May 20, 2015
Top 10 Mistakes Getting to $100M ARR
In this talk, Jason gives guidance on the Top 10 mistakes getting from 0-$100M in ARR. He includes examples from RainforestQA and a case stu...
Nir Eyal is a teacher at the Stanford Graduate School of Business, contributor to Forbes, advisor to several startups including Product Hunt, and the author of Hooked: How to Build Habit-Forming Products. With accolades from WordPress founder Matt Mullenweg and 500 Startups founder Dave McClure, Eyal has made a name for himself by teaching startups how to build customer habits by baking “hook model” loops into products themselves. Heavybit caught up with Nir Eyal to find out how developer companies can take advantage of his model.
Heavybit: Many of the hooks you describe come from an emotional pain point like Facebook to cure loneliness or Google to cure uncertainty. But, Developer companies often like to think of themselves as the “logical” vs. the “emotional”. What feedback do you have for developer and enterprise companies to form customer habits?
Nir: In my book, I describe what I call “Hooks”. Hooks are experiences that connect users’ problems to a company’s solution with enough frequency to form a habit. Hooks are in all sorts of products we use with little or no conscious thought. Over time, customers form associations that spark unprompted engagement, in other words, habits. In the enterprise product space, there are all sorts of relevant emotions that create associations with habit. Uncertainty regarding what to do next, the fear of missing out on what’s going on, or the stress of needing to complete a work assignment. There are all sorts of emotional motivators to use enterprise software habitually.
Heavybit: Many of the examples you use for triggers and rewards come from the social media space. What are some examples of triggers and rewards that can be applied to developer and productivity tools?
Nir: As opposed to “internal triggers,” which are cues based on emotions, things in our environment that prompt the user are examples of “external triggers”. Some examples of external triggers include emails, notifications, or anything that calls the user to action. Next, the action phase of the Hook is defined as the simplest behavior done in anticipation of a reward. Something as easy as clicking on a link or scrolling a feed, are examples of these very simple actions users do with little or no conscious thought. For example, clicking on a notification (external trigger) from Slack, quickly provides the reward of knowing the contents of a post created by a coworker. The key here is to make these behaviors as easy as possible — reducing the steps and cognitive effort users need to take. This is where new technology companies disrupt existing incumbents — they find a new way to make getting to the reward faster and easier. The easier a behavior is to do, the more likely people are to do it.
Heavybit: What are some examples of companies in the productivity or developer space who have successfully cracked the frequency or habit problem?
Nir: In the four step process I describe in Hooked, I detail how products use hooks to form user habits. Hooks start with a trigger, then an action, then a reward, and finally an investment. Through successive cycles through these hooks, user habits are formed.
There are several examples of hooks in enterprise products. Companies like Salesforce, Github, Stack Overflow and more recently the productivity software Slack, all have great hooks that keep users coming back. The four steps of the hook are the same in any product that forms a user habit.
Heavybit: You said one of the most powerful thing in forming a habit is the anticipation of pain alleviation. Can you think of any developer or productivity tool that does this?
Nir: Imagine you’ve just walked into the office and sit down at your desk. Though you’re likely to notice it, you subconsciously experience a pang of stress regarding what to do next. Your brain searches for an answer to questions like: who is relying upon me for something? What are my commitments and meetings? What do I need to get done today? For most of us, the behavior done habitually to relieve the uncertainty is to quickly open our email, calendar or to do list. Today, several companies are trying to capture those habits with new solutions. These fledgling company’s success depends on their ability to create associations with these pain points and offer better ways to remove that pain.
Heavybit: Do you think developer platforms with their add-ons and plug-ins are an example of stored value or investment? Please elaborate on why some companies get to charge more for similar products.
Nir: Perhaps the most frequently neglected step in building a habit-forming product is asking for an appropriate investment — it also represents the biggest opportunity companies often miss. An investment is when the user puts something into the product for a future benefit, not for immediate gratification. For example, when the user takes steps to accrue data, content, followers, reputation, or skills by using the product, they are more likely to use the product again in the future. With repeated investments into the product, it actually gets better with use. Investments also load the trigger to bring users back through the hook again. Reputation is a very important form of investment. For example, the more developers answer questions on Stack Overflow, the more they accrue points. These points denote status among users’ community of fellow engineers, not in a frivolous gamification sort of way, but in an extremely meaningful and purposeful way. One’s reputation on Stack Overflow is very important and the more users invest in accruing a good reputation score, the more likely they are to continue using the service in the future.