Recently I had the honor of speaking at the Habit Summit, a cool conference on habit building and other behavioral design issues. I shared with the audience how companies can build better and more profitable customer habits through proper customer relationship management. This talk was the culmination of my more than 10 years of research on consumer habit by analyzing tons of customer data from a variety of industries including retail, financial, and travel industries. In this three-part blog series, I’d like to share some of those insights with you. In this part 1, I will talk about how to facilitate habit shaping and development in the customer acquisition phase. Then in part 2, I will discuss the role of habit in customer retention. Finally in part 3, I will share how to build on habit and even more importantly not mess up with habit in customer expansion strategies.
Habit Evolution Over Time
In my research, I have tracked the pattern of customer habit evolution over time. Again and again, I see a U-shaped curve like the figure below. In the beginning, consumers are new to the company. Although the novelty makes them buy frequently, there is a lot of exploration going on, trying to understand what the company has to offer. This is why you see a dip in habit in the figure. Then as consumers become familiar and comfortable, they settle into a more stable behavioral pattern and their habit strength associated with the company goes up.
What does this U-shaped curve mean to your business? It means that there should be two distinct phases in your habit strategy. The first part is what I call the habit shaping window, where your strategy should focus on leveraging consumers’ exploration tendency to shape the most desirable habit for your business. Then in the habit increase stage, your strategy should enter into a habit maintenance and transformation phase, focusing on sustaining habit and not disrupting it unnecessarily. More on that second phase in latter parts of the series. Let’s focus on the habit shaping window and what you should do in this phase for now.
How Long is Your Habit Shaping Window?
The first question you’ll want to ask yourself is how long you have to work with in shaping new customer habit. The answer is it depends. Because habit develops from repeating the same behavior in the same context, the length of this habit shaping window really depends on how frequently people engage in the behavior. So if you have new customers who come in buying infrequently, you’ll have more time to work with those customers. But if some of your new customers start with gusto, your opportunity window will be shorter. Similarly, if your business is in one of those frequently consumed categories (e.g., snacks, mobile apps, etc.), you can expect a shorter habit shaping window. I have seen habit forming on average somewhere between 3-6 months for credit card products, compared with a much longer average window of a few years for less frequently used travel products and services. To gauge the exact time frame, you’ll need to do some analytics of your customer data to see the frequency and stability of your customers’ behavior over time.
Add Contextual Triggers to Build Habit
Now that you know how long your habit shaping window is, what should you do to build that habit? Research shows that you will really want to build in contextual triggers in your customers’ experience. Specifically, psychology research on habit has discovered four most common types of contextual triggers:
- Time trigger: associate your product use with a specific time (e.g., I use this app first thing in the morning).
- Location trigger: build your product use around a specific location for the consumer (e.g., I use this app when I am at the gym).
- Social context trigger: encourage the same cohort use of your product (e.g., I use this app whenever I am out with my buddies).
- Pre/post-event trigger: think about what people are likely to do before or after using your product and try to pair your product use with that action (e.g., I use this app right after my workout).
You don’t have to cover all four triggers with your product because some triggers may not be relevant to you. But do consider building at least one contextual trigger with your product. It is like programming the mind in an “if-then” fashion, so that when the if trigger is present, the habit associated with your product is likely to be put into action.
There is a lot more I can say about habit triggers than I have space for here. If you want to really dive into this topic, you may want to check out two wonderful books on habit: Hooked: How to Build Habit-Forming Products by Nir Eyal and The Power of Habit by Charles Duhigg.
Do NOT Offer Free Lunch!
Before leaving this first part of the series, I’d like to talk about a common mistake businesses make in the customer acquisition stage. In an effort to get more customers, businesses often offer free incentives to new customers. Everyone loves free! But my research sounds caution against overuse of free incentives, especially if building long-term habit is your goal. Below you can see a comparison of the habit evolution curve for a group of customers acquired without incentive (left) and another group acquired with some free incentive (right), based on real data. Do you see the difference? It takes much longer (the very long valley in the curve on the right) for those who joined with free incentive to settle into habitual behavior, and the eventual habit strength is not quite as high as those who joined without a free incentive.
This may be hard news to take, as you may have spent quite a bit of money on such free incentives. You may be worried that without the free incentives, it’ll be difficult for you to compete in the marketplace when everyone else is doing it. Fortunately there is a potential solution to the problem, by offering what I call “conditional love”. Instead of offering the incentive for free, no questions asked, you ask consumers to do something in return, ideally multiple times. The message goes like this: “If you do X n times, you will receive Y for free.” In field data that I’ve seen, requiring consumers to do something in return especially with repetition kick-starts the habit process. As you can see from the figure below, those joining with a “conditional” bonus actually form habit faster and stronger than those without any bonus. Wonderful, isn’t it?
Thank you for reading this first part! I hope you find the above discussion helpful. As always, please feel free to reach out with your comments or questions. See you next week with part 2 of the series. Want to be notified of new postings? Fill out the form below to subscribe to my blog.