Nir Eyal

The “investment” is something you build into the product to make it better with use, and load the next external trigger. Habit forming products appreciate and get better and better as you use them, so you have to find a way to make the product better with use (“stored value”).

If you’re looking at a two-sided marketplace, there might be one side where it does make sense to apply the habit-forming model. Example with Airbnb for owners: hook is uncertainty about who wants the property, action is opening the app/website, the reward is seeing what is the message (how much they’re willing to pay, etc.) and the investment is how much you invest on your Airbnb platform (changing listing, responding to customers, etc.).

Not every product has to be habit forming. The line of demarcation is not enterprise vs. consumer, it’s frequent vs. infrequent: if your product is not used frequently, you don’t need to form a habit in the product.

It’s crucial to know what the internal trigger is. You need to understand the psychological itch, the uncomfortable emotional state that gets people to come back to your product.

Gamification works if the internal trigger is boredom. It tends not to work because it tends to serve chocolate-covered broccoli: something we think people should eat, covered with something people love.

You can always buy growth, but you can’t buy engagement. You must design it, it must be build into the product.

You have to first understand what the internal trigger is for your users to form the habit, then craft the variable reward that scratches the user’s itch. Examples: boredom -> entertain; loneliness -> connect people together; stress/anxiety -> insurance.

The most important thing to realize is that at an early stage, engagement is more important than growth. If you don’t nail engagement first, it will die down.

If your product is not used frequently enough to build a habit, you can bolt on a habit-forming mechanism on top of the experience. This is done with content or community.

We think about the viral coefficient needing to be > 1, but we do not think about the viral cycle time (VCT): the amount of time that elapses between one person sharing your product to one person or more. If that time is longer than it takes people to churn, then you’re losing users.

4 ways to capture the competition’s customer habits:

1. Greater velocity through the hook: you need to find a way to go through trigger -> action -> reward -> investment quicker

2. Increasing frequency through a change in interface (e.g. wearables, Alexa, etc.)

3. Making the reward more rewarding (i.e. scratching the user’s itch better, which requires a 9x product)

4. Making it easier to get people into the hook (e.g. Microsoft Office vs. Google Docs at the time)

If you can’t tell where people currently go to solve the problem, it probably means it’s not a problem.