Businesses need to understand consumers better than they know themselves: Nir Eyal


  • 31 Mar 2016
Businesses need to understand consumers better than they know themselves: Nir Eyal

Creating customer habits around products is a constant challenge for businesses, both big and small. In his book Hooked: How to Build Habit-Forming Products, Nir Eyal talked about creating products compelling enough to “hook' their users. The part-time academic, entrepreneur, angel investor and author will look at the the psychology behind what drives user behaviour and how to build products to cater to core human at a VCCircle Training workshop on May 20 at Singapore. In this interview with VCCircle, Eyal talks about the most neglected step in building a habit-forming product, his mantra for investing in a startup and insights into psychological attributes for winning businesses. Edited excerpts:

Your work primarily revolves around the intersection of psychology, technology and business. What are the psychological attributes which, when combined with cutting edge technology, can build winning businesses?

For most companies, constantly vying for customer attention is a struggle, but some businesses make bringing users back look easy. l believe the impulse to check Facebook, open Slack, or play Candy Crush is no coincidence. Rather, these products are designed for habit. The successful attributes can be enumerated as follows:


1. Frequency is Key

Habits are most likely to take hold when the behaviour occurs frequently. Considering how many times per day people search Google, check sports scores, or send email, it’s clear why these products are so habit-forming.

2. Form Associations


Habit-forming products attach themselves to what I call “internal triggers.” The most frequent internal triggers are negative emotions. When we’re lonely we check Facebook. When we’re uncertain we search Google. When we’re bored we watch videos on YouTube.

3. Use Good Triggers

To form the habit in the first place, products need to utilise “external triggers”. Anything that tells the user what to do next — like a 'click here' button, a notification, or even customer word-of-mouth — is an external trigger. When an external trigger prompts the user to action the moment they feel the internal trigger, that’s magic.


4. Make the Habit Simple

Making a behaviour easier to do increases the likelihood of the action occurring. Opening an app, scrolling through a feed, or pushing a play button are all examples of these very simple actions.

5. Use Variable Rewards


Variable rewards give the user what they came for and yet leave them wanting more. They scratch the user’s itch and yet keep them guessing about hat they might find the next time they engage with the product or service.

6. Get Users to Invest

Asking the user to invest in the product increases the likelihood of the user returning. When the user accrues data, content, followers, reputation, or skill by using the product, they store value in it, it becomes better with use, and the user is more likely to use the product again.


How important is emotion while dealing with logic in the context of building a successful product?

At the core of every human behaviour is the avoidance of pain. Even the desire to attain something pleasurable creates a wanting sensation we call the “stress of desire.” The way the brain gets us to act is by using emotion first and logic second. Therefore, to design for user behaviour, businesses need to understand consumers better then they understand themselves. An understanding of consumer psychology is critical.

What is the underlying idea behind your “theory of hooks”? Can triggers and rewards be applied to all businesses?

Not every business needs to create a habit, but every business that needs a habit needs a hook. Designing habit-forming products isn’t easy and I wouldn’t recommend doing it unless your business model depends on it. For example, many of the companies I describe in the book, such as Facebook, Twitter, and others, would go out of business if they didn’t create and retain consumer habits. However, even if your company doesn’t rely upon a habit, there is still much to be learned from consumer psychology.

What are the attributes you look at while assessing an angel investment opportunity?

I look for GEMs. GEM stands for growth, engagement and monetisation. Each of these three elements are necessary but not sufficient. Before I invest, I want to understand how the company will grow its user base, how the product uses consumer psychology to keep people engaged, and how it will ultimately monetise.

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