Tag Archives: Nir Eyal

How Scarcity Can Influence Buying Behavior

Editor’s Note: This
essay is adapted from Hooked:
A Guide to Building Habit Forming Products
 by Nir Eyal. Nir also blogs
at NirAndFar.com.

There are many counterintuitive and surprising ways
companies can boost users’ motivation to buy by understanding heuristics ‘ the
mental shortcuts we take to make decisions and form opinions. Even though users
are often unaware of these influences on their behavior, heuristics can predict their actions.  
In 1975, researchers Worchel, Lee, and Adewole wanted to
know how people would value cookies in two identical glass jars.[1] One jar
held ten cookies while the other contained just two stragglers. Which cookies
would people value more? 
While the cookies and jars were identical, participants
valued the ones in the near-empty jar more highly. The appearance of scarcity
affected their perception of value. 
There are many theories as to why this is the case. For one,
scarcity may signal something about the product. If there are fewer of an item,
the thinking goes, it might be because other people know something you don’t.
Namely, that the cookies in the almost-empty jar are the better choice. The jar
with just two cookies left in it conveys valuable, albeit irrelevant,
information since the cookies are identical. Yet, the perception of scarcity
changed their perceived value. 
In the second part of their experiment, the researchers
wanted to know what would happen to the perception of the value of the cookies
if they suddenly became scarce or abundant. Groups of study participants were
given jars with either two cookies or ten. Then, the people in the group with
ten cookies suddenly had eight taken away. Conversely, those with only two
cookies had eight new cookies added to their jars. How would these changes
affect the way participants valued the cookies? 
Results remained consistent with the scarcity heuristic. The
group left with only two cookies rated them to be more valuable, while those
experiencing sudden abundance by going from two to ten, actually valued the
cookies less. In fact, they valued the cookies even lower than people who had
started with ten cookies to begin with. The study showed that a product can
decrease in perceived value if it starts off as scarce and becomes
abundant. 
For an example of how perception of a limited supply can
increase sales, look no further than Amazon.com. My recent search for a DVD
revealed there were ‘only 14 left in stock,’ while a search for a book I’ve had
my eye on says only three copies remain. Is the world’s largest online retailer
almost sold out of nearly everything I want to buy or are they using the
scarcity heuristic to influence my buying behavior?
You can hear Nir
speak at the upcoming Future of Consumer Intelligence Conference 2014 in Los
Angeles, California.  The Future of Consumer Intelligence 2014
explores the emerging role of decision science and the convergence of knowledge
points – insights, foresights, social science, marketing science and
intelligence with technology as a central driving force and profound connector.
For more information on the event, click here to download the interactive
brochure: http://bit.ly/1qzXDjP
Register for FOCI and
see Nir in person! http://bit.ly/1p43bWl
[1] Worchel, Stephen,
Jerry Lee, and Akanbi Adewole. ‘Effects of Supply and Demand on Ratings of
Object Value.’ Journal of Personality and Social Psychology 32, no. 5 (1975):
906′ 914. doi: 10.1037/ 0022-3514.32.5.906
.

Why Habits are the Lifeblood of Your Business

Editor’s Note: This
essay is adapted from Hooked: A
Guide to Building Habit Forming Products
by Nir Eyal. Nir also blogs at NirAndFar.com.
Habits are one of the ways the brain learns complex
behaviors. Habits form when the brain takes a shortcut and stops actively
deliberating over what to do next.1 The brain quickly learns to codify
behaviors that provide a solution to whatever situation it encounters.
The success of many companies depends on their ability to
find a way to get users to go from infrequent use to being dependent on the
product. It is at the point when customers start to use it on their own, again
and again, without relying on overt calls-to-action such as ads or promotions,
that the product becomes a habit.
These habit-forming products change user behavior and create
unprompted user engagement.  Habit formation is good for business in
several ways. Building for habits increases customer lifetime value, provides
pricing flexibility, supercharges growth, and erects competitive barriers.
1. Increasing Customer Lifetime Value
Fostering consumer habits is an effective way to increase
the value of a company by driving higher customer lifetime value (CLTV). CLTV
is the amount of money made from a customer before she switches to a
competitor, stops using the product or dies. User habits increase how long and
how frequently customers use a product, resulting in higher CLTV.
Some products have a very high CLTV. For example, credit
card customers tend to stay loyal for a very long time and are worth a bundle.
Hence, credit card companies are willing to spend a considerable amount of
money acquiring new customers. This explains why you receive so many
promotional offers, ranging from free gifts to airline bonus miles, to entice
you to add another card or upgrade your current one. Your potential CLTV
justifies a credit card company’s marketing investment.
2. Providing Pricing Flexibility
Habits give companies greater flexibility to increase
prices. For example, in the free-to-play video game business, it is standard
practice for game developers to delay asking users to pay money until they have
played consistently and habitually.
Once the compulsion to play is in place and the desire to
progress in the game increases, converting users into paying customers is much
easier. Selling virtual items, extra lives, and special powers is where the
real money lies.
As of December 2013, more than 500 million people have
downloaded Candy Crush Saga, a game played mostly on mobile devices. The game’s
‘freemium’ model converts some of those users into paying customers, netting
the game’s maker nearly a million
dollars per day
.
3. Supercharging Growth
Users who continually find value in a product are more
likely to tell their friends about it. Frequent usage creates more
opportunities to encourage people to invite their friends, broadcast content,
and share through word-of-mouth.
Products with higher user engagement also have the potential
to grow faster than their rivals. Case in point: Facebook leapfrogged its
competitors, including MySpace and Friendster, even though it was relatively
late to the social networking party. Although its competitors both had healthy
growth rates and millions of users by the time Mark Zuckerberg’s fledgling site
launched beyond the closed doors of academia, his company came to dominate the
industry. Facebook’s success was, in part, a result of the more is more
principle ‘ more frequent usage drives more viral growth.
4. Creating Competitive Barriers
When it comes to shaking consumers’ old habits, better
products don’t always win ‘ especially if a large number of users have already
adopted a competing product. For example, August Dvorak designed a keyboard in
1932 that is far more efficient than the QWERTY most people use today. Dvorak’s
design of vowels in the center row proved to increase the speed and efficiency
of typists. However, despite having built a better product, the switch to his
keyboard never happened. Why? QWERTY survives because the costs of switching
user behavior after habits have been formed are too high.  
For many products, forming habits is an imperative for
survival. As infinite distractions compete for our attention, companies are
learning to master novel tactics to stay relevant in users’ minds. Today,
amassing millions of users is no longer good enough. Companies increasingly
find that their economic value is a function of the strength of the habits they
create. In order to win the loyalty of their users and create a product that’s
regularly used, companies must learn not only what compels users to click, but
also what makes them tick.
You can hear Nir speak
at the upcoming Future of Consumer Intelligence Conference 2014 in Los Angeles,
California.  The Future of Consumer
Intelligence 2014 explores the emerging role of decision science and the
convergence of knowledge points – insights, foresights, social science,
marketing science and intelligence with technology as a central driving force and
profound connector. For more information
on the event, click here to download the interactive brochure: http://bit.ly/1h9MG2Q
Register for FOCI and see Nir in person! http://bit.ly/1eozvcg

1. Dickinson, A. &
Balleine, B. (2002) The role of learning in the operation of motivational
systems. In Gallistel, C.R. (ed.), Stevens’ Handbook of Experimental
Psychology: Learning, Motivation, and Emotion. Wiley and Sons, New York, pp.
497’534.

How to Build Habit-Forming Products in Four Steps

Can New Model Help Get Respondents Hooked on Research?

By Marc Dresner, IIR
Email, Facebook, Twitter’most of
us engage in one or more of these and other, similar types of pursuits every
day, usually many times a day, without fail and typically without being
prompted to do so.
Some of these activities we can justify.
Maybe not Angry Birds, but we all
need email, right? Our jobs demand it.
Even on vacation’with autoreply’when
all projects and accounts are in safe hands and you’ve dotted all the i’s and
crossed all the t’s before walking out the door’
Let’s be honest: Do you tell your
colleagues not to email you while you’re away on vacation or is it usually the
other way around?
My boss once threatened me with
an additional week of vacation if I emailed
her again from whatever beach I was suffering on.
And I’m not even a workaholic.

Sometimes, it’s not a
matter of choice; it’s an inescapable compulsion.

Deprivation studies show that separating someone from their smartphone for just one day produces intense anxiety

Indeed, deprivation studies show time
and again that when separated from one’s favorite device’usually a smartphone’for
even just a single day, people frequently experience intense anxiety.

Nir Eyal refers to the apps and
such to which we as a society seem increasingly tethered as ‘habit-forming
technologies.’

‘These
products somehow draw us to use them’It’s unprompted engagement.’
Nir Eyal

‘These products
somehow draw us to use them,’ said Eyal. ‘It’s unprompted engagement. They
don’t necessarily say, ‘Hey, come open this app,’ and yet we still take out our
phone and do it anyway.’

In
short, a ‘habit’ occurs with some regularity and usually with little or no
conscious thought.
And in his new book, ‘Hooked: How to Build Habit-Forming Products,’ Eyal explores the how and why behind this
behavior and introduces a model for developing products that cultivate it.

The
pattern that habit-forming technologies take time and again is a four-step
process: the ‘Hook Model’

‘The
process, the pattern that we see habit-forming technologies take time and time
again is a four-step process I call the ‘Hook Model,” Eyal told The Research Insighter.

‘The Hook Model is very
simply an approach to connect your user’s problem to your solution with enough
frequency to form a habit,’ he added.

How
could the Hook Model be applied to increase research response and cooperation?

While
this should appeal to anyone in product development for obvious reasons, geek
that I am, I couldn’t help but wonder how the Hook Model might be applied to increase
research response and cooperation.

To what
extent do we see Hook Model principles effectively used in some of our more
engaged panels and research communities?
Can
these principles be introduced with minimal risk of biasing sample?
In this
interview with The Research Insighter‘the official podcast series of the Future of Consumer Intelligence conference’we’ll review:
‘ The four-step
process for getting someone ‘hooked’
‘ The
roles frequency and perceived utility play
‘ How
to increase the habit-forming potential of a product or service, and much more’

Editor’s note: Nir Eyal will present ‘Designing Habit-Forming Technology‘ at The Future of Consumer Intelligence conference taking
place May 19-21 in Universal City, CA.

As a loyal reader of this blog you will SAVE 15% on your registration to attend The Future of Consumer Intelligence when you use code FOCI14BLOG today!

For more information or to
register, please visit www.futureofconsumerintel.com 

Want to hear more from Nir Eyal? Check out his blog: NirAndFar.com.
Marc Dresner

ABOUT THE INTERVIEWER 
Marc Dresner is IIR USA’s sr. editor and special communication project lead. He is the former executive editor of Research Business Report, a confidential newsletter for the marketing research and consumer insights industry. He may be reached at mdresner@iirusa.com. Follow him @mdrezz.

Secure Your Future in Market Research at The Future of Consumer Intelligence

As someone who’s engaged with The
Future of Consumer Intelligence
in the past, you know what we’re all about.
But why should you choose this event over any other?

We know that there are a lot of conference options out there. There are events
that talk about research, about innovation, and about technology, but no other
event out there brings it all together, and respects the science behind the
disciplines. The Future of Consumer Intelligence is the result of that
intersection, true innovation that’s reshaping the future of the market
research industry.

If your future interests include participating in market research, truly
understanding your consumers as people and translating insights into new
business opportunities, The Future of Consumer Intelligence is where you need
to be.

The Future of
Consumer Intelligence 2014
May 19-21, 2014 // Sheraton Universal // Universal City, CA
Download the brochure for full conference details: http://bit.ly/1f7IuT6

We’ve created the right mix to inspire innovation within your market research
practices – the right people, just as passionate about what we do as you are,
the right content, focused on innovation and technology in research, and the
people you want to hear from, including: 
  • The Future of Technology: When Minds & Machines Become
    One: Ray Kurzweil, Director of Engineering, GOOGLE
  • Privacy & Big Data: Ann Cavoukian, Ph.D., Information
    and Privacy Commissioner of ONTARIO,
    CANADA
  • A Guide to Long-Term Thinking: Magnus Lindkvist,
    Trendspotter, FUTUROLOGIST
  • Giving Big Data a Direction: John C. Havens, Founder, THE H(APP)ATHON PROJECT
  • The Art of Business Analytics: Simon Thompson, Director,
    Commercial Solutions, ESRI
  • Humanization of Data: Jer Thorp, Former Data Artist, THE NEW YORK TIMES
  • Designing Habit Forming Technology:  Nir Eyal, Habit
    Design Researcher, NIRANDFAR.COM
  • Can Technology & Privacy Co-Exist?: Jonathan Fox, Global
    Director of Data Privacy, MCAFEE
  • Generating Word of Mouth: Jonah Berger, Author, CONTAGIOUS: WHY THINGS CATCH ON 

And more!
Download the new, interactive conference brochure for full
session descriptions and access to exclusive video content from the 2013 event:
http://bit.ly/1f7IuT6

Mention code FOCI14BLOG & Save 15%
off the standard rate. Register today: http://bit.ly/1fdYQF6

We hope to see you in California!

All the best,
The FOCI Team
@TMRE

#FOCI14

themarketresearcheventblog.iirusa.com

Ray Kurzweil On Intelligence When Minds & Machines Become One

“WHY DID YOU CHANGE YOUR MIND?”
Every researcher’s dream is to truly understand what
motivates, persuades and changes behavior. 
Technology is a disruptor, and when
paired with science the possibilities are endless.  

Come explore possibility with us at The Future of Consumer
Intelligence and discover how to translate genuine insight into confident
decision making.
The Future of
Consumer Intelligence 2014
May 19-21, 2014 // Sheraton Universal // Universal City, CA

Download the brochure
for full conference details: http://bit.ly/1fLunmf
2014 Keynotes
include:
  • The Web Within Us: When Minds & Machines Become One, Ray
    Kurzweil, Director of Engineering, GOOGLE 
  • The Need for BIG Privacy in a World of Big Data, Ann
    Cavoukian, Information & Privacy Commissioner, 
  • ONTARIO, CANADA
  • Making Data More Human, Jer Thorp, Former Data Artist, THE
    NEW YORK TIMES
  • How to Generate Word of Mouth, Jonah Berger, Author,
    CONTAGIOUS: WHY THINGS CATCH ON 
  • When the Future Begins – A Guide to Long-Term Thinking,
    Magnus Lindkvist, Trendspotter, Futurologist
  • Designing Habit-Forming Technology, Nir Eyal, Habit Design
    Researcher, NIRANDFAR.COM

Topics Covered Include:

Consumer Intelligence // Big Data & Analysis // Strategy
& Action Planning // The Future Consumer // The Connected Consumer //
Research at the Center of Marketing Strategy // Data Visualization //
Crowdsourcing // The Future Researcher // Beyond Data Driven // Social
Listening //
Designing Intelligence // Privacy in a World of Big Data // From Consumer
Understanding to Empathy // Leveraging Technology to Uncover Deeper Insights //
Designing Habit-Forming Technology
And much more!
Mention code FOCI14BLOG & Save 15% off the standard
rate. Register today:
 
**Plus, don’t miss your special video invitation from
conference Chairman Ben Smithee to find our why you need to attend The Future
of Consumer Intelligence: http://bit.ly/MuI2CO
Interested in learning more? Download our new, interactive
conference brochure loaded with exclusive content that can’t be found anywhere
else: http://bit.ly/1fLunmf
We hope to see you in California!
Best,
The FOCI Team
@TMRE
#FOCI14

www.themarketresearcheventblog.com

Ray Kurzweil On Intelligence When Minds & Machines Become One

“WHY DID YOU CHANGE YOUR MIND?”
Every researcher’s dream is to truly understand what motivates, persuades and changes behavior. 
Technology is a disruptor, and when paired with science the possibilities are endless.  
Come explore possibility with us at The Future of Consumer Intelligence and discover how to translate genuine insight into confident decision making.
The Future of Consumer Intelligence 2014
May 19-21, 2014 // Sheraton Universal // Universal City, CA

Download the brochure for full conference details: http://bit.ly/1fLunmf
2014 Keynotes include:
  • The Web Within Us: When Minds & Machines Become One, Ray Kurzweil, Director of Engineering, GOOGLE 
  • The Need for BIG Privacy in a World of Big Data, Ann Cavoukian, Information & Privacy Commissioner, 
  • ONTARIO, CANADA
  • Making Data More Human, Jer Thorp, Former Data Artist, THE NEW YORK TIMES
  • How to Generate Word of Mouth, Jonah Berger, Author, CONTAGIOUS: WHY THINGS CATCH ON 
  • When the Future Begins – A Guide to Long-Term Thinking, Magnus Lindkvist, Trendspotter, Futurologist
  • Designing Habit-Forming Technology, Nir Eyal, Habit Design Researcher, NIRANDFAR.COM

Topics Covered Include:

Consumer Intelligence // Big Data & Analysis // Strategy & Action Planning // The Future Consumer // The Connected Consumer // Research at the Center of Marketing Strategy // Data Visualization //
Crowdsourcing // The Future Researcher // Beyond Data Driven // Social Listening //
Designing Intelligence // Privacy in a World of Big Data // From Consumer Understanding to Empathy // Leveraging Technology to Uncover Deeper Insights // Designing Habit-Forming Technology
And much more!
Mention code FOCI14BLOG & Save 15% off the standard rate. Register today: http://bit.ly/MupKSc
**Plus, don’t miss your special video invitation from conference Chairman Ben Smithee to find our why you need to attend The Future of Consumer Intelligence: http://bit.ly/MuI2CO
Interested in learning more? Download our new, interactive conference brochure loaded with exclusive content that can’t be found anywhere else: http://bit.ly/1fLunmf
We hope to see you in California!
Best,
The FOCI Team
@TMRE
#FOCI14