How to Build Habit Forming Software Products w/ Nir Eyal, Author of Hooked

Hey everybody, it's Mike DelSito, co-founder of Product Collective, and we're back for another industry interview. Thank you so much for being here, um, and I am super excited for this interview today for a few reasons. One, this is definitely a topic that for me as a product person has been important. A couple of the products that I've worked on in the past, this is totally relevant. You know, products that we had were consumer-facing products and they needed to be, you know, sticky. They need to be things that people kept coming back to. So I remember reading Nir's book and it was super helpful, but also Nir was one of the very first speakers at Industry back in 2015. So he goes way back with, as it relates to Industry and what we're up to here at Product Collective. So I'm going to, you could already see Nir, but I'm gonna go and introduce Nir in just a second, Before I do, I want to just let a reminder to everybody who's here for the first time. Maybe this is the very first industry interview you've ever attended. First off, thank you for being here, but we do these pretty often. Usually it's the first and third Wednesday of every month. And pretty simple, you know, we try to find product leaders that are up for chatting with us here and gives all of you an opportunity to ask questions that might be on your mind as well. In fact, Here there's an ask a question section. You might see that. Also a chat. Definitely, you know, use the chat to introduce yourself, all of that. But if you have a question for our guests today, use the ask a question section. I'm going to be monitoring that throughout. So definitely check that out. I would love to ask your questions as well as mine. Also, there are a few other industry interviews coming up. There's one that's already on the site. And you can check that out. There's also one that we will be adding really soon with John Zeratsky, who's one of the co-authors of the book Sprint. So that's actually coming up in September. So keep an eye out for that. And then finally, we have our conference in the fall. Industry takes place in October, October 1st through the 3rd. But I'm pretty pumped that we just announced last week BJ Novak will be joining the lineup. So some of you might know BJ Novak as the youngest vice president of Dunder Mifflin. That was his character anyway on The Office. He was a writer and actor on The Office. He also is a bestselling author, a children's author. In fact, I learned that my 5-year-old son knew who he was, you know, well before I mentioned him at home. So I thought that was pretty cool. But BJ will be talking about some of the products he's worked on. Believe it or not, actually software products. He has worked on some of those, but TV scripts and books and the processes that he goes through It might not be all that different than what you go through as a software product person. So you might be surprised. So maybe you could join us in Cleveland for that. I actually— there's a promo code you could use. I made it just for today, HABIT, and you'd save a couple hundred dollars off of your pass. We're going to make that available for the next week so you can check that out. But with all of that out of the way, I do want to say hello to Nir Eyal. How's it going, Nir?

Hey, I'm doing great. Thanks so much for having me today.

Yeah, well, thank you for joining us again. It's, uh, you know, I really enjoyed reading your book. Um, it's been out for a while. When did it first come out again?

Can you remind me? Uh, late 2014.

Yeah, so definitely, you know, been out for a few years. But, um, I— again, we had the chance to bring you out to Cleveland, Ohio for Industry, actually the very first Industry back in 2015. But ever since then, like, I've continued to go back and reread your book Hooked a couple of times, listen to it, the audio version. It's definitely been something that I've revisited several times, and I thought that this would be a really cool opportunity because I bet there's several other product people, probably not just several, probably a couple hundred product people that are joining us today where they're in the same boat. So yeah, again, thank you very much for being here.

Oh, my pleasure. This is great. This is my favorite part, actually. So there's been so much happening in the habit-forming product space, and there's been a lot of development since I wrote the book that I'm very eager to talk about. And I love— this is my favorite part when I give a presentation. I'm happy to kind of give a run-through of the hook model and what I put in the book, but I would love to go beyond what I put in the book and kind of see if we could tackle some folks' engagement challenges when it comes to building habit-forming products.

I would love that. I would love that. And Like I said, hopefully many of the questions today are coming from the audience and not me, but I do want to start off maybe with just for folks that—

One thing real quick before we get into the questions. If we don't get to your question today, you can go to my website nearandfar.com. I actually do office hours every single week. I kept getting asked these questions about, hey, what do you think about my hook and how can I make my product more habit-forming? If we don't get to yours today, because we only have about half an hour, on my website there's a little tab that says schedule time with me. I book time with people every week in 15-minute increments. I do these office hours for an hour a week. Feel free to book some time there if we don't get to you today.

That's awesome. That's awesome. Thank you for bringing that up. And I put it right in the chat for everybody too.

All right, perfect. Cool.

So, you know, I wanted to— for a lot of the people that are joining us, I would assume they are already familiar with Hooked, maybe even already read through Hooked, but It might have been a while, so I just thought maybe just to start things off, if you wouldn't mind just really, you know, kind of giving us a quick refresher on the premise and sort of the background for, you know, what, why you wrote Hooked in the first place.

Yeah, absolutely. So I worked at the intersection of gaming and advertising for several years. At the intersection of these two industries, I saw a lot of companies come and go, and I didn't really understand why some worked and why some didn't. So I got started back in 2017 or 2007, back when apps wasn't mobile apps, apps were Facebook apps. And the Facebook ecosystem back then was a really interesting time to test out many of these theories around how consumer psychology can change people's behaviors. And so I saw a lot of companies kind of, you know, trying out these techniques and some of them would do incredibly well and then others would fall on their face. And so I really wanted to understand and codify why this was happening. And so when my last company was acquired, I had some time on my hands and I was looking for a guidebook on how to do this. How do we build the kind of products that bring people back? And the reason why I thought this was so important is because I had an investment hypothesis around how I would invest my human capital, which said that basically, you know, my view of the future was that as people went from desktop to laptop to mobile devices to wearable devices and now audible devices like Amazon Alexa, the Amazon Echo, and Microsoft Cortana and Siri, that habits become more and more important because as the real estate shrinks, as there's less place to trigger people with messages, with what I call an external trigger, you have to be triggered yourself. You have to form a habit. So the smaller the interface gets, the more important habits become. And I think that's been epitomized when you think about the voice interface with products like the Amazon Echo, where if you don't remember what to tell Alexa to do, she won't do it for you. And just the same way that goes with our mobile devices, if you don't exist on the home screen of someone's phone, if they don't remember that you exist, you might as well not even exist. So habits become increasingly important when it comes to mobile devices, and then of course to any device, any interface where the screen real estate shrinks. So that's why I wrote the book. I frankly didn't find a book that existed that taught me how to do this. And so I sought out to write it myself.

That's great. And I want to come back to, you know, you mentioned things like Amazon Alexa that when you wrote the book, I don't even know if like Amazon Echo was out quite yet. There's probably been—

nowhere near.

The world's changed a little bit in the last year. Right.

But what was clear even back then is that devices would become more ubiquitous. Transmission speeds would become faster and access to these devices would increase. So as devices became, you know, things that are— and I think that that's my positive for the year. Our devices will just be embedded into our day-to-day lives. And I think the Amazon Echo is a good example of that. You know, we'll have computing devices and these digital interfaces all over the place, and it'll be up to us and the app maker to create those habits that remind us to use these products.

Yeah, as a quick aside, sometimes that habit— my 5-year-old yesterday just out of nowhere said, Alexa, order a fidget spinner. And all of a sudden, like, fidget spinner ordered, and you had to go and cancel it. So sometimes those habits are really instilled even in the young ones.

The funny thing is my daughter now only talks to Alexa with the robot voice. So she'll say, Alexa, play me some music. So she's learned because that's how Alexa talks to her. That's how she talks back to Alexa.

That's funny. Well, so going back to that, to the hook, you know, I know there's a model, sort of this 4-step model. And again, some of us might remember that, but others might need a refresher. Would you mind even just giving us a quick refresher on those 4 steps? I feel like that's a big part of the book.

Sure. So I spent a lot of time trying to understand what is it about performing products? What is it about the best-of-breed companies out there in our industry that are so good at changing consumer habits? What is it that Facebook and Twitter and Instagram and WhatsApp, and even in the enterprise space, companies like GitHub and Slack and Salesforce— what is it that they do in the design of their products to keep people coming back on their own? And so what I found in my research was that they all use these 4 basic steps that I dubbed the Hooked Model. The Hook Model basically has these 4 basic steps. It starts with a trigger. There are 2 types of triggers. We have internal triggers and external triggers. We'll get back to those internal triggers in a second, but let's start with the external triggers. External triggers are something in our environment that tell us what to do next. It can be a ping, a ding, a ring, anything in your environment that gives you some piece of information for what to do next. Let's take Facebook. I think that's a very habit-forming product. I think a lot of people would agree that's a product that sometimes can turn from a habit to be a healthy behavior, sometimes for some folks even an addiction where they overuse the product. So the trigger would be the external notification, right? It's something over email, something over your device that says, hey, something just happened on Facebook, check it out. That's an example of an external trigger. The next phase of the hook is the action phase. The action phase is defined as the simplest behavior done in anticipation of a reward. In the case of Facebook, it's just opening the app and scrolling the feed. On YouTube, it's pushing the play button. On Google, it's a quick search. The simplest thing that I can do to get my need met. Then the third step of the hook is the variable reward phase. Now, the reward phase is where the user's itch is scratched, where they get what they came for. And when it comes to rewards, it's important that they're not just the reward. It's not just satisfying the user's need. What we also find with habit-forming products is that there's also some element of variability, some form of uncertainty. And this comes out of the work of B.F. Skinner, the father of operant conditioning. Skinner found that in his experiment, he took these pigs, he put them in a little box, he gave them a disc to peck at, and every time they pecked at the disc, they would receive a little reward, a little food pellet. And what Skinner observed was that the rate of response, the number of times these pigeons pecked at the disc, increased when the reward was given on a variable schedule as opposed to a fixed schedule of reinforcement. So we see variable rewards in all sorts of things that we find interesting and engaging. If you think about romance, what makes a romantic relationship interesting? What makes slot machines something that we like to play? What makes sports interesting? What makes the news something that we want to engage with. And of course, why do we keep scrolling our news feeds? It's all about these variable rewards, searching and searching for this next bit of information. And then finally, and perhaps the most important of the 4 steps of the hook, is the last step, which is called the investment phase. The investment phase is where the user puts something into the product in anticipation of some kind of future benefit, some kind of long-term reward. And so investment can take the form of data, content, followers, and reputation. All of these things that as I do, I'm increasing the value of the product with time. Now that's amazing. Think about it. That's never been done in the history of production of products. We've never had a time when we are co-creating in real time these products and services. So in the case of Facebook, right after I've opened the app, I've started scrolling my feed. Now that's the variable reward phase. The investment phase is every time I like something, comment, friend somebody, post something. All of these things are building the product for me in real data I'm giving the company, and it's improving it with use. Now, through successive cycles through these hooks, what we find is that we no longer need the external trigger at all. People become triggered from what's called an An internal trigger is a negative emotional state. It's a state of discomfort that we seek to escape. Now the way the brain gets us to act, all of our actions, is by this source of discomfort. We used to think in psychology that people act to gain pleasure and avoid pain. Came from Freud. Now we know that's not true. That neurologically speaking, it's actually pain all the way down. Everything we desire, everything we want, is driven by a homeostatic process. So for example, when you feel cold, you put on a coat. When you feel warm, you take the coat off. When you feel hunger pangs, you eat. And when you feel stuffed and it's not comfortable to eat more, you stop eating. So the same goes for our products. It's very important that you know, if you want to build a great product or service, it has to cater to a user's need. It has to cater to their pain points. Not just on a functional level, but on a psychological level. So it's very important you understand those internal triggers because your job as someone who's building a habit-forming product, the beauty of what we do in this industry, the reason I love being in this space and I believe in it so much is because we get to solve people's problems. But in order to do that, you have to understand what their pain points are. So the very first step is where I ended. It's understanding what is the sufficient frequency that we are going to attach our product's use to. Then we do the trigger, and then we do the action, the reward, and the investment, and then the hook continues. And of course, the hope is we don't want to hook people to just various things or time wasters. What we want to do is to help them form healthy habits, right? Get them exercising more, saving money, connecting with friends and family, being more efficient at work. These are all behaviors that we can turn into habits, into healthy habits, If people would only use our product. So that's why I do what I do. I don't want to get people hooked to video games and social networks. That's boring. What I want to do— why can't we use the same exact techniques in psychology to get people hooked to healthy habits that improve their lives?

Yeah, that's, that's great. And everything that you were saying, those 4 steps, I was thinking of my own personal experiences. With me, it's Less Facebook, although I'm there too, but like more on Twitter. And every single one of those steps, you're right on. And even those, those triggers that happen after the fact, like when I'm out of the app, I'm thinking to myself, I wonder if I have any, you know, are there any app notifications that I should be looking at? And it brings me back there. So it's, it's totally relevant. I'm curious though, you know, this seems, it seems simple, like the way you explained it was, it was pretty succinct. Then, you know, that sort of captured everything. But I also imagine that there are plenty of companies, plenty of products that get it wrong. Like even with the best intentions, even having read your book, listened to your talks, I'm curious, why is that? Why do you think people do get it wrong if the concept is relatively simple and easy to understand?

Yeah. So there's no one area that people consistently get wrong. It really depends on the context of that company. So it used to be for many years, the thing that everybody, or the most people got wrong was that they didn't believe that this worked, right? They thought that, that these kids in Silicon Valley, they somehow just got lucky. They stumbled onto these products and now millions of people, now billions of people just use them. And that's changed. Now I think people are starting to realize that good design must incorporate product psychology. We have to understand what makes people tick in order to understand what makes them click. And so that's now become, I think, more of an industry practice. I think the biggest problem used to be not even using this tool in the first place. Now I see that the problem is kind of shifting into how do we incorporate How do we get everybody on board to think about these deeper user needs? So we've crossed a big hump. I think there's still a far way to go. I think, you know, recently there's been a lot of talk around some companies doing this too well, right? That products like Facebook and Twitter and Instagram are hooking us too much, maybe causing addictions. But I still think that the real problem is not that a few companies have found ways to suck us in. The real problem is that far too many products just suck. Right? That way too many things out there are just— So the real opportunity, the real problem is that still not enough people use this inside their products and services.

Got it. Got it. And for, for product people, you know, this is, again, this is a critical thing for us. Many of our products like this should be something that we're adopting. If we're nodding our heads and agreeing with you, though, where can we start? Like, what is sort of step one for us as product people?

Right. So I don't say this to sell more books because I swear to God I'm not going to say this for that reason. You know, I don't care if you go pirate my book on, you know, somewhere on the internet where you can pirate my book. I don't really care. That doesn't matter. I already earned my advance, $3 a book. So that's not the point. The point is that I wrote the book for entrepreneurs. I wrote the book for people who build product, and I know how hard it is to build the kind of product people actually want to use. So the book is a very quick read. It literally tells you what to do. At the end of every chapter, it says, here's a summary, here's what you need to know, and here's what to do next. It literally says, do this now. I made it almost like a workbook inside a general psychology type, type book. So it's not full of time-wasting stories. It's a very actionable book. If you can get people to read it on your team, I think it changes their minds, and it will give them the vocabulary that they need to be able to even discuss this stuff. Once you start talking about the deficiencies of your product using this model, the best thing that the book can do to you, or this philosophy can do for you, is that it can help you diagnose why your product isn't engaging. right? It can tell you, oh my gosh, I don't have a good internal trigger, or the action is too difficult, or the reward isn't rewarding, or it's not variable enough, or I'm not asking for the right investment. To diagnose the problem and understand why this product isn't engaging enough is half the battle, right? You can't fix the problem unless you know what the problem is. That's the very first step.

That's great. And I am a big advocate of it too. So for folks that are on here that haven't read the book, I definitely would encourage it too. Again, borrow it from the library. I would encourage you to buy it too, because it's worth buying. But anyway you can read it, definitely read it. I have a couple more questions, but again, just want to encourage everybody to ask their questions. We have time for a few more. But the one thing I did want to ask is, again, it has been a few years and we talked about some new technologies that have popped up, but I'm just curious if you were rewriting the book right now, would any— has anything, any of those new things that popped up, has it changed? Like, is there anything you would necessarily add Or is it really like these new technologies just reinforce even more those key principles that, you know, that you put in Hooked?

Yeah, I think that the book has certainly held the test of time for the few years it's been out. I think that nothing I've seen has changed my mind about the Hooked model. I think it just as much applies today, maybe more so because the external triggers, as I mentioned earlier, you know, the external triggers don't exist for many of the products that we're trying to form habits around. So when you think about, a smartwatch app or a voice device, habits matter even more when the interface shrinks. So nothing has shown me that the model doesn't work. One thing that I didn't put in, wish I would have that I've since kind of uncovered later on is that some people kind of misunderstood that the variable reward phase is about gamification. And that's not true. Gamification using points, badges, leaderboards is a potential solution, but it's not the potential. You know, what tends to happen with gamification when we, when we put on points and badges and leaderboards willy-nilly without really understanding the entirety of the hook model is that we don't scratch the user's itch. And so this is a big problem because, you know, if the reward doesn't scratch the itch, if we don't understand first and foremost what is the internal trigger, what's the pain point, what's the uncomfortable emotion that we seek to satiate with sufficient frequency to form a habit. If we don't understand what that is, then we're just guessing, right? So, you know, if the user seeks to be entertained, let's say the internal trigger is boredom, well then points, badges, and leaderboards can be great because to be relieved of their boredom, for example. But let's say the internal trigger is workplace stress. It's, let's say it's anxiety about your money. Adding gamification is not gonna work, right? So the variable reward has to match the internal trigger. It has to scratch the user's itch or it's not gonna work. And I should have made that a little bit more clear because this is certainly not gamification. That's not what I'm advocating. In fact, most of the time I say don't use gamification. And then there's another little nuance in that, you know, some products want to add a variable reward. So if you think about a product like Facebook or, you know, many other social media apps, They would want to insert some variability. So there's this, this searching mechanic, this uncertainty about what you might find when you use the product. Other products operate in inherently variable situations, and in those cases, their goal is to give the user greater agency and control. Now, what do I mean by that? Let's take a product like Uber. Okay, 15 years ago— what am I talking about? Not 15 years ago, a few years ago, like maybe like what, 5 years ago? When you call the taxi cab company, it would take you a long time, right? You have to call the cab company and say, how long until my taxi cab gets here? And the agent would always say 15 minutes. That's where that number 15 came from. They would always say 15 minutes, go on there. Well, what does that do to the user's sense of fear and uncertainty about that internal trigger of, can I get to where I'm going on time, right? Sometimes 15 minutes will be true. Sometimes it'd be half an hour, sometimes it'd be 45 minutes because the dispatcher had no idea. Here comes Uber and Lyft and they give you this little Pac-Man interface that tells you exactly how far your ride is from picking you up. But what does that do to your sense of agency and control? It decreases that problem, that internal trigger is now satiated. Sometimes I find, I live in New York City, many times I'll call an Uber even if there's a New York City taxi cab right in front of me, because I've become so habituated to using the product. So sometimes if the internal trigger matches adding variability, that's the case. But in other scenarios, many times in SaaS applications, for enterprise products, for example, you don't want to insert variability. You want to take a situation that's already variable and give the user greater agency and control over something that's already variable. So that's a bit of a nuance, but it's very, very important.

Yeah, well, I'm glad you brought that up.

Somebody did ask about, hey, is there differences from B2C to B2B?

So that helps answer that a little bit. I am curious if, you know, would you answer their question even more on that, or is it really just sort of depend on, you know, B2B is even broad, SaaS is broad, like does it really just depend on the product itself?

So the line of demarcation I use, you know, in the book I talk a lot about consumer because those are the ones everybody knows, right? Everybody knows Facebook and Instagram and WhatsApp, but the same exact apply for enterprise products. The line— consumer or enterprise— the line of demarcation is frequent or infrequent. If your behavior, if the core habit does not occur within a week's time or less, it is almost impossible to change a consumer's habit. Okay, so if you're using the kind of— if you're selling an enterprise product, that is never used. What kind of enterprise products are never used? Let's say it's some kind of security software that you only need if something breaks. Let's say you sell insurance. Well, insurance is never going to become a habit because you buy it once and you don't use it, so to speak, unless something terrible happens. So for those kind of products, you don't need— that's a one-time sale, right? You just need to make the sale and hope nothing goes wrong. But if your product is frequently used and increasingly in enterprise products, you are competing on engagement. For SaaS products specifically, if people don't use the product, they don't re-up, they churn, they don't keep paying, they don't use it. So the line of demarcation is not enterprise or consumer, the line of demarcation is, is it a product that needs to be used habitually, that people use on their own with sufficient frequency? That's really when you need to form these hooks. Every business needs to be habit-forming. It's that every business that needs to be habit-forming needs a hook. Got it.

And I'm going to take one more question, if that's okay. Maybe we can have a quick answer for this one, but it was kind of along the same lines. The question was like, okay, I understand, you know, Facebook, Twitter, they have rich content. So there's a, there's a lot of rich content and events that, you know, customers might consider a reward, right? I need to keep scrolling so I see all that content. But what about a product like, you know, connected IoT thermostat? But it kind of goes back to what you said before, maybe, is, you know, maybe not all products necessarily need to be habit-forming. But I wanted to ask you about that.

Yeah, you know, if a product— if you can remove the need to use the product, right? If you can make a thermostat that doesn't rely on user behavior, that's great, right? If it's a one-time purchase and then I put it on my wall and it does everything for me, well, then you may not need the consumer to do anything. It's only what your business model requires. So the companies I talked about earlier, you know, let's take Google for example, or GitHub, or Salesforce, or Stack Overflow, any of these companies that I've mentioned, every single one of them, if people don't use the product out of habit, these companies die. If they had to send you an ad to remind you, hey, don't forget to use our product, these companies go out of business. So it's only dependent on what your business model requires. Now, habit forming is that you compete on price and features, right? If you're Geico and you sell car insurance, that is not a habit forming product. And Geico won a lot of business by saying, guess what, 15 minutes will save you 15% on car insurance. But if somebody else comes to market and says, hey, we can save you 16% with 14 minutes, well then they win. They win on those features and price. Whereas forming a habit is something that even if your product is not as good, people will still use your product, right? But the fact is, the cold hard truth is that it's not the best product that wins. Frequently it's the product that captures the monopoly of the mind that captures the market. Because once you form a habit with a product, you don't even ask, is there a superior product out there? When you Google something, you don't ask yourself, hmm, I wonder if Bing is better than Google. No, you just Google it. You don't even check to see if the competition is any better. And so that's the competitive advantage of having a habit-forming product.

That's great. Well, I could chat about this all day with you and pick your brain, but obviously we don't have all day and we're already up on our time. So it went really quick. But thank you so much.

One more quick one.

Yeah, I was gonna say there's questions people didn't, uh, did answer or did ask that I didn't get to. But again, um, you mentioned your— people can schedule, uh, kind of working hour or office hours with you, right?

Yeah, they absolutely can do office hours with me. I'm happy to do that, or shoot me an email. I think that's, uh, urgent. I can try and do that. The best thing is to schedule office hours with me. Um, I guess I can see some of these questions too. If I— maybe later on I can answer. Is there— can I answer inside this interface?

You can, you can come back to this interface for sure. Also, what I could do on Twitter, I could, you know, we could definitely do that too. Maybe I can ask some of these on Twitter. We could do that. But yeah, for folks that have logged in here, could come back to the interface for sure. So that's another good idea.

All right, terrific. I just, I just love answering these questions. So as many as you can throw at me, I'm happy to try and give a shot.

Awesome. Well, I hope people do go to nearandfar.com. We put the URL there because you have an awesome newsletter as well. You have a summit of your own. I think the summit just happened, right?

Right. Yeah, it was in April, the Habit Summit. Yeah.

So I hope people can check that out for next year as well. And yeah, how else can folks keep tabs on you? On Twitter, I assume, and other places as well, right?

Yeah. So nearandfar is my website. Again, near spelled like my first name, N-I-R. And then one thing I've been working on that some folks might be interested in is I'm I'm writing my next book now, and the next book is called Indistractable. I know many of us, including myself, struggle with distraction. Part of the reason why I got into this field of studying habit-forming products is that I saw how my behavior was being changed by my technologies, sometimes for better, sometimes not so good, right? Sometimes for the worst. And so I really want to dive into how do we— now that we know how to build habit-forming products, how do we as consumers put distraction in its place? And so something I really care about, a lot of times I get asked about ethics of how to use this stuff to help people. And it's something I'm very concerned about. And I really, you know, it's something I've been thinking about quite a bit. So my next book, if that's a topic that's interesting to you, if you find that you're, you sometimes find it difficult to stay focused and wish you could conquer distraction, then you'll be seeing a lot more of my writing on that through my newsletter.

That's awesome. Well, we'll definitely keep tabs on that. Well, thanks again for being here, Nir. I really appreciate it.

My pleasure. Thank you so much for having me.

All right, and thanks everybody for joining us. We'll see you next time.