Nir Eyal (author of How to Build Habit-Forming Products) explains the importance of asking users to invest in a product to increase retention. He argues investment (not primarily money) creates "stored value" that makes products appreciate with use and lists four ways investments store value: contributed content, data, following, and reputation, each making it harder for users to leave.
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Hi, my name is Nir Eyal, author of how to Build Habit Forming Products. And today I'm going to tell you probably the most overlooked part of building a habit forming product. It's all about how to get users to invest. Now many people in the technology business think that if we just give people what they want, that that's good enough. But actually there's a missing step that if you don't ask for you, you're really missing out on a huge opportunity. That missing step is asking users to invest in the right way. Now, investment is not just about money. In actuality, money is the last form of investment. Because remember, monetization is a result of engagement. And if you can get people to engage with your product or service, they're much more likely to monetize later on. So investment is all about work that the user does something that the user will put into the product to improve the product with use and make it more likely for them to come back in the future. Now there are a few ways to get users to invest in your product or service, but the most important thing about the investment phase is that it increases the likelihood of the user coming back. Now before I go into the different forms of investment and how to get your users to invest in the product, let me tell you why investment is so important. User investments in your product are very important because they allow the product to improve over time. And this is a really, really big deal if you think about it. Everything that you use in the physical world, your clothing, these books, everything that you can touch and hold in the physical world depreciates with use, right? The more you use it, the less value it becomes, it depreciates. But habit forming products should do the opposite. Habit forming products should appreciate in value. They should get better and better the more they are used. And they do this because of this principle that I call stored value. Now, investments build stored value by improving the product with use. The more you use the product, the better it becomes. And there are a few forms of investment that store value. Let me take you through four ways that investments store value. The first way that investments store value is by asking the user to contribute content. So when you think of a Pinterest page or using Google Drive, for example, the more content that you upload, the more valuable the service becomes to you. So that the more content I put into my Google Drive, the more it becomes my one and only cloud storage solution. Another form of investment is data. So when you think about the more data you give a site, how it becomes better and better over time. Think about Mint.com, a personal finance software. The more data you give the service, the more valuable it becomes. It becomes harder to stop using that software because of how much you can do with it. The more data you give the service. The next way that investments store value in a product is by building a following. Followers increase the likelihood of a user coming back to the site. So if tomorrow Instagram were to tell everybody, hey, look, we're gonna shut down Instagram unless you send us some money, who's more likely to pay? Is it gonna be someone who has just 10 followers or is it gonna be someone who has 10,000 followers? Well, of course it's gonna be the person with more followers. Because the product becomes better at reaching an audience the more followers you have. It stores value, the bigger your follower count. And finally, reputation. Reputation is a form of stored value that users can literally take to the bank. So when you think of sites like Upwork or ebay or Airbnb, your reputation as a user of those sites makes the site better with use. You can literally charge more for your goods and services based on your reputation score. And think about it. How likely are you to leave one of these platforms after you stored all this value in the form of your reputation, Right? Even if a better product or service were to come along, you probably wouldn't leave because you've got this great reputation only on that site. Which brings me to the cold hard truth here people, that there is no rule anywhere that says the best product wins. Because it's not the best product that necessarily wins. It's the product that captures the monopoly of the mind. The first to mind solution. The company that can form that habit that captures the market. So remember, get users to invest in your product to improve it with use and make it more likely for them to come back in the future. So now go out there and build your habit forming product and good luck.
