing things and a new, more convenient way to fulfill existing needs.” – Nir Eyal

About Nir Eyal

Nir Eyal is a writer and consultant who has advised businesses on designing successful products. Nir has founded and sold two companies since 2003. He taught at the Stanford Graduate School of Business and the Hasso Plattner Institute of Design. Nir runs a popular blog called NirAndFar.com and frequently writes articles for The Harvard Business Review and Psychology Today.

It’s Difficult to Change Established Habits

Our habits are challenging to change permanently they are what make it so difficult to quit smoking or stick to a new year’s resolution.

The neural pathways of the old habit remain in our brains and are ready to be easily reactivated. For example, ⅔ of alcoholics are drinking again within a year of a detox program.

The more you repeat a behavior, the stronger the neural pathways formed in your brain will be. Without repetition, the habit you are seeking to adopt has to have massive value for you. One habit which isn’t frequent but still occurs due to its great value is our use of the retailer Amazon. Although we don’t use Amazon every day, it is still a habit to shop from Amazon despite other online stores existing. Amazon’s direct price comparison of multiple items is so useful that we all make a habit of shopping there, even if it is infrequent and, combined with the Buy Now instant purchase button and Prime Next Day Delivery customers receive a near instant reward in the form of their purchased item. Back in 1999 when building Amazon Jeff Bezos is quoted in an interview as highlighting Amazon as a company focused on distribution and customer experience over being a dotcom "internet" business.

Create Products That Are Habit-Forming

The most successful businesses and products in the world are those that are habit-forming.

Nir outlines some of the advantages of selling habit-forming products:

  • They attract long-term customers. As habits are challenging to get rid of, your customers are likely to become repeat customers. These customers are of greater value based on the total cash flow or life-time value they will produce.
  • Habit-forming products have a strong competitive position. Once a customer has formed a habit around your product, a competing product will have to be significantly better than your product. Nir uses the example of QWERTY keyboards to showcase this point. Although many more intuitive and effective keyboard layouts have been introduced, people still prefer using the QWERTY layout. This isn’t because this layout is better; it is just because they now have a habit of typing on this layout.
  • Habit-forming products have greater price flexibility. When customers have a habit of using your product, they develop a dependency. Online games that start as free-to-play are a good example of this and enforce the importance of trial periods and getting users to value quickly. Games like Fortnite and mobile apps with free game modes and in-app purchases are examples of this.

The Four-Staged Hook Model

The Hook Model consists of four steps which have to be repeated continuously to form a habit. Habits occur when a user's internal trigger or compulsion leads them to perform the action autonomously without any external nudges.

1. The Trigger – There needs to be an external event that encourages a consumer to use your product for the first time. A common trigger is an engaging TV commercial or email CTA. Eventually these are replaced by internal compulsions as habits form.

2. The Action – The action relates to what has to be done for the consumer to use the product. For example, ordering a subscription or joining an online community, this should be quick, easy and accessible.

3. The (Variable) Reward – The user should then obtain fulfillment when engaging with your product. This should align or exceed what was promised by the trigger event and should be variable to build anticipation as seen in loot boxes.

4. The Investment – The consumer must invest something of value to use your product. This might be time, money, personal data, or information. They essentially must buy in and attribute value and make a commitment before returning through the cycle.

After the final step, the consumer is led back to the start of the cycle. The four steps are then repeated over and over until a habit starts to form. The consumer will start to develop their unique internal triggers instead of external ones. These consumers will then have an impulse to use your product without the need for external influences.

Consumers’ internal triggers will continue to get stronger until their engagement with your product is no longer conscious. They do not even have to think about using your product. Instead, they will just do it. At this point, the cycle has become an unstoppable chain reaction that will be extremely difficult to change.

This model outlines an interesting feature of how our long-term behaviors are formed. Most importantly, understanding these behaviors can help your business be successful. Let's take a look at each of the four stages in detail:

External Triggers

Habits require a spark to kickstart the cycle proposed by the Hook Model. The most common external triggers are call to action from advertisements, targeted or generic, and word of mouth from friends or family.

External triggers are necessary for products to become part of a consumer’s habits. Some businesses may adopt traditional advertising to try and access new customers. Paid advertising can be expensive and so creating virality from within your product will reduce costs. An example of this is adding friends to an app or sharing links to socials organically from apps like Spotify.

Nir explains that triggers can only be effective if they give the consumer a simple choice of actions to take. Consumers do not react well to overly-complicated external triggers. Therefore, it is unlikely that a consumer will engage with your product if you use complicated and confusing external triggers. Nir provides an example to explain this point. Imagine you want to join a social networking site, but the registration form takes an hour. This kind of obstacle will significantly reduce the likelihood that your product will be used, let alone become a habit. Therefore, a simple trigger should always be prioritized over a complex trigger.

Internal Triggers

The frequency at which we use a product over time is crucial for habit production. Companies cannot rely solely on external triggers pushing consumers to use their product consistently. This would be expensive and dependent on chance. Hence, internal triggers are a hugely important part of creating habit-backed products.

Nir explains that we usually use products to solve the problems that we have. More often than not, these problems relate to avoiding pain or seeking pleasure. For example, think about the reasons for us buying food, clothes, or smartphones. Each of these items provides us with pleasure: we enjoy the taste of food, enjoy wearing clothes that suit our personality, and smartphones provide us with entertainment and the opportunity to build communities. However, these items also help us avoid pain, such as hunger, coldness, and social disconnection.

The key to producing internal triggers is encouraging consumers to make a mental connection between your product and a desired solution. This desired solution should either be the avoidance of pain or the seeking of pleasure. Once this mental connection is formed, you have an internal trigger with a positive association, as the product helped solve a problem.

Nir explains that the most powerful internal triggers are negative emotions. We are more likely to seek out habitual problem-solving products when we are experiencing negative emotions. For example, many of us have internal triggers for social networks and smartphones. These triggers range from boredom to the stress of living in uncertainty. Subsequently, we build habits that help us forget about these emotions or change them into positive ones.

Internal triggers produce an impulse in consumers to use the product more and more often. However, internal triggers are only cues that encourage consumers to use your product. Motivation is still required to make a product a habit.

Every Product Needs a Motivation

A trigger alone is not sufficient to generate action in consumers. Nir explains that people only take action if three preconditions are met: A trigger, a motivation, and the capability.

The most accessible motivation that a company can attach to their product is ease of access and use. Nir recommends simplifying the steps needed to use your product. Utilize emotion-grabbing advertisements to increase the likelihood of customers using your product.

Utilize Variable Rewards

We cannot maintain motivation without delivering the results the customer expects. For users to use a product frequently, a foundation of habit-building, the product must work every time it is used and they must see value quickly.

Studies have shown that our craving for rewards causes a stronger emotional reaction than receiving the reward itself. Thus, anticipation is essential when trying to encourage consumers to form a habit out of your product. If the reward received is predictable, then customers won’t be as excited by the product. Therefore, you want consistent rewards of varying degrees. Variable rewarding is an approach often adopted by social media platforms. Twitter and Facebook present you with a combination of photos, videos, posts, and polls. While scrolling through these feeds, you can never predict what will come up next. This unpredictability is what brings customers back again and again to these social media platforms.

Finally, as well as providing variable rewards, these rewards should always relate to the user’s initial motivation to use the product. Nir provides the example of online question-and-answer forums to showcase this point. People usually start contributing to question-and-answer forums, like Quora, because they crave the reward of social recognition. When some sites attempted to offer them cash rewards, they found that these rewards were not effective. These rewards were no longer in line with the users’ original motivation.

Investment Encourages Habits

Customers can invest time, effort, money, or even personal data into your product. Research suggests that we place more value on things when we have invested.

Secondly, humans try to be consistent in their behaviors. Studies show that what we’ve done before tends to be a pretty good predictor of what we will do in the future. Hence, if we feel we’ve invested in a product by using it frequently, we’ll likely keep using it in the future.

Habit-Building Products Should Be Done Responsibly

This book is based around the idea of getting people hooked on a product. However, the first thing that comes to mind when the word hooked is used is addiction. Therefore, Nir emphasizes the importance of companies using the Hook Model responsibly. Irresponsible habit-building is merely manipulation.

Nir suggests that companies ask themselves two questions to identify whether they are habit-building responsibly or irresponsibly:

  • Does the product enhance the users’ lives?
  • Would the entrepreneur use the product themselves?

If the answer to both of these questions is no, then it is highly likely that your company is engaging in irresponsible habit-building.

Know Your Product and What Your Customer Wants

Every entrepreneur wants to create a product that people want to use over and over again. Having repeat customers is impressive and also brings economic benefits. However, to implement the Hook Model, you have to know your product and your customers.

Firstly, you need to ask yourself the question of whether your product should be habit-forming. Not all new products need to be habit-forming such as one-off purchases like life insurance.

Once you have decided to create a habit-forming product, you will need to analyze your customers’ needs, as well as the benefits your product offers. Understanding your customers’ needs is vital for adjusting the triggers and rewards you incorporate into your Hook Model.

If you have an existing product and wish to increase habitual use you should look at why your existing users are utilising your product and double down on the elements of the hooked model to increase usage and the hooked cycle.

Summary

Hooked is a great entry-level user psychology reference book for product managers, founders and anyone wishing to understand human behaviour. For more specific examples you might also wish to look at The Power of Habit and Seductive Interaction Design.