User retention: 4 steps to master it in your startup, by Nir Eyal

Decipher me or I'll devour you: to early-stage startup founders like you, a user might look as mysterious as a sphinx. But we're here to tell you that other creators have been through that same feeling but eventually solved the puzzle.

Nir Eyal is one of them. After understanding how users think and keeping them engaged with his startups, he then decided to share his learnings on mastering user retention with other people on that same journey.

Nir is the best-selling author behind the books Hooked: How to Build Habit-Forming Products and Indistractable: How to Control Your Attention and Choose Your Life. He also taught Marketing at the Stanford Graduate School of Business and Design and sold two tech companies. Currently, he's an active investor in companies like Canva, Eventbrite, and ProductHunt.

You can watch his full chat with Gina Gotthilf, co-founder and COO of Latitud, in the video above. But guess what? We love summaries just as much as you do. So here's a non-nonsense guide on if you should build a product that creates habits and the four steps to master user retention in your startup.

Should you build a product that creates habits?

Yes, screens are everywhere right now. But think about it with more care and you'll realize they've been getting smaller and smaller: televisions, laptops, tablets, phones, wearables, and finally, no screen at all, with auditory tech like Alexa.

For Nir, this lack of screens makes us more reliant on our habits because there's less real estate to send people push notifications. That's why he decided to study how products can form habits instead of relying on momentary triggers.

You might be feeling bad right now, thinking you're brainwashing your customers. Well, Nir broke the news for us: any form of design is a form of manipulation. By designing, you're changing someone's behaviors or emotions to meet your business' ends.

But he remembered there are two kinds of manipulation: persuasion and coercion.

Persuasion is helping people do things they actually want to do but don't, because of the lack of good product design. If you have behavioral design skills, it would be a waste to not help people with your talent.

Now, coercion is making people do stuff they don't want to and will regret later on. That's not only unethical but bad for business: they'll never buy from you again and tell their friends to stay away from your company as well.

We want people to habituate, not become addicted to something. From the consumer's perspective, that means using the product because they want to, not because they feel like they have to.

Startups generally create products that actually help their users lead better lives (we know you're on that list!). Then, could they hook people into healthy behaviors (such as learning languages, exercising, or saving money) in a way that's as sticky as Instagram?

That's what Nir has been studying – and the answer is it depends.

(That's life for you.)

It's really hard to change consumer behavior. To actually have a shot at that, the size of your business doesn't matter. What matters is if your business is based on repeatable behavior. The cut-off frequency point is a week's time, Nir says.

Let's give an example. Imagine you have a car insurance startup. Your customers only need to contact you when they have a problem. It will be very hard to create consumer habits, so you're better off investing in making more sales and providing good assistance on the rare occasions your insurance is used. This is being sales-led.

But now, imagine you have a language learning app in which people need to have daily lessons taught by a killer owl. The product itself is what makes people want to use it, and if they don't feel that need, they'll just leave your startup to dry (aka churn). Now that's something you should invest in people using it repeatedly. This is being product-led.

So it's not that every business needs to be habit-forming, but that every product that needs to be habit-forming should be thinking about its hooks.

And what even is that? A hook is an experience designed to connect a user's problem to your product with enough frequency to form a habit.

4 steps to master user retention: the hook model

Now that you've decided that yep, your startup's product is something people should use at least once a week, you need to start working on your hooks. You need to have the four steps of the hook model embedded in your user experience. Let's check these hooks:‍

1st user retention hook: trigger

The first hook tactic is practicing triggers. Nir says that there are two types of triggers: external and internal.

External triggers

External triggers are everything that's on the environment and gives your users calls to action, telling them what to do next. The pings, rings, and dings.

To make good external triggers, understand your users' schedules. Nir gives the example of a flight attendant that wakes up a passenger violently to offer them a drink. We'd think the flight attendant was rude. Yes, they might eventually want a drink but only when they're feeling thirsty. So why don't we also consider how rude it is to send notifications to our own users on our schedule and not on their schedule? Food for thought.

Internal triggers

Internal triggers are an uncomfortable emotional state users can be in, from anxiety and stress to boredom. Every product interaction your users have is rooted in a psychological reason.

When you are building a product that's habit-forming, you need to ask yourself what uncomfortable sensation you're solving. Invest as much dedication as you can to identify internal triggers because that's the foundation of everything.

Keep asking yourself why people do what they do currently. Focus on emotions and not features to become more creative, come up with a real solution, and understand the real internal triggers.

"The problem with startups is that they already know the solution but they don't know the problem. That happens all the time", Nir says.

When you discover the internal triggers, building the external triggers gets way easier and more effective. Eventually, you'll understand your user so well that you'll be able to reduce your external triggers: they'll already become internal to your customers. Congrats: you formed a habit.

2nd user retention hook: action‍

After the trigger, you get to the action phase. You present to the user the simplest action they can do to get relief from their psychological discomfort. For example: after receiving a notification from a language app, they can just open it.

3rd user retention hook: the variable reward

After doing the simplest action possible, they are offered a variable reward. That's the core of the hook model, so pay close attention!

In the product design community, Nir says it's often taught to just give people what they want. But you also need some variability, in the form of an intermittent reinforcement

The time you brainy folks were waiting for: Nir's idea comes from the American psychologist Burrhus Frederic Skinner's operant conditioning. B.F. put pigeons in a cage and let them peck at a disk to receive a food pellet. So they'd feel hungry, peck, and get their needs met. Times were good.

But then the psychologist tested giving them the pellets only sometimes. What happened was the number of pecks increased when the reward was given on a variable schedule of reinforcement.

The conclusion? In products that are based on habit-forming, you'll always see this variability, the presence of the unknown. You can see this when playing slots or scrollig your Instagram feed. Make that reward valuable and you can proceed to the next and final step.

4th user retention hook: the investment

The final hook is asking the user to input something into your product to make it better.

In our language app, that would be showing the next lessons based on their previous answers. In social media, that would be recommendations based on the user's history and on the social media-developed algorithms. The app just gets better and better, and users keep using and using it.

Checklist to master user retention in your startup

Answer these five questions to nail the hook model and master user retention in your startup:

1. What is the customer's internal trigger? (What is the psychological itch that the use of our product will scratch?)
2. What's the external trigger then?
3. What's the action? How can it be made simpler?
4. What's the variable reward? Is it fulfilling and yet leaves the user wanting more?
5. What's the bit of work done to increase the likelihood of the user passing through our hooks once again?

‍