How To Use The Psychology Of Habit Formation To Be A Better Marketer With Best-Selling Author Nir Eyal [AMP 085]

Has your smartphone ever beeped or vibrated to let you know that something, some piece of information or message, is waiting, just for you? Without even thinking, you read, listen to, or watch, and become completely absorbed in it. How have these pieces gained so much power over our behavior and attention? How do software companies hook us, and what can marketers learn from this phenomenon? Today’s guest is Nir Eyal, who says today’s smartest companies have melded psychology, business, and technology into habit-forming products. Nir is the best-selling author of Hooked: How to Build Habit-Forming Products. He’s an angel investor and expert in behavioral design. He unveils some psychological principles behind some of today’s biggest and most valuable companies. Some of the highlights of the show include:

• Skill of the century is the ability to cultivate focus
• Behavioral Design: Products that are most engaging and habit forming were built with consumer psychology in mind
• People use the Hooked model to engage with a product or service
• Step 1: Internal trigger (reason why you use a product - to modulate your mood, to feel something different; products and services cater to emotional discomfort)
• What’s the user’s itch? What’s their pain point that occurs frequently enough to build a habit around?
• Step 2: Action (the simplest behavior done in anticipation of a reward and relief from discomfort; technology shortens the distance between the need and reward)
• Lewin’s Equation: “People act in accordance to their personality and their environment,” which means the easier something is, the more likely people are to do it
• Step 3: Reward Phase (the itch gets scratched, the customer’s need is satiated, and their problems are solved)
• Element of Variability: Something of mystery, something of uncertainty
• Three types of variable rewards are: Rewards of the tribe, rewards of the hunt, and rewards of the self
• If you can form a habit, you can engage people with your brand through a community/content habit, and monetization is the result of engagement
• Step 4: Investment Phase (increases likelihood of the next pass through the hook by loading the next trigger and storing value)
• Content, data, followers, and reputation are ways to get users to invest in your product
• Companies should make a deliberate effort to understand consumers better; what makes people click and tick, so you can build services that they want

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Transcript:

Jordan: Maybe this has happened to you. You hear a beep or feel a vibration, and it’s your smartphone letting you know that something, some piece of information or a message is waiting just for you. Then without even thinking, you’re reading, you’re listening, or watching, and completely absorbed in what the app just told you to do. Have you ever wondered how these pieces of software have gained so much power over our behavior and our attention, and what we marketers may have to learn from this phenomenon? Well, my guest has a compelling answer. He says today’s smartest companies has melded psychology, business, and technology into habit-forming products. In this episode, I interview Nir Eyal. He’s the best-selling author of Hooked: How to Build Habit-Forming Products. He’s an angel investor and an expert in behavioral design. He’s even taught at the Stanford Graduate School of Business and Design. He knows what’s up and will unveil some really interesting psychological principles behind some of today’s biggest, most valuable, and most frightening companies. My name is Jordan. I’m with CoSchedule and here’s my conversation with Nir. Nir, thanks so much for being on the show today. Nir: My pleasure, Jordan. It’s great to be here. Jordan: Can you kick us off by telling us more about what you’re working on these days about Hooked, Habit Summit. You have so many things going on. They’re all very fascinating. What’s the deal with all that stuff you’re doing? Nir: Yeah, I’ve been pretty busy actually. My book, Hooked, came out back in 2012. This year will be the fifth Habit Summit in San Francisco. It’s April 10th through the 12th. We do that every year and it’s basically a conference about many of the things I write about in my book about how to use the psychology of building habits for good, how do we help build the kind of products that people want to use, that people come back to time and time again to help them live better lives. This year is particularly interesting because there were a lot of questions around ethics. This year, a lot of the companies that I have talked about in my book, like Facebook, Twitter, WhatsApp, and Instagram, some of these companies have come under fire lately for being too persuasive, too engaging, too habit-forming, and maybe too addictive. That’s part of the discussion too. I’m also going to be giving a preview of my next book which is called Indistractible, and that book is all about how do you master what I call the skill of the century. The skill of the century in my opinion is the ability to cultivate focus. How do you make sure that you do what you say you’re going to do everyday, and that’s a challenge that I know I have had for many years. Then, until I really started digging into the psychology of focus, did I actually understand how to get my own brain under control and actually do the work I want to do and live the life I want to live. A lot of stuff going on. Jordan: Yeah, but really good, really valuable stuff. I wonder can you share your story with us? You have a pretty interesting background in how you got on the track that you’re on now. How did that happen? Nir: Sure. Let’s see. I started two companies and the last of which was in the intersection of gaming and advertising. Let’s face it. These two industries are all about mind control and it was from that vantage point that I got to learn a whole lot about how to change people’s behavior. I became very fascinated with how different products and services are designed with psychology in mind. I kind of dove into the science of behavioral design and how these products are built, and I discovered it was no coincidence that the products that we find most engaging, most habit-forming—if you think about some of the companies I mentioned earlier like Twitter, Facebook, Instagram, WhatsApp, Slack, and SnapChat—that many of these companies were in fact built by people who really understand consumer psychology. Not many people know this but Mark Zuckerberg, before he dropped out of Harvard, he had two majors. One of course is computer science and the other was psychology. If you think about Kevin Systrom, the founder of Instagram, same story. He was a symbolic systems major. Symbolic systems is the intersection of computer science and psychology as well. Reed Hastings. Many of these people who started these tech companies understand consumer psychology because understanding consumer psychology makes you a better marketer, makes you a better product manager, helps you deliver the kind of products and services that engage people. When my last company was acquired, I had some time on my hands and I started to spend that time in the Stanford library. I talked to a lot of people at the time who were building these tools, that were working at these companies I mentioned earlier. The idea of the book was to kind of take the patterns, the things that we see time and time again inside these world-class habit-forming products and bring them to the rest of us, so that anybody building a product or service can use these techniques to build these better products and services. The problem I see out there is not that a few companies suck us in. That’s not the big problem. The big problem I want to tackle is the problem that too many products suck. Most of the people I know in the product development field, they’re not struggling with Facebook’s problem, making products that are too addictive. They’re struggling with the problem that nobody gives a shit about their products. This is what kills me. Even when the product is actually great, even if the product would actually do great things for people’s lives, if they would only use it, that really frustrated me. I started with these two tech companies, I know how hard it is to build the kind of products that people want to use, and I just saw so many companies out there with great ambitions to improve people’s lives, if people would use the goddamn product. And that’s where I really focus my time on this, teaching the tenets of consumer psychology so that everybody, not just these frivolous social networks and video games can use these techniques, but that all of us can use these techniques to help our customers and our users live better lives. Jordan: Where does it start then? As you started doing this research and you started kind of peeling back the layers of the onion or this might even be like a Pandora’s Box analogy. I don’t know what’s more appropriate, but where does this start? Nir: It starts with understanding the Hooked model. The Hooked model is kind of the framework for my book. It’s a four-step model that users walk through when they engage with a product or service. Most of the examples I gave in the book are online examples because when you want to learn a skill, when you want to learn how to be really great at something, you’re looking at the best in the business. The companies I profile, the products I look at are the ones that—everybody thinks [... habit-forming products like some of the companies I mentioned earlier—you can use this in all sorts of businesses. But where it really starts is the first step of the hook, which is internal trigger. The internal trigger is the very first thing we have to look at. Not many people understand the fact that every product you use, everything you use, you use because of one reason only. That one reason is to modulate your mood, to feel something different. It’s called the homeostatic response. That when we feel discomfort, it prompts us to action. In fact, all action is prompted by discomfort. It’s not something that people widely understand, but if you think about it, when you feel the discomfort of cold, that prompts you to put on a coat. When you put on a coat, you walk into a warm room, and you feel the discomfort of being too hot, your body regulates itself by telling your brain to prompt you action to take off the coat. When you feel hungry, you eat. When you feel the discomfort of being full, you stop eating. Online, in many of the products and services we use, they cater to emotional discomfort. When you’re feeling lonely, you check Facebook. When you’re feeling uncertain, you check Google. When you’re feeling bored, you might check YouTube, or the news, or Reddit, or stock prices, or sports scores. The list goes on and on for boredom. That’s a very big problem that people have. Where we always start is what’s the user’s itch? What’s their pain point that occurs frequently enough to build a habit around? Jordan: Holy crap! It’s just crazy when you start walking down that. You’re absolutely right. Do they intentionally manufacture this trigger point then, if that’s the right way to say it? Understanding this is the discomfort that is going to prompt them to take this action that we want them to take? Nir: That’s the way good products are built. And just to be clear, there’s a nuance here. We never create the internal trigger. The internal trigger is already there. If you create pain in people’s lives, not only that is immoral, but people don’t use the product for very long. If humans are built with a fuse in a way that’s tripped whenever something harms them—I should give a little disclaimer here; except for the case of some people which we can get to later on the topic of addiction—for the vast majority of people who are of sound body and mind, when a product harms them, they say, “Screw that. I don’t want to use it anymore,” which, by the way, is exactly what we’re seeing with Facebook these days. Facebook was one of the examples of a product that was very engaging on its way to touching the lives of over two billion people these days, but now we’re seeing a backlash. What’s happened? The hook broke. The internal trigger is no longer satiated. The itch that people were coming to engage with on Facebook, the reason they came to scratch their itch of loneliness, seeking connection, connecting with friends, has kind of become cluttered with political ads, all kinds of ranting from lunatics out there, and all this crap has now made the product worse. This is a serious problem for a company like Facebook. The formulae I provided in the book is wonderful but it’s not something that you can just rest on your laurels and say, “Okay I’m done.” It doesn’t work that way. It’s a model to help you diagnose what might be deficient in your product, are you missing one of these four fundamental steps, which we can walk through, between the trigger and the action, the reward and the investment. And then to make sure if your product isn’t engaging enough, if it’s not bringing back people on their own, how can you fix one of those four steps so that it becomes more engaging? Jordan: So we move from the trigger. What happens next? Nir: After the trigger is the action. The action is the simplest behavior done in anticipation of a reward, the simplest thing that we can do to get relief from our discomfort. The keyword here is ‘easiest.’ We know for several decades now, there’s an equation called Lewin’s equation from psychology which says that “people act in accordance to their personality and their environment.” What this essentially means is that when we shape the environment to facilitate a behavior, we can do so by making something easier to do. In short, the easier something is, the more likely people are to do it. When it comes to good product design, good marketing for that matter, it’s really about how easy you can make the intended behavior. Is it physically easy? Is it at a price point that makes it easy? Is it cognitively easy? To understand what you want the user to do. Something as simple as a Google search, or pushing the play button on YouTube, or scrolling a feed, or checking a dashboard. We always want to make sure that we design experiences that are absolutely as easy as possible to do because that gives us the highest likelihood of getting the user to take the intended behavior. Jordan: All water flows downhill is sort of the idea, and like frictionless user experience, that kind of thing. Nir: Right. We don’t want to impede the user from getting their reward, from scratching the psychological itch. If we understood that the internal trigger is loneliness, boredom, fatigue, stress, whatever it might be, we have to give the user what they want as quickly and easily as possible. If you think about it, that’s really technology in a nutshell. All technology, I don’t care if it’s the cotton gin to the iPhone. The job of technology is to shorten the distance between the need and the reward. That’s what all technology has to do. Your job as someone who’s designing a product experience, designing a marketing experience, whatever might be, is to give that user psychological relief as quickly and as easily as possible. Jordan: When it comes to delivering that, I guess we come to this reward idea. Describe that because I’m guessing this is where a lot of us could screw this thing up. Nir: Right, right. The reward phase is the third step of the hook and this is simply where the itch gets scratched. This is where we satiate the customer’s need. This is where product design and where product marketing is really a very important job. What we do is solve people’s problems. That is a non-trivial job. That is a super important job and it has tons of very important applications. To ease people’s suffering, I can’t think of a better thing to do with my life, frankly, and so what people constantly think in the reward phase is how do we scratch people’s itches? How to we give them what they came for based on that internal trigger? If the internal trigger is uncertainty, how do we give them greater confidence and agency about what they’re uncertain about? If it’s boredom, how do we entertain them? If it’s loneliness, how do we connect them to someone? There’s always a connection between the two. I want to go one step deeper because a lot of people know the basic framework around forming a habit, and there’s been a lot of books written about habit. But there’s something I think a lot of books leave out and that in the importance of variability. When you look at these habit-forming experiences, particularly in the early phases of forming a new habit, what we find endemic to these products is always an element of variability. Something of mystery, something of uncertainty, that slot machine effect of scrolling your feed or the uncertainty of what you might find next is what it’s all about. But again, particularly in the beginning. We find this variable reward mechanic built in all sorts of product experiences and that’s what keeps us engaged. The point of the variable reward phase is to give the user what they want, to scratch that itch, and yet leave a bit of mystery around what they might find the next time they engage with a product or service. Jordan: That makes a lot of sense to me around Twitter and Facebook when you don’t know what you’re going to find and that’s the whole enticing thing, like what did my friends create. How does this work for a company or a brand who has kind of a set product? What is the variability play there? Nir: There are three types of variable rewards. There are rewards of the tribe, rewards of the hunt, and rewards of the self. Rewards of the tribe are things that are pleasurable, that come from other people, and have this element of mystery. Empathetic joy, feeling good because someone else feels good. Competition, cooperation, all of these things come from other people, feel good, and have this element of mystery. Many of these things are the product itself. For example, if you think about Stack Overflow, if there’s any engineers listening, every engineer I know uses Stack Overflow. Five thousand questions are answered every single day on this platform where the variable reward is what does my community of other engineers think about my answers? Your answers get uploaded or downloaded and there’s variability there around what people think about the answer. That’s something that occurs frequently and many products struggle with the fact that they sell and physical good that is just not bought often enough. What they’ll often do is bolt on an experience that can be engaged with frequently enough. For example, if you have a community around your product. I recently wrote an article about the Hallmark Keepsake Ornament Club because it’s an example of a company that sells a product that is only used about once a year. How often do people buy Christmas ornaments? And yet, they have built this thriving community of over 300,000 members that engage with each other, not because of the stupid Christmas ornaments, it’s because they want to engage with other members of the community. They will communicate with each other, they will engage around the brand to be in touch with each other. That’s reward of the tribe. Then you have the rewards of the hunt, which is all about the search for material rewards, about supplies, information, money. That’s the classic searching on your Twitter feeds for content. But we also see the rise of content marketing, also explained by this phenomenon that when then send someone an email, can you get them in the habit of opening that email because there’s something uncertain amount of what they might find when they engage with that message. A company that does this really well is Williams Sonoma. Again, it’s an offline product that is not consumed frequently because people don’t buy cutlery everyday, and yet they form this content habit around this website they have called Taste, which has been rated as one of the best cooking-related content sites on the web. They’re constantly cranking out new content, two, three articles a day, and sending out these emails. They form this content consumption habit. It’s a great example of this mantra I’d like to repeat and I like to see people tape up on their walls everywhere because the mantra that I’d repeat is that monetization is a result of engagement. As marketers, we have to put that up around our offices because we are so focused on getting people to check out, to just transact, buy, and get out. We haven’t thought about how to get people to check in. I would say that in this day and age, where so many products and services are commoditized and it’s a race to the bottom of how cheap you can make your goods and services, that if you can form a habit, you can engage people with your brand through a community habit, through a content habit, monetization is the result of engagement. Don’t worry so much about getting people to check out. Think about how to get them to check in. How can you engage them? The last type of variable reward I what I call the rewards of the self. This is all about the search for mastery, consistency, competency, and control. For example, checking all your email notifications or finishing the to dos in your to do list. There’s a sense of mastery and completion, getting to the next level, the next accomplishment, almost like a video game that keeps people engaged as well. Jordan: So really, the variability you can add doesn’t have to be in the product itself. It can be sort of tangential or attached, like you’re explaining. But it needs to be associated tightly in the consumer’s mind with the actual product or service itself. Nir: Right. The best is if you can make the actual product or service the habit. But there’s this frequency test. Larry Page, the founder of Google, likes to call it the toothbrush test, that he doesn’t want to invest in any product that people don’t use with the frequency of a toothbrush, twice a day. That’s a little bit harsh. I think that’s tough. It’s a good metric but it’s pretty darn tough to find a product that you can engage with that often. My bar is a little less frequently. It’s about once a week. If you don’t engage with a product at least once a week, it’s very, very difficult to change a consumer habit around that product. A product like Williams Sonoma that sells cutlery and kitchen supplies, that’s not something that many people will ever buy out of habit. It doesn’t even meet the definition of a habit which is a behavior done with little or no conscious thought. When I buy a crock pot or some dishware, I think about it, I deliberate about it, it’s never going to be a habit. You can’t make the purchasing the habit. You want to make something around the product a habit, like a community, like content. Those are ways that you can make a product habit-forming by attaching a habit to it. But of course, the best if you can make the actual product experience a habit. For example, checking the dashboard, opening a feed. Those are the kind of frequent behaviors that we can turn into a habit. Jordan: I see. There’s a fourth component that actually takes these and sort of propels us back in again to the framework. Is that correct? Nir: Right, exactly. This is the critical step of the hook. It’s probably the most overlooked. it’s called the investment phase. A lot of people forget this step because people think, “Well, if we just give people what they want, if we give our customers what they need, then that’s it. We’re done.” That’s true, but when it comes to products and services, if you’re not asking for this critical fourth investment stage, you’re leaving a lot of opportunities on the table. Let me tell you what the investment stages. The investment stage is something you do at the end of the experience, so to speak. After you’ve been rewarded, after your itch is scratched, that you do to make the product better with use. You’re investing in the product, not necessarily for immediate gratification, but for some kind of eventual reward. The purpose of the investment phase is two-fold. The main purpose is to increase the likelihood of the next pass through the hook and it does it in two ways. Number one is by loading the next trigger. When you send someone a message, for example on Slack or WhatsApp or any of other messaging service, there’s no immediate gratification, there’s no points, there’s no badges, nothing really happens. What you’re doing when you invest in a platform by sending someone a message is that you’re loading the next trigger because you’re likely to get a reply. What can your business do when you interact with your customer to load the next trigger? A simple example is when I go to the dentist. On my way out, as I check out, they say, “Hey, fill out this postcard and we’ll remind you of your next appointment.” Something that I did to bring myself back. That’s a very low-tech example. It gets way easier and way more powerful when it comes to a high-tech example because the frequency increases. The other thing that investments can do is to store value. This is a really, really big deal. One of the amazing things about technology today—and today, every business is a technology business, as Marc Andreessen said, “Software is eating the world,” so there’s no business that’s not touched by technology in some way—any time that you can get the product to improve with use, that’s called storing value. Unlike offline products—think about things made out of atoms, things made out of bits—when it comes to your chair, your desk, your monitor, your clothing, all of these things lose value with wear and tear. They depreciate. But habit-forming products should appreciate. They should get better and better with use. They do this through data, through content, through reputation, through followers, anything the user puts into the product that makes it better and better and better with use. If you think about it, if you log into my Facebook account, it actually be meaningless for you. It has been customized to my interest, in my taste, with my friends based on the data I gave these companies. If you’re not figuring out a way to get users to invest in your product, one of those four ways—content, data, followers, reputation—you’re missing a really big opportunity to improve the product with use, which of course, makes it even stickier and stickier. Jordan: If we take a broad overview then of the hook formula, I guess the synopsis that you’ve given us, what is the best way you think marketers can take this and leverage it immediately? Nir: The first thing is to admit and to proselytize to your colleagues and co-workers that these products, these world-changing companies that we talk about, that we so admire and have attracted so much attention lately, they didn’t get this way by mistake. They didn’t get this way as a happy accident. They were very deliberate about understanding psychology. In some ways, a lot of people have moral issue with that. But on the other hand, we should learn from those companies. We should understand, “Well, if they can do it, why can’t I do it for my startup or for my company?” That’s the first thing. Understand this kind of stuff doesn’t happen as an accident. It’s a deliberate effort to understand consumers better than they understand themselves. You got to understand what makes people click and what makes people tick so you can build the kind of services that they want to engage with again and again and again. That’s the first step. Jordan: Nir, where can people learn more about this stuff and keep up with you? Nir: Absolutely. My book is called Hooked: How to Build Habit-Forming Products. That’s available wherever books are sold. On my website there’s other great places, a lot of research that I’ve published since the book. There’s a lot of updates there as well as information about my next book which is called Indistractible, which is about how do we master the skill of the century around focus, how do we keep out distraction so that we can kind of live the lives we really want to live. If you want updates about that, you can find out more on my website. My website URL is nirandfar.com. Jordan: Nir, thanks so much for being on the show today. Nir: My pleasure. Thank you. Jordan: So there you have it. You learned how software companies hook us. You probably saw a little peek into your own experience with technologies and I hope you also learned how we as marketers can use these habit-forming powers for good, to add more value, and to help people make our products and services a part of their lives that benefits them. Thank you so much, Nir, for peeling back the curtain on something that is so fascinating and so ubiquitous in human experience today. You can learn more about Nir and his work, including his book Hooked, also the Habit Summit and his upcoming book by visiting this episode’s full transcript and show notes. You can go to coschedule.com/podcast. It’s all there, all the links that you need as well as every single word that we said, so you can read along, take notes, and learn how to become a habit-forming marketer before you know it. Thanks so much for being with us in the episode of the Actionable Marketing Podcast. We’ll be back next week for even more.