Habit Designer
Increase sales, satisfaction, and retention by designing the primary interactions your customers have with your product or service as habits.
Use this tool when:
- you want to generate more sales from your existing funnel
- you want to increase the retention if your product or service
- you want customers to become fans
Overview
| Time | ± 45 minutes | |
| Difficulty | 3 / 5 | |
| People | 3 - 5 | |
| Author | erik van der pluijm | |
| Website | https://designabetterbusiness.tools | |
| License | CC BY SA 4.0 |
What is it and when should I use it?
Perhaps this sounds familiar: you pickup your phone to look something up or use an app, but 10 minutes later you find out you totally forgot about that and have been scrolling Instagram or Whatsapp instead. These are great examples where apps have ‘hacked’ your habits in such a way that you come back to them almost subconsciously.
79 percent of smartphone owners check their device within 15 minutes of waking up every morning.
- Nir Eyal
For these apps, this is a great thing. And it can feel great for customers, too. Acting on habits can feel relaxing and rewarding.
The Habit Designer can help you to create ‘habit loops’ in your own products and services.
This is important for three reasons.
- Lowering Customer Acquisition Cost (CAC)
- Increasing Customer Lifetime Value (CLTV)
- Blocking competition
First of all, the success of your business depends for a big part on the number of people you can convince to become customers. After all, this is likely how you generate revenue.
To convince a customer, you need to bring them from a state of blissful oblivion about your product or service to where they are ready to shell out their hard-earned cash.
In doing so, there are big hurdles to overcome. They need to be aware of a need for your product, find it, and, importantly, trust it enough to purchase it, to name but a few.
It will cost you (money, time, energy) to help them overcome these hurdles. This represents the Customer Acquisition Cost (CAC). To be successful, the amount of revenue your customer generates (Customer Lifetime Value) will need to be higher than the CAC.
And it’s not just about people buying your product once: looking at the Pirate Metrics Funnel, Retention and Referrals are just as important as Revenue. It is much more expensive to convince a customer that first time than it is to get them to come back after a good experience. Getting a customer to come back requires much less work: they already know your product and have experienced its quality first hand. A lot of the hurdles mentioned above have been cleared already. And it becomes even better if your customers start referring your product to others: they will be actively helping you to convince new people by increasing trust.
Users who continually find value in a product are more likely to tell their friends about it.
- Nir Eyal
The benefits are huge. It is estimated that a 5% increase in retention (i.e. 5% more returning customers) can drive an increase in profit of up to 70%.
So, how do you get people to become a repeat customer?
The first thing to understand is that your product or service needs to be good, meaning that it fulfils your customers’ needs. But the real keyword is trust. People need to trust you and your product before they spend money on it. And people tend to trust what they know.
When they have had a good experience, they trust that the next experience with your product will also be good. When they don’t have that experience yet, they will rely on other things to indicate trustworthiness: the opinions of their friends, people reviewing the product, authorities or celebrities endorsing the product. This is what a lot of marketing relies on. But, nothing beats personal experience.
Giving people positive experiences with the product is key. Start creating small habits that give people rewarding experiences. If people have fun, and their reward systems are stimulated, they come back. The more they come back, the more they trust your service, and the more likely they are to take the plunge and buy your product or service.
As customers form routines around a product, they come to depend upon it and become less sensitive to price.
- Nir Eyal
Once people are habitually using your product, it becomes much harder for competitors to convince them to switch. Your customers spend more time with your product, and that leaves little time to look for competing products; besides, they feel they are satisfied with your product and don’t need to switch.
What is a Habit Loop?
In his book ‘The Power of Habit’, Charles Duhigg defines the components of a habit loop:
- A Cue (or Trigger) that starts the loop,
- A Routine (or Action) that is performed in response to the trigger,
- A Reward that is the result of the routine.
- A Craving that drives the loop and reinforces it
The Reward triggers the dopamine neurotransmitter in our brain, which helps us learn. In effect, it teaches us that the Action was the correct response to the Trigger, reinforcing the likelihood of performing that action the next time the trigger appears. This is called conditioning.
All humans are motivated to seek pleasure and avoid pain, to seek hope and avoid fear, and finally, to seek social acceptance and avoid rejection.
The interesting thing is that this conditioning moves the dopamine reward forward, to where it happens even before the Routine. The dopamine response to the reward creates a Craving to receive that reward again, and – in effect – to look for the cue associated with the reward.
This system mostly works great. It helps us to learn many things, the right rewards conditioning us for a variety of behaviours, such as to eat when hungry, study to get good grades, and be friendly to other people. But it can also be hacked. You can reward people for any behaviour you want! The proof is smartphone addiction: if you think about it it is ridiculous we all spend hours every day staring at a tiny screen.
It turns out that it is very difficult to create new habits that require a big change in behaviour, but that it is much easier to change, ‘hack’, or build on existing habits.
For inspiration, have a look at successful gamified apps such as Duolingo.
In the definition of a habit loop given above one piece is still missing: the Investment. What is a customer willing to do or spend to keep this loop going. What does their ‘craving’ cost them? This is something that can be very important to your business.
Tool Overview
Trigger A trigger or stimulus that starts the loop.
Action The action that the user performs in response to the trigger.
Reward The reward that is the result of the routine.
Investment The investment your user makes to be part of the loop
Craving A ‘craving’ the user develops that drives the loop and reinforces it.
Steps
1 Find existing habits
The first step is to look at the habits your customers already have. The reason is, it is much harder to remove habits or create new habits than it is to change existing ones slightly.
The Golden Rule of Habit Change: You can't extinguish a bad habit, you can only change it.
- Charles Duhigg
Try to find the current ‘habitual users’ of your product. How many of your customers fall in this category? What is the pattern you see in their behaviour? Look for what Nir Eyal calls the ‘Habit Path’, a series of similar actions shared by your most loyal users.
You’re looking for the ‘Habit Path’, a series of similar actions shared by your most loyal users.
- Nir Eyal
If you do not have a product yet, you can also look at other things: what does your customer’s day look like (Customer Journey)? What other products are they using, and how do they do that? What are the things they already do?
Using sticky notes, plan out your customers timeline, just as you would in the Customer Journey (You can use the customer journey template). Pay special attention to things that people do every day, and try to identify habits.
Look for ‘keystone habits’, the habits that matter the most. These are the habits that influence how people work, eat, live, play, spend, and communicate.
1 Map existing habits
Using the Habit Designer template, map out the existing habit. Find the Cue, Routine, and Reward. What is the investment people make? How often do they do this? And how do they feel afterward? What is the underlying craving?
Map out 3-5 current habits. These will form the basis of new habits.
Tip! Sometimes the investment is just the time they spend
1 Hack the Habit
Next up is creating the habit you need. As said, it is difficult to create a totally new habit, and easier to change or hack an existing habit.
Rather, to change a habit, you must keep the old cue, and deliver the old reward, but insert a new routine
- Charles Duhigg
There are three ways to do this:
- Before the trigger: Pre-emption
- During the action: Redirection
- After the action: Chaining
You can try to insert your own trigger just before or at the start of the existing trigger. You can try to come up with a new action for the trigger. Or, and this is the easiest one, you can use Chaining, and add the new action after the existing action.
For your selected current habit, try to see if you might insert or emphasize a trigger that occurs just before the trigger that is driving the current habit. Try to figure out if there is a way to prompt your users to perform a different action. Or try to see if you can prompt them to piggyback a new action at the end of their routine.
Over time, your ‘hack’ can grow and even take over and replace the old habit.
Tip! In each case, try to come up with a ‘nudge’ to change the current behaviour, rather than a radical change.
4 Hack the reward
When designing a new habit, it is very important to look at the reward that drives the conditioning.
One thing to remember when designing habit loops is that reinforcement is stronger when there is a smaller distance between the Cue, Routine, and Reward. Think about breaking Routines that take longer into smaller pieces, and rewarding these subroutines. Instant gratification is king. Many small rewards strung together work better than one big one in the distant future.
The strongest kind of reward is the variable reward. The human brain is very susceptible to variable rewards, and will tend to make a bigger Investment if it has a shot (even a tiny shot) at a huge reward, even when the expected reward is small. As an example look at lotteries and gambling addiction, but also at popular online games where ‘lootboxes’ drive a big part of the game.
Warning! Variable rewards are a powerful weapon. Handle with care.
5 Next Steps
Put your habit loop in practice, and monitor the result. It really helps to measure the transitions between each of the stages so you can see how many people were triggered, how often they responded with the action, and how many then get the reward and come back.
Try to define experiments to make your loop stronger. Remove friction, change the reward, or break it into smaller pieces. Build new habit loops on top of your existing loops.
Keep track of your experiment results and improve your loop.
Get a new tool in your inbox every week
Sign up for free now and receive a weekly email with one new innovation tool straight to your inbox. 🚀