The Relationship Between Customer Engagement, Loyalty and Revenue-thumbnail

amp-talksEver wonder why people get addicted to certain web applications and not others? Nir Eyal, author of Hooked: How to Build Habit-Forming Products, says that our psychological need to connect with others is often what drives us to form habits around technology. Watch Nir explain the psychology behind habit-formation, and the four steps to getting customers hooked on your product in his Advocamp presentation.


Thanks everyone! A pleasure to be here. Today, I will be talking about habit-forming products.

About a year ago, I wrote this book, Hooked: How to Build Habit-Forming Products. Thanks to many of you in the room, the book became a Wall Street Journal Bestseller. The book was really about how these companies that we’ve all come to know and use over the past five-to-10 years created these habits out of thin air—the ones that make these very engaging products. Think about the consumer space, and products like Facebook, Twitter, Instagram, Pinterest, and WhatsApp. How did these companies, which kind of came out of nowhere, in the span of five to ten years, create these products that touch the lives of hundreds of millions—if not billions—of users? And they are making hundreds of millions if not billions of dollars?

What I want to do today is look at the patterns from some of these consumer web products to figure out what we can learn from them. And how can we apply some of these principles to the enterprise, and specifically the products that we use and build, for our customers? What lessons can we take away from these patterns?

Let’s start off with the definition of a habit just to make sure we’re all on the same page. The definition of a habit is this impulse to do a behavior with little or no conscious thought. About 40% of what you do day in and day out is done purely out of habit.

After a few years of research looking at these companies, trying to figure out what it was that made them so habit-forming, I discovered this model called ‘the hook.’ Inside the world’s most habit-forming products, you will find this pattern. The hook is an experience designed to connect the user’s problem to your solution with enough frequency to form a habit. Here are the four basic steps of these hooks: a trigger, an action, a reward, and an investment. It’s through successive cycles, through these hooks, that customer preferences are shaped, tastes are formed, and these habits take hold.

Let me walk you through this ‘hook’ model. The first step of any hook starts with a trigger.nir_eyal_advocamp_product_advocacy_hook_model

1. A trigger tells the user what to do next. There are external triggers—things in the user’s environment that tell you what to do next with some bit of information: a call to action, click here, buy now, tweet this, or a friend in the real world telling you about this great new product you should try out. These are all examples of external triggers. We all know about these external triggers, particularly in the advocacy community. We see these every single day.

But what I think we don’t consider enough—and what turns out to be absolutely critical when it comes to forming long-term habits—is the importance of forming associations with what we call internal triggers. Internal triggers are things that cue action. They tell us what to do just as reliably as those external triggers. But in the case of internal triggers, the information for what to do is stored as an association in the user’s mind. What we’re doing when we’re in a particular place, a certain situation, a certain routine, around certain people, and most frequently, when we experience certain emotions, dictates what we do next. It calls us to use these technologies frequently in our pockets with little or no conscious thought, out of habit.

The most frequent internal triggers are these emotions, but not just any emotion. Specifically, they are negative emotions. So what do we do when we’re feeling bored or lonesome or dissatisfied or fatigued or lost? When we experience these internal triggers, it prompts us to find relief with these products that we have in our pockets today. These smartphones, these apps, provide relief.

Some of the research that shows us this is the case comes from a study that found that people suffering from depression check email more. Now why would that be? It turns out that what the study found was that people suffering from clinical depression experience what psychologists call “negative valence state.” They feel down more frequently than the rest of the population. And so, what are they doing to boost their mood to get out of this valence state? They’re turning to their devices. They’re checking email more frequently than the rest of the population. And of course, if we’re honest with ourselves, we kind of all do this, don’t we?

What product do people go to? What app do we check when we’re feeling lonely? Facebook, of course. And what are we doing when we’re feeling unsure? Before we scan our brain to see if we know the answer, what do we do instantly? We Google it, right. And what about when we’re feeling bored between two and four o’clock in the afternoon? There’s that big project you don’t feel like working on right now, where do you go? You check YouTube, you check Reddit, you check sports scores, you check stock prices, you check fashion magazines or Pinterest–there are lots of solutions for this painful internal trigger of boredom. We don’t like that sensation, so we seek solutions. We seek a pain reliever to that negative state.

Now, let’s talk about in the workplace, in the enterprise. When we’re feeling anxious, what do we check? Email. And what about when we’re feeling indecisive and we’re not really sure what task we should be working on now, what do we do? We check… email. And what about when we’re feeling stressed? There’s that big looming project that we just have to get done? What do we do? We check… email. So maybe, the conclusion we need to come to is that it’s email that’s making us depressed in the first place.

And of course, this is the opportunity. What you’re seeing today at the enterprise is this new crop of enterprise habit-forming products. They’re taking this old need, these old internal triggers which have been with the human species ever since our species first evolved 200 million years ago—loneliness, seeking connection, boredom, stress—and they’re offering better, new solutions. And of course, we can do much better than just email.

So, let’s take a company like Slack. Slack is a great example of a very habit-forming product for the enterprise. Apparently, it’s the fastest-growing enterprise product in history. Let’s talk about for a minute why I think Slack is a habit-forming product.

First, let’s talk about Slack’s external triggers. When you’re using Slack, you’ve got all these external notifications, external triggers, in the interface itself with these little icons telling you something new is happening in the workplace. Somebody has posted something. And on the mobile interface as well, you see all these little red notifications that tell you, ‘Hey, check into Slack. See what’s going on. Somebody just posted something.’ Those are examples of external triggers.

What about Slack’s internal triggers? I think Slack’s internal trigger is workplace FOMO. Everybody know what FOMO is? Fear Of Missing Out. It’s actually in the Merriam Webster Dictionary this year. It’s a real word, FOMO. So, this is an age-old problem. People have this fear that they might be missing out on what’s going on in the workplace. It’s the proverbial water cooler. And so, by bringing that online in this safe space, now there’s a forum to scratch that itch, to see what’s happening, to make sure we’re up-to-date.

What’s interesting about many of these habit-forming products in the enterprise is not only do they cater well to these internal triggers, to scratch these itches that we all have throughout our day, but they also block out distraction really well. They create this wall from these other things that we used to do to scratch these itches. For example, if we used to go on email, Slack’s mission is to abolish email, right? An organization that’s using Slack doesn’t need to use email anymore. And part of what makes Slack so successful is that it’s the only app you should be using during working hours for an organization that’s on this platform. Today, you’re either on Slack or you’re slacking off, right? Because they built this wall around the product to keep out these other distractions.

After we figure out the user’s internal trigger, we use an external trigger to prompt them to action. The next step of the hook is the action phase. 

2. The action phase is described as the simplest behavior done in anticipation of a reward. Let me show you some examples of the action in some consumer products and consumer web products, and just how easy and effortless these actions are. What could be easier than scrolling on Pinterest? Just that scroll, or pushing the play button on YouTube. And it turns out that there’s actually a formula to help us predict these singular behaviors.

It comes to us from a researcher at Stanford by the name of B.J. Fogg. Fogg tells us that for any human behavior, online or offline, we need three things:

  1. M – Sufficient motivation.
  2. A – Sufficient ability. Ability is how easy or difficult something is to do.
  3. T – The trigger. 

I think it’s actually super useful when you’re asking yourself, “Why isn’t the user doing what I want them to do? Why isn’t this behavior happening? We’ve designed this beautiful website, this beautiful app, beautiful experience. Darn it! People aren’t doing the thing we want them to do.”nir_eyal_advocamp_product_advocacy_2

So, Fogg tells us that we can actually plot any human behavior. Think about the power of this—online, offline, doesn’t matter—any human behavior only needs these three things. We can ask ourselves: does the user have sufficient motivation—high motivation, low motivation? Does the user have sufficient ability? If something is easy to do, it’s way over there. If something is hard to do, it’s over here. And if the user has sufficient motivation and sufficient ability, they cross that blue threshold. And if the trigger is present, the behavior will occur every single time – offline, online, it doesn’t matter.

Let’s make this concrete. I want to make sure we get this. I want you to think of the last time that a phone rang in your life and you did not pick up the phone. Why didn’t you pick up the phone? Give me a reason.

You’re eating. Maybe you’re with your family. You’re having a meal at dinner time. So that would be an example of you lacking ability, right? Even if you really want to pick up that call; it’s from somebody important that you need to talk to, you have tons of motivation, but you lack ability. It’s too difficult, right? There’s this social awkwardness of having to say, ‘Hey, I got to take this call right now. I got to leave the table.’ It takes work. It’s effortful. You lack ability even if you have plenty of motivation.

What’s another reason you have that you may not pick up the phone?

You don’t know who’s calling, right? Or it’s your ex-wife. Okay? So even if the phone is right there next to you, you know, it’s very easy to pick it up. You would have high ability, but you lacked motivation, right? So you don’t cross that threshold, because even though you have plenty of ability, you lacked motivation. You don’t cross the line.

What’s one more reason why you may not pick up a call because of a trigger?

The phone’s on silent, right? Think about this. Even if you really want to pick up the call, high motivation, even if the phone is right there next to you, very easy to pick it up, if you never heard it ring, if you never had a trigger for that action, no behavior will occur. So for any human behavior, anything you want your user to do, any click you want them to make, any human behavior requires all three—motivation, ability and a trigger—every single time.

The innovation in specifically the technology space around these new user behaviors and new user actions is really about this X axis of ability. What’s happening today in many habit-forming products is that they’re finding new ways to decrease ability, to make it easier for the user to do the intended behavior. And what they’re doing is playing with these six levers of ability that Fogg gives us.

nir_eyal_advocamp_product_advocacy3People become more likely to do something the less time it takes, the less money something costs, the less physical effort is required, the less brain cycles. Brain cycles has to do with cognitive load, because the harder something is to understand, the less likely the behavior is to occur. That’s a big one when it comes to the tech products we make—that we have to make them as easy as possible to understand, and therefore it’s more likely that the action will occur.

Social deviance tells us that we’d become more likely to do something when we see other people like us doing it as well. And then, non-routine tells us that we become more likely to do something simply for the fact that we have done it before in the past. And this is why habits are such a big deal, because the more we do a particular behavior, the easier it becomes. We gain ability, and therefore become more likely to do it in the future. What do we call that principle? It’s called practice, right? The more we do it, the easier it becomes; and the more likely we are to do it in the future.

So these six factors of ability, this is what we see companies doing. We see them removing the friction, removing the barriers to doing this particular action. Companies like MobileIron in the enterprise base—this company has made it easier. They’ve increased the user’s ability to take these key actions of using apps that were previously only available on a desktop interface, they’re importing to the mobile interface. And what we’re seeing in this mobile revolution is that the ease of use increases the user’s ability and therefore the action of using these products is more likely to occur.

Recently, we see the Apple Watch making waves in the enterprise space company. Salesforce just announced that they will be the first enterprise-focused product making apps for the Apple Watch. Again, the ease of access—the fact that now I don’t have to take out my phone or log-in to a laptop to use this product makes it more likely for these key actions to occur, because now all I have to do is look at my wrist and I can start using a product.

After we’ve figured out the simplest action in anticipation of reward, the next step of hook is the reward phase.

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3. The reward phase is where the user’s itch is scratched a little bit. And remember, we’re making products not just for the functional requirements of what our users want, what our advocates want, but also for the psychological requirements. And what we find is endemic to these habit-forming technologies is that they scratch the user’s itch in this reward phase of the hook. Specifically in enterprise habit-forming products, the itch we’re scratching is this need to control uncertainty either by adding in a bit of variability, or giving the user more agency and control around something that is inherently variable.

Why is variability so important? We know psychologically that the unknown is fascinating. There’s something that draws us into the unknown, to mystery. Variability causes us to focus and engage. This comes from the classic work of B.F. Skinner.

Many of you might remember Skinner from your Psych 101 class back in college—the father of operant conditioning. He took these pigeons, put them in a little box. He gave them a disc to peck at. And at first, every time the pigeon would peck at the disc, they would receive a reward. So what Skinner observed was that he could train the pigeon to peck at this disc every time they were hungry. But then, Skinner did something a little bit different: he introduced a variable reward. So sometimes the pigeons would peck at the disc, nothing would come out, nothing would happen. The next time the pigeon would peck at the disc, they would receive a reward. And what Skinner observed was that the rate of response, the number of times these pigeons pecked at the disc increased. The behavior occurred more frequently when the reward was given on a variable schedule of reinforcement.

We see this throughout all sorts of habit-forming technologies. If you think about the experiences that are most habit-forming, most engaging, the things offline and online that capture your attention and won’t let go, you will find one or more of these three types of variable rewards: rewards of the tribe, rewards of the hunt, and rewards of the self. Let me introduce these to you.

Rewards of the tribe are all about these things that feel good, that have this element of mystery, this bit of variability and come from other people—so the search for empathetic joy, feeling good because someone else feels good. Think partnerships and cooperation. This is really where advocacy lives, right? This reward that we get from other people that has this bit of variability. The best example I can think of at a consumer web space is of course social media. When I open my Facebook newsfeed, I’m never quite sure what I’m going to see, right? What pictures do people post? What are the comments going to say? How many likes does something get? There’s a high degree of social variability.

We see something similar happening at enterprise-focused products in a product like Stack Overflow. Five thousand questions get answered every single day. This is the world’s largest technical question and answer site. And no money has exchanged hands. But what’s going on here? Why are people spending all this time and effort writing what essentially amounts to technical documentation? Why are they doing it? Well, what happens when you post an answer to Stack Overflow? What happens to your answer?

It gets upvoted or downvoted. And there’s some variability there, right? When I post an answer to Stack Overflow, what are people going to say about it? Is it going to get upvotes? Is it going to get downvotes? And the more upvotes I get, I get these badges. But these badges aren’t just these decorative items on my profile, these badges mean something in the community of people whose opinions I care about. It’s a big difference. It’s not just decoration. It denotes status in my tribe, my fellow tribe of engineers. This is a very important principle around advocacy.

Next comes the search for resources, what I call rewards of the hunt. Rewards of the hunt stemmed from our primal search for food and other material possessions. And in modern society, we buy these things with money. So when people think of variable rewards, they oftentimes think of slot machines. They think about the variable reward that comes out of a gambling machine, right? That you’re never quite sure what you’re going to win is part of what makes gambling habit-forming and potentially addictive.

Well, it turns out we see a very similar mechanic online. Take a look at the Salesforce app on a mobile device and you’ll see that it’s almost this Facebook-like feed. And let’s talk about the feed for a minute. Have you noticed how so many products today, both in the consumer web as well as in the enterprise, have this feed mechanic? Why is that? Why does everything seem to have this feed today? Let’s take a look at it. Maybe the first thing isn’t very interesting or the second thing isn’t very interesting. But what do I have to do to get to that third thing that’s interesting? I just have to scroll. So this scrolling and scrolling uses the same exact psychology of what keeps us pulling on a slot machine. This variable rewards of the hunt, searching and searching for these rewards – same exact mechanic at work.

We see something very similar happening to what people have called “data porn.” This variability of my business metrics going up and down, up and down; that’s a variable reward system. So in a product like Medallia where I’m tracking my business metrics in a dashboard, that’s a form of variable information reward, that keeps us checking and checking and checking.

Finally, the search for self-achievement, rewards of the self. Rewards of the self are things that feel good, that have an element of variability but don’t come from other people and aren’t about information or material rewards. These are things that feel good in and of themselves. They’re intrinsic motivators. It’s about the search for mastery, consistency, competency and control.

In the consumer web space, the best example I can think of is games, right? When you’re playing Candy Crush or Angry Birds, whatever the case might be, you’re not necessarily playing it with other people. You’re not necessarily even winning anything, right? There’s no material rewards, but what you’re doing is getting to the next level, the next accomplishment, the next achievement. And there’s this pleasure of this search for mastery, consistency, competency and control.

In the enterprise space or in the workplace, the good old task list, right? I know people who add items to their task list because it just feels so good to tick them off. There’s something around competency and control, about mastering these inherently variable experiences. And if we take this to a logical extreme, you’ll get what Asana did (which as an April Fool’s joke): every time you finished a task, this unicorn jumped across your page with a rainbow emanating from it! That accentuated this experience of completing a task—the search for mastery, consistency, competency, and control.

One word of warning before you say ‘great,’ let’s just put unicorns in our products and we’ll make them super habit-forming. We want to make sure that fundamentally, the variable reward scratches the user’s itch, gives the user what they came for. There has to be a connection between the variable reward and the internal trigger. We can’t just willy-nilly put points and badges and leader boards and expect it to work. It has to scratch the user’s itch, which is why it’s so important to understand that internal trigger; it’s absolutely fundamental. Because the point of the variable reward phase is to give the user what they came for, to solve their pain point, and yet leave them wanting more with this bit of mystery, a bit of the unknown about what they might find the next time they use the product. Which finally brings me to that last step of the hook—the investment phase.

4. The investment phase is perhaps the most overlooked of the four steps of the hook. It’s where people put something into the product, they invest in the product, not for immediate gratification but for a future benefit. And the point of the investment phase is to increase the likelihood of the next pass through the hook.

Investments increase the likelihood of the next pass in two ways. The first way is investments load the next trigger. For example, when I use HipChat, and I send someone in my workplace a message over HipChat, there’s no immediate gratification, right? I don’t get any points, I don’t get any badges. Nothing really happens when I send someone a message. What I’m doing is loading the next trigger, because when I send that message, I’m likely to get a reply. And that reply comes in the form of an external trigger, this notification which prompts me to open the app and pass through the hook once again. The point of the investment phase is loading the next trigger. That’s the first way that investments increase the likelihood of the next pass through the hook.

The next way that investments increase the likelihood of the next pass through the hook is by storing value. Storing value is a big deal, and it’s one of the reasons I love working in the technology industry. Because if you think about physical goods, if you think about your laptop or your phones or these chairs you’re sitting on, everything in the physical world depreciates with use. It loses value with wear and tear. But habit-forming technologies should do the opposite. Habit-forming products should get better with use. They should appreciate with value the more they’re used. And they do this because of this principle of stored value.

One form of stored value is content. So, one of the things that makes Google Docs so successful as opposed to buying Microsoft Office is that you don’t just create documents with a Google Doc, you store them. You keep your content in the cloud by storing your content in Google Drive. And the more content you store, the more invested you are in that system, in that product. It got better and better with use.

Data. So when I use a product like Xero, which is an accounting software trying to take on QuickBooks for small businesses, the more data I give Xero, the better it gets for me. It learns. So every time I reconcile these transactions, it learns what these transactions mean to me and it gets better and better the more I use it, making it more and more difficult to stop using it.

Followers. On Github, the more I build a following on a product like GitHub in the workplace for the enterprise, the more my work can be seen and shared by other people.

And finally, reputation. So, reputation on sites like Linkedin, the endorsements of my skills earned affect my future job prospect. In this case, this form of stored value becomes something that users can literally take to the bank. And how likely am I to leave to some other system, some new Linkedin competitor, after I’d stored all this value in the form of my reputation on their system? Kind of hard to do, right? It’s kind of hard to leave all of a sudden.

So, that’s the four basic steps of the hook model: a trigger, action, reward and investment. And through successive cycles, through these hooks, this is how customer preferences are changed, how tastes are formed, and how our habits take hold.

We know that habits are very good for the bottom line. It could be very good for our business, but not every business needs a habit. This is not magic pixie dust that you can just pour in any business and “poof,” you’re going to be super successful. You may not even need a habit. However, if your business model does require a habit, if the way that you create and deliver value to your customers requires unprompted user engagement, people coming back on their own without spending marketing, without expensive advertising. Then you need a hook.

In summary, here are the five basic questions that you have to be able to answer if you’re building a habit-forming product for the consumer, or for the enterprise:

(1) What’s the internal trigger? What’s the itch that your product is addressing on a psychological level?

(2) What’s the external trigger that brings your user to the product?

(3) What’s the simplest behavior done in anticipation of reward and how can it be made simpler?

(4) Is the reward fulfilling, and does it leave the user wanting more?

 (5) What’s the bit of work done to increase the likelihood of the next pass through the hook?

For too long, enterprise software has been something that users had to use as opposed to something they wanted to use. But we know what happens when people’s autonomy is threatened. There’s a psychological phenomenon called reactance that says that people rebel when their autonomy is threatened. When we’re told what to do, when something is forced upon us, we don’t like it. With the opportunity ahead of us, and by taking lessons from successful consumer web products and mastering the principles of designing for habits, enterprise products can grow from the bottom-up as opposed to going committee down.

The trend of giving users more control and more choice will continue with the consumerization of IT. Successful enterprise products will earn adoption by forming these customer habits. And the differentiating factor between the companies that succeed and those who fail in enterprise will be understanding and applying the principles of consumer psychology. The goal is to understand not only what customers can tell us they need, not just their articulable needs, but also the hidden drivers of their behaviors. The companies that understand what makes users tick will ultimately be the ones that help people live happier, healthier, more connected, more productive lives by using the power of habits for good.

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