Once users successfully form a habit of using their products, the company can benefit a lot, specifically: higher user lifetime value, greater price flexibility, faster growth, and stronger competitive advantage .
Habits are actions that people make in an almost unconscious state. According to statistics, nearly half of humans’ daily activities are subject to habit. Habits are one of the ways the brain can master complex actions. Neuroscience scientists point out that there is a basal ganglia in the human brain that is responsible for unconscious behavior. Those unintentional conditioned reflexes will be stored in the basal ganglia in the form of habit, so that people can free up energy to pay attention to other things. When the brain tries to take shortcuts instead of actively thinking about what to do next, a habit is formed. In order to solve the current problems, the brain will extract appropriate countermeasures from the behavior repository in a very short time.
How companies can benefit from habits
Since a well-established behavior pattern will have such a huge impact on our every move, companies will inevitably be able to use the power of habit to discover valuable business opportunities. In fact, companies that are proficient in this way have always regarded cultivating user habits as a basic principle of their products.
Habit-forming products can change the behavior of users so that they can start to engage in certain activities without external incentives. Its purpose is to allow users to consciously get close to this product over and over again, without the need for an explicit call to action such as advertising and promotion. Once the dependence on the product is formed, users will use the product to pass the time in the usual tasks such as queuing.
Before analyzing the causes of habit, we must first clarify the importance of habit and what competitive advantage habit can bring to the enterprise. Generally speaking, users’ reliance on products will bring the following benefits to enterprises:
1. Enhance “user lifetime value”
There is a concept in business administration: the value of a company is equal to the total amount of benefits it will obtain in the future. The reference standard depends on how the investor calculates the reasonable price of the company’s stock. When evaluating the performance of the company’s CEO and management team, it is mainly based on their ability to increase the company’s stock price. Therefore, CEOs and managers are most concerned about the size of the net cash flow generated by their company. In the eyes of shareholders, the management’s task is to implement strategic plans to increase the company’s future earnings by increasing profits or reducing costs.
Allowing users to form dependence on products is an effective way to enhance the value of the company, because it can enhance the “user lifetime value.” The so-called lifetime value of users refers to the total amount of investment a user pays for a certain product during his lifetime. When users rely on a product, the use time will be extended, the frequency of use will also increase, and the ultimate user lifetime value will therefore be higher.
The lifetime value of some products is quite high. For example, credit card holders will generally become long-term loyal users, bringing rich returns to credit card issuers. Therefore, these organizations will spend a lot of money to acquire new users. This is why you will receive a wide range of promotional offers, including free gifts or airline mileage awards, to entice you to apply for a new card or upgrade your old card. The lifetime value of users implied in you is the driving force behind the marketing of credit card institutions.
2. Improve price flexibility
Warren Buffett, a well-known investor and CEO of Berkshire Hathaway, once said,
“To measure whether a company is strong, it is necessary to look at how much pain it has experienced in raising prices.”
Buffett and his partner Charlie Munger found that after users form a habit of using a product, their dependence on the product will increase and their sensitivity to price will decrease. The two of them confessed that it was precisely because of this consumer psychology that they would invest in companies such as Coca-Cola, which became famous throughout the world. Buffett and Munger know very well that habits allow companies to take more initiative in raising prices.
For example, the rule of the free-to-play video game industry is that game developers delay charging players until they become addicted. Once players start to be impatient to play the game, and desire to reach a higher level in the game, then it becomes logical to pay for it. The real income actually comes from the sale of virtual game supplies such as virtual props, health points, and super powers. Since December 2013, more than 500 million people have downloaded “Candy Crush Saga”. This “free” game, which appears mainly on mobile devices, has turned some users into paying players, and brings net profits to game developers as high as $1 million per day on average.
3. Accelerate growth
Those users who continue to find surprises from the product are often happy to share this feeling with their friends. The more frequently they use the product, the more likely they are to invite friends to share it. The loyal fans of the product will eventually become the promoters of the brand, and they will do free publicity for your company, allowing you to gather new customers without any effort. Products that allow users to actively participate also have another advantage, which is to surpass their opponents at a faster rate of development in the competition. For example, Facebook, although it did not take the lead in the field of social networking, but it still came from behind, surpassing competitors MySpace and Friendster. When Zuckerberg gave up his studies and brought the newly released Facebook to the market, both MySpace and Friendster were developing well, with tens of millions of users, but despite this, the dominant position in the field of social networking was eventually seized by Facebook.
To a certain extent, Facebook’s success can be attributed to what I call the “virtuous circle” law: the more frequently it is used, the faster the viral growth. As David Skok, who has transformed from a technology company operator to a venture capitalist, pointed out, “The most critical factor in increasing the growth rate is the’viral cycle’.” This cycle refers to the length of time it takes for old users to invite new users, and its influence cannot be underestimated. For example, within 20 days, if a two-day cycle is used, the number of users may reach 20,470, but if this cycle is halved and turned into a one-day cycle, the number of users will exceed 20 million! Logically speaking, the shorter the cycle, the more ideal the result, but the degree of ideality has not received enough attention. “
Attracting a large number of users to visit every day will greatly shorten the product’s “virus cycle” for two reasons: first, old users will use the product more and more frequently (such as adding friends to follow on Facebook); second , The more old users there are, the more likely it is to attract feedback from new users. This cycle can not only increase the amount of user participation, make this reciprocating process never interrupted, but also speed up the promotion of the product.
4. Improve competitiveness
The user’s dependence on the product is a competitive advantage. Once a product allows users to change their lifestyle habits, other products are almost non-threatening. Many business operators mistakenly believe that as long as a new product is slightly better than the original product, it is enough to make users fall in love at first sight. However, when it comes to shaking the old habits of users, entrepreneurs will find that good products do not always have the upper hand, especially when many users have already chosen other competitive products.
John Gouville is a professor of marketing at Harvard Business School. He clearly pointed out in a classic paper: “Many innovations end in failure, because users always rely too much on the original products, but the merchants are always high Evaluate new products.” Gouville believes that for new products to gain a firm foothold in the market, it is not enough to be a little better, and must have an absolute advantage. Why is this? Because the influence of the original product has deepened into the bones, if you want to shake the user’s habits, the new product or service must have the energy to destroy it. Even if a new product has significant advantages, if the conflict with the user’s established habits is too intense, it is doomed to fail.
Take the QWERTY keyboard as an example, it is inferior to other new products in many aspects. This keyboard came out in the 1870s and was originally used on an old typewriter that is now an antique. Frequently used characters are very separated on this keyboard, which prevents the linkage lever on the typewriter from getting stuck when people are typing. Of course, this kind of obstacles to operation has long since disappeared in the digital age, but no matter how sophisticated the character layout of other new keyboards is, QWERTY is still a universal standard keyboard. The reason why QWERTY keyboards endure is entirely because the cost of changing user habits is too great. When we first used this keyboard, we often only used one or two fingers. After months of practice, we learned to mobilize ten fingers at the same time, and the text will flow from our thoughts to the screen without knowing it. Switch to a completely unfamiliar keyboard, even if it can improve work efficiency, it also means that we will have to learn to type again. The possibility of making this change is almost zero.
Users will also become more dependent on the product because of “stored value”, thereby further reducing the possibility of switching to another product. For example, using Gmail to send and receive emails, emails can be kept forever, and all the user’s past email content can be stored for a long time. The influence of Twitter users will increase with the increase in the number of fans, allowing them to exert greater energy when spreading information in the circle. Life segments recorded by users on Instagram can also be added to their digital clipboards. People’s lives are closely related to these products and services, and changing email services, social networks, or photo sharing applications will cause them too much trouble. The intrinsic value contained in these services is not transferable, so users will not easily abandon them.
All in all, the loyal dependence of users will prompt companies to make further investments in products. Higher user lifetime value, greater price flexibility, faster growth, and more significant competitive advantages, all of which will jointly create more considerable economic benefits for the enterprise.
Monopoly thinking
The ability to allow users to form dependence on the product is a desperate matter for enterprises. However, for new companies trying to break the status quo, this dependence will only reduce their chances of successful innovation. In fact, there are very few cases where users can change their long-standing habits. If you want to change the user’s habits, it is not enough to convince them to try new things, such as letting them open a webpage for the first time in their lives. You have to guide them to repeat this behavior for a long time in the future.
Some companies have succeeded in creating habit-forming products because they have carried out disruptive and bold innovations. However, like other practical activities, this innovative design must follow certain laws and principles to define and explain why some products have survived the change, while others have not.
The first thing to be clear is that our brains tend to use existing thinking patterns, so new behaviors are always difficult to last. Experiments have shown that after animals in the laboratory become accustomed to a certain new way of behavior, their behavior will turn around over time, regaining the old habits of the past. As described by a term “last in, first out” in accounting, the latest gains are often the first to be lost. This explains why it is difficult for people to quit a certain habit completely. Among alcoholics who have received treatment for abstinence, about two-thirds will regain their old habits within a year. Another study shows that people who lose weight through diet almost without exception get fat again within two years. In the process of cultivating new habits, the biggest obstacle is the old habits. Research shows that these old habits are deeply ingrained. Even if we adjust our behavior, the neural pathways in the brain remain in the previous state and may be activated again at any time. For those designers or companies who want to launch new products, this is undoubtedly an extremely difficult obstacle to deal with.
If you want a new habit to take root in your life, you must increase its frequency. If the user frequently touches a certain product, especially in a short period of time, the possibility of him forming new behavior habits will increase. Google search engine is a very typical example. It shows that once users start to use a certain service frequently, they will definitely incorporate this service into their fixed behavior habits. If you have doubts about Google’s ability to influence user habits, try Bing. When comparing the performance of these two platforms that both provide anonymous search services, we will find that they are no different. Although, thanks to the efforts of talented designers, Google’s calculation system runs slightly faster, but the time saved is hardly noticed by anyone. This is not to say that milliseconds are irrelevant, it’s just that such a small time difference cannot be a bait to hook users.
That being the case, why don’t more Google users turn to Bing’s embrace? This is the power of habit. It is habit that allows Google to have so many loyal users. When they are already familiar with the Google interface, switching to Bing will only increase their cognitive burden. Although Bing is similar to Google in many ways, even a small pixel setting difference may force users to adapt to new access methods. Adapting to the Bing interface actually reduces the search efficiency of these Google users and makes them feel that Bing is a bit inferior. This feeling has nothing to do with technology.
People often search for information on the Internet frequently, so Google is fully capable of consolidating its position and becoming the best choice in the minds of old users. Users will no longer worry about whether or not to choose Google, they just act on their instincts. In addition, using tracking technology, Google can also record the user’s search trajectory, improve the accuracy of search results according to their past preferences, and enable users to enjoy personalized services, thereby further strengthening their closeness with this search tool connect. The higher the frequency of use, the faster the search speed, and therefore the more users love it. It is the virtuous circle formed under this habit that has made Google dominate the industry.
Habit-based development strategy
Sometimes, a certain behavior does not occur frequently, but it still becomes a habit of users. If you want these infrequent behaviors to evolve into habits, you must let users deeply feel its usefulness, either it can bring you happiness, or it can help you relieve pain.
Take the Amazon website as an example. The strategic positioning of this online retailer is to become a one-stop shopping mall covering the world. It believes in its ability to create user habits, so it publishes many ads for highly competitive products on its website. Users will often see here that the goods they intend to buy are sold at a discount, and they can link to another website and complete the purchase with a single click of the mouse. Some people think that making a wedding dress for others is tantamount to seeking a dead end, but for Amazon, this is precisely the way it succeeds.
By advertising to major competitors, Amazon not only earns enough advertising fees, but also uses other people’s marketing investment to win a place in the minds of users. Users are eager to find the products they need, and Amazon’s website just prescribes the right medicine to alleviate people’s urgent needs. Although the website does not directly participate in the sales of these products, it has won a large number of loyal fans because it eliminates users’ concerns about prices, and has become a trusted website in the eyes of users. A study in 2003 showed that when users can learn about discounts on various products from online retail sites, they will be more likely to become loyal users of the site.
By allowing users to compare the products of different stores within the website, the Amazon website makes everyone deeply feel that its role cannot be underestimated. Although the frequency of people logging into shopping websites is not necessarily very high, they have already regarded Amazon as their first choice when buying goods. In people’s minds, its status is already indestructible. In fact, because users can easily and comfortably compare products for shopping on Amazon.com, they will frequently open the website’s applications on their mobile devices and compare prices while visiting physical stores. They can often buy what they like at the lowest price. commodity.
Habitual interval
To create habit-forming products, companies must seriously consider two factors. First, frequency, that is, how often a certain behavior occurs; second, perceivable use, that is, in the minds of users, what uses and benefits the product has compared to other products.
We use Google every day to search countless times, but in terms of specific search capabilities, it is not much better than the competitor Bing. On the contrary, we may not log in to the Amazon website so frequently, but we can feel its unparalleled advantages, because in this all-encompassing one-stop shopping site, we can buy anything we need. If the frequency of a certain behavior is high enough and the perceived use is enough, it will enter our “habit zone” and then evolve into a default behavior. These two factors are indispensable. If either aspect is missing, the possibility of a certain behavior developing into a habit will decrease.
Some behaviors will never develop into habit, because they do not happen frequently enough. No matter how rich this kind of behavior can bring you, the lack of frequency will only allow it to exist as your conscious action, but it will never become your subconscious reaction, and the latter is what we call a habit. . Even if the benefit of a certain behavior is not obvious, because it happens frequently enough, it will become your habit. This discovery can provide some theoretical guidance for enterprises. Unfortunately, as of now, no research has provided a general timetable to tell us how long it takes to develop a behavior into a habit. A 2010 study showed that some habits take only a few weeks to form, while others take more than 5 months to form. The researchers also found that the complexity of the behavior and its importance to the user greatly affect the speed of habit formation.
Think about it, which services or products are habit-forming? In fact, most of them, even if they don’t accompany us all the time, at least permeate our daily lives. Below, let us explore the root cause behind this frequent behavior.
Vitamins or painkillers?
Launching a new product or launching a new service should be an easy task, but the fact is that most innovation attempts end up without a problem. The reasons for failure are varied, such as the company’s shortage of funds, the untimely timing of product launches, the market has no demand for the product, or the founder gave up halfway. Similarly, the reasons for success vary. However, all successful innovations have one thing in common: they can solve problems. This may seem clear, but in fact it is very complicated, because people always have their own opinions on what kind of problem a new product should solve.
“Do you produce vitamins or painkillers?” When the founders of startups are eager to get their first venture capital, investors always like to ask them this old-fashioned question. From the perspective of investors, the correct answer should be “pain killers.” Similarly, those innovators in large and small companies are often asked to verify their innovative ideas in order to persuade investors that the time and money they spend is worth the money. Investors and general managers are like the goalkeepers of enterprises. They all hope to invest funds in projects that can solve practical problems, or in other words, projects that can meet current needs, so they will choose “pain killers.”
Analgesics can meet people’s explicit needs, relieve pain in certain parts of the body, and usually have a larger market coverage. In contrast, vitamins may not alleviate superficial pain. It can meet the emotional needs of users, but it cannot meet their functional requirements. When we swallow a multivitamin every morning, we don’t know if it can actually make us healthier. Studies have shown that the effects of multivitamins on our bodies actually do more harm than good. However, we don’t care if it is really useful. Taking vitamins is not because it is effective, but because it is like completing a task. Although it cannot relieve physical pain, it can bring psychological comfort. Even if we don’t know what it does, we all feel relieved by treating our bodies well.
Not taking painkillers may make us miserable, while vitamins are different. Occasionally a few days are missed, such as when going on vacation, it is not a big deal. Does this mean that investors and managers are making the best choice? Is it always the right strategy to produce painkillers instead of vitamins? The answer is: not necessarily.
Let’s take a look at some of the most popular consumer technology companies today, such as Facebook, Twitter, Instagram, and Pinterest. What are they selling? Is it vitamins or painkillers? Most people may answer “vitamins,” because the behavior of users on these sites is nothing more than to improve their status in social networks, not to complete important tasks. Remember the era when these services have not yet entered people’s lives? No one gets up in the middle of the night and yells to update their status. However, as with other innovative things, only when these things have been integrated into our lives, we will discover how much we need them. Before you decide whether these top technology companies in the world are selling vitamins or painkillers, please be clear: If you feel pain because you can’t perform a certain behavior, it means that a habit has been formed.
Here is a clarification of the concept of “pain”, because it frequently appears in business school lectures and marketing books, which is somewhat exaggerated. In fact, the experience we are trying to describe is closer to “itching”. It is a desire lurking in our hearts. When this desire is not satisfied, discomfort will appear. Those products that allow us to develop a certain habit can just alleviate this discomfort. The use of technology or products to “tick” can satisfy our cravings faster than just letting it go. Once we become dependent on a certain technology or product, it is the only panacea.
As for whether technology companies are peddling vitamins or painkillers, my opinion is that they have both. The services provided by technology companies are more like icing on the cake at the beginning, but once it becomes a part of users’ daily life, it will soothe people’s inner “itch” like painkillers.
Summary
(1) The usage habits formed by users for their products are fundamental to the survival and development of some companies, but not all companies are subject to this.
(2) Once users successfully form a habit of using their products, the company can benefit a lot. The specific manifestations are: higher user lifetime value, greater price flexibility, faster growth, and stronger Competitive advantage.
(3) Only when the frequency of occurrence of a certain behavior is high enough and the perceivable uses are sufficient, can it develop into a habit.
(4) Habit-forming products are non-essentials (such as vitamins) at first, but once they become habits, they will become essentials (such as painkillers).
(5) Habit-forming products alleviate the pain of users through “tickling”.
