Welcome to the sequel in our Growth Foundations series. Now that we’ve covered how technology companies utilize Acquisition Loops for swift product proliferation and securing dominant market positions, it’s time to delve into the strategies that keep users engaged, making them revisit and power use the product.
The focus of this article is to comprehend the significance of retention for the consistent growth of any brand, product, or protocol. We will unravel the concept of Habit Loops — understanding their essence, their vital role, and the approach towards creating customized one(s) for your product.
Take Instagram as an example — it has mastered the art of using powerful habit loops, which significantly contributes to its steadfast user base. People use Instagram so habitually, almost to the point where it could be viewed as excessive (and harmful), underscoring the effectiveness of these loops.
Section 1 — Revisiting Growth Loops, their Features, and the Two Macro Types
Section 2 — Retention, Habit Loops, and User Psychology
Section 3 — Organic Habit Loops, Examples, and Crafting Your Own
Section 4 — Manufactured Habit Loops; Triggers, Channels, Rewards, and Real-World Examples
Section 5 —Environment Habit Loops, Stages of the Loop, and Discovering Environment Loops
Section 6 — Recap of Key Points and Application
SECTION 1: Revisiting Growth Loops, their Features, and the Two Macro Types
Revisiting Growth Loops
Think of growth loops as self-propelling engines that continually promote user acquisition, engagement, and retention for a product or service. Imagine an ongoing cycle where the actions of users continually boost growth, resulting in an increasing number of people finding and using the platform or product. If designed correctly, this cycle can catalyze remarkable growth.
Essential Characteristics of Growth Loops
Intentional: Growth loops don’t just spontaneously occur. They have intentionally planned cycles involving user inputs, actions, and results, which drive the acquisition of new users or enhance engagement with existing ones.
Reflexive: In a growth loop, user inputs or actions produce beneficial outcomes, which in turn stimulate further inputs or actions. It’s a perpetual cycle that maintains the forward momentum.
Sustaining: The charm of a growth loop lies in its potential for longevity. Every successful loop reinvests in itself, fostering a climate for enduring growth. This self-reinforcing mechanism is what makes growth loops such an influential strategy for growing your user base and extending your product’s reach.
The Two Types of Macro Growth Loops
- Habit Loops: These loops focus on fostering repeated behavior among existing users, effectively turning these behaviors into habits. The process involves triggering user actions, rewarding the desired behavior, and reinforcing the action through positive feedback. Imagine it as a cycle of engaging, rewarding, and then reinforcing user behavior to ensure that they keep coming back to your product.
- Acquisition Loops: As the name suggests, these loops concentrate on acquiring new users. In this article, we deep dive into acquisition loops. The methods of acquisition can vary, encompassing everything from owned product channels to marketing/sales strategies. Tactics might include referrals, leveraging user-generated content, and more.
SECTION 2 — Retention, Habit Formation, and User Psychology
Imagine having a bucket full of holes. You keep pouring water (or in our context, acquiring and activating new users), but the water continues to leak out (users leaving). That’s precisely what happens when you don’t have user retention. You’re endlessly spinning your wheels, gaining few or possibly no net users.
Hence, retention — one of the pivotal factors for any brand, product, or community — is what fuels consistent growth. It’s the key to fixing that leaking bucket.
Retention = Activation + Engagement + Resurrection.
Today we will be focusing on Engagement.
Improving retention requires a strategy to induce users to form a habit with your product and to offer them rewarding experiences. That’s where Habit Loops come into play.
In the simplest terms, we define retention as:
amount of users active within a period of time
It’s a binary concept — you either retained a user, or you didn’t. There’s no middle ground.
Engagement, on the other hand, exhibits a depth spectrum. It plays an integral part in enhancing retention.
We define engagement as:
an activated user who is within the natural frequency of usage
The ultimate goal is to instill product-related habits in users, making them more likely to be retained. Once a user is activated and starts using the product within its natural frequency, it signifies that the user has likely formed a habit.
Engagement is the starting point of this journey. To successfully engage users, we need to comprehend their psychology. If we manage to engage them well, it’s probable that they will form a habit, ultimately resulting in active (retained) users.
Building on Claude Hopkins’ Legacy
Claude Hopkins, the author of Scientific Advertising, was a seminal figure when it comes to user engagement and habit formation. He introduced the “Routine — Reward — Cue” concept, which continues to be a cardinal principle in understanding consumer behavior.
Hopkins emphasized the power of habit and the role of rewards in strengthening those habits. His philosophies draw parallels to how users interact with products today. By creating a routine (the product usage), associating it with a reward (experiencing value proposition), and setting up a cue (a trigger or reminder), we can embed habitual product use in users’ daily/weekly monthly lives.
This approach, which comes to life through Habit Loops, helps transform user engagement into habit formation, ultimately leading to improved retention.
SECTION 3 — Organic Habit Loops, Real-World Examples, and Crafting Your Own
Organic Habit Loops
Continuing with our deep dive into Habit Loops, let’s turn our attention toward Organic Habit Loops. These loops form the crux of user engagement and are instrumental in encouraging habitual product usage, and are experienced by users organically when using the product.
Organic Habit Loops are ingrained processes that motivate users to routinely engage with a product or service, leading to its habitual use.
Stages of an Organic Habit Loop
- Organic Trigger: This is the initiation stage, where users encounter triggers that inspire them to act. These triggers are usually intrinsic and are related to their needs, emotions, or situations. Remember, it’s organic.
- Action: The user responds to the trigger by taking a specific action within the product.
- Reward: After the action, the user experiences a reward — often a positive outcome or satisfaction that reinforces the behavior and prompts repeated actions in the future.
Real-World Examples of Organic Habit Loops
Trigger: Boredom or seeking inspiration.
Action: Visiting Pinterest to explore and pin/save something of interest.
Reward: Discovery of intriguing content tailored to personal interests.
Trigger: The need to convene a meeting with people who aren’t physically present.
Action: Hosting a meeting on Zoom.
Reward: A seamless meeting experience with high-quality audio and video, no matter where the participants are located.
Trigger: Hunger coupled with an unwillingness to cook or step out.
Action: Ordering a meal through GrubHub.
Reward: Having delicious food delivered right to your doorstep, saving you effort and time.
Trigger: The need to commute to a certain place.
Action: Booking an Uber ride.
Reward: Convenient, timely transportation that spares you the hassle of driving.
The purpose of the Organic Habit Loop is to encourage users to seamlessly incorporate the usage of the product into their daily routines. By understanding and leveraging these loops, brands can significantly enhance user engagement and retention.
Crafting an Organic Habit Loop for Your Product
It is crucial to identify the Trigger, Action, and Reward associated with your product to define the organic habit loop effectively. Here are some questions that can help:
- Trigger: What problem does your user face that your product can address? Identify the initial itch that motivates your user to interact with your product.
- Action: What core action within your product equates to a user being retained? Define the main action users need to take within your platform for successful interaction and, ultimately, retention.
- Reward: Understand the “why” of your product. Why does your product exist, and why would users choose it over others? The reward is the payoff that users get after performing the desired action. It should be something meaningful and satisfying, driving them to repeat the action.
Strategies for Reinforcing Habits
Once you’ve identified your organic habit loop, the next step is to strengthen and reinforce it. There are two effective approaches to consider:
Manufactured Loops: These involve creating triggers within your product or through your marketing efforts. Manufactured loops are designed stimuli that nudge users towards a specific action. They could be as subtle as notifications, or prompts, or as overt as a new feature announcement or an entire marketing campaign.
Environment-Based Loops: These loops involve inserting triggers into the user’s environment or context, essentially weaving your product into the user’s everyday life. This could be done by integrating your product with other platforms or tools your users frequently use or creating use cases that align with users’ daily routines and activities.
Remember, effective habit loops create a smooth and rewarding user journey, leading to better engagement and ultimately higher retention. Your unique approach to a product will determine the balance between these strategies.
SECTION 4 — Manufactured Habit Loops; Triggers, Channels, Rewards, and Real-World Examples
Manufactured Habit Loops
Our exploration of habit loops continues with a look at Manufactured Habit Loops, a critical strategy for instilling desired behaviors in users and improving product engagement.
These loops strategically weave your product into users’ daily lives by incorporating triggers in their everyday environments.
The Stages of a Manufactured Habit Loop
Manufactured Habit Loops follow a particular sequence:
- Manufactured Trigger: These are cues or prompts that are deliberately created and inserted into the user’s perception to prompt a specific action.
- Channel: These triggers are then pushed through various channels, ranging from notifications within the product to emails or messages.
- Action: This is the core action around which we’re trying to establish a habit. It is the intended response to the trigger.
- Reward: This is the gratification the user receives after taking the action. The reward serves to reinforce the action and promote repeated behavior.
To illustrate the workings of Manufactured Habit Loops, let’s examine two cases:
Manufactured Trigger: New content related to topics of interest.
Channel: Email or push notification featuring new content tailored to the user’s interests.
Action: The user pins or saves some of the discovered content.
Reward: The joy of discovering new, interesting information, and the social reward of sharing it.
Manufactured Trigger: Changes like a comment or edit on an issue or card.
Channel: Email notification providing information about the change.
Action: User replies, comments, or performs other actions on the card.
Reward: A sense of completion and updated information, keeping the user informed and engaged.
Types of Manufactured Triggers
Different types of manufactured triggers can be effectively employed, depending on your product and user behavior:
- Time-based Triggers: These are timed notifications or prompts. For instance, JetBlue might send a reminder that your flight to LAX is in 90 minutes.
- Location-based Triggers: These triggers are based on the user’s location. For example, Starbucks may prompt users to pay with their app when they are near their favorite location.
- Change-based Triggers: These triggers are associated with significant changes. For example, Robinhood might alert users when Apple’s stock increases by 10%.
- Network-based Triggers: These triggers leverage the user’s social network. Imagine, Medium might notify you when Anthony posts a new article.
- Programmatic Triggers: These triggers are based on actions or sequences programmed into the user’s device or app. For instance, Dropbox could prompt users to back up photos when they connect their phone to their computer.
Each type of manufactured trigger serves a unique purpose and can be deployed in various contexts to promote user engagement and habit formation. These triggers, when used judiciously, can significantly improve user retention.
Channels for Delivering Triggers
Creating triggers is one thing, but delivering them effectively is another critical aspect of habit formation. Here are some common channels that can be used for engaging your users:
- Email: This classic method is still effective and provides a direct line to your users.
- Mobile: Utilize push notifications to reach users on their smartphones.
- In Product: Use UI/UX notifications to nudge users towards certain actions while they’re actively using your product.
- Platform: Employ integrations and partnerships to reach users on platforms they already use.
- Browser: Take advantage of browser notifications and extensions to keep users engaged.
- Desktop: Use desktop notifications to catch users’ attention while they’re using their computers.
- Paid Media: Leverage retargeting strategies to bring users back to your product.
- Direct Mail: Though it might seem old-fashioned, some users still respond well to physical mail.
Types of Rewards
The effectiveness of your habit loop is directly related to the perceived value of the reward. Here are some reward types that can motivate your users:
- Time: Show users how much time they saved by using your product.
- Money: Offer financial incentives, like a gift card for inviting a friend.
- Information: Provide valuable information, like a template after subscribing to an email list.
- Completion: Offer the satisfaction of completing a task, like reaching “inbox zero”.
- Mastery: Give users a sense of achievement, like reaching a new level in a game.
- Joy: Create delightful moments that enhance the user experience.
- Recognition: Give users likes or reward badges for their contributions.
- Confirmation: Reinforce social connections, like getting a friend request.
- Competition: Show users they’re doing better than others, like a notification that their open rate was higher than the industry average.
Real-World of Manufactured Habit Loops
Let’s look at how some companies integrate Manufactured Habit Loops into their products:
Slack — Network Trigger
Manufactured Trigger: Someone messages you.
Channel: Email with information about the message.
Action: You message the person back.
Reward: Social interaction, time saved, and task completion.
Amazon — Time Trigger
Manufactured Trigger: New scheduled shipment of items.
Channel: Direct mail or email notification about the shipment.
Action: Provide rating or feedback on items.
Reward: Financial savings, joy, and the surprise element.
Coinbase — Change Trigger
Manufactured Trigger: Ethereum’s value increases by 5%.
Channel: SMS or push notification with the price movement.
Action: Execute a trade on the platform.
Reward: Potential financial gain and a sense of mastery.
Understanding and utilizing the right channels and reward types can significantly enhance your habit loop strategy, leading to improved user retention and engagement.
SECTION 5: Environment Habit Loops, Stages of the Loop, and Discovering Environment Loops
Environment Habit Loops
These are unique types of habit loops that utilize the user’s environment. They work by inserting triggers into places and products that users interact with when they encounter the problem your product solves.
Stages of an Environment Loop
Organic Trigger: This is an organic cue or trigger tied to a user’s needs or circumstances.
Environment Trigger: This is a cue that is placed in the user’s environment, typically near where the organic trigger occurs.
Action: This is the core action that you want your users to habitually perform.
Reward: This is the benefit that the user receives after taking the action, incentivizing them to repeat the behavior.
Examples of Environment Habit Loops
Let’s look at how a couple of companies employ Environment Habit Loops:
Organic Trigger: The need for a simple, high-quality method to host a virtual meeting.
Environment Trigger: Google Calendar integration via the browser extension, which prompts the user to schedule a Zoom meeting.
Action: Host a meeting using Zoom.
Reward: Experience a meeting with high-quality audio and video.
Organic Trigger: The user wants a simple and secure way to earn a yield on their stablecoins.
Environment Trigger: An integration with Shapeshift places Yearn at the front of their platform, which allows Shapeshift to easily access secure yield.
Action: Deposit assets into Decentralized Finance.
Reward: Safe, secure, and low-risk yield on stablecoins.
Organic Trigger: The need to get somewhere.
Environment Trigger: Partnership with Google Maps, which suggests Uber as an option for travel.
Action: Use Uber to get to the desired destination.
Reward: Arrive at your destination in a timely, hassle-free manner.
By tactfully integrating your product into the user’s environment at the moment when the problem occurs, you can promote habitual use and significantly enhance user retention.
More Examples of Environment Habit Loops
Uber: Through its partnership with Google Maps and the display of its logo on cars, Uber integrates itself into the user’s environment, serving as a reminder to use their service when the need arises.
Zoom: Zoom’s browser extension for calendar and its integrations with Slack serve as environmental triggers for the user to host meetings using Zoom.
Yearn Finance: Yearn uses a partnership program to place their product inside many other web3 platforms, prompting users to use their service.
Yelp: Yelp employs SEO strategies to create content triggers, helping build a habit of turning to Yelp for reviews.
Nest: Nest places its products in big-box stores, enabling users to stumble upon them and potentially trigger usage.
Discovering Environment Loops for Your Product
To identify potential environment loops for your product, consider these questions:
What are all the places, products, services, and people a user might interact with when the organic trigger occurs?
How frequently are users interacting with these elements?
Build: Can you create something of value via API, integration, extensions, or content to place your product in the user’s environment?
Buy: Can you purchase ad space to position your product near the organic trigger?
Partner: If there are platforms with no easy ad space, can you form a partnership that adds value and places your product near the trigger?
Costs of Environment Loops
Don’t forget to consider the costs when evaluating potential environment loops.
Development Costs: Creating environment triggers often requires more investment in product development compared to manufacturing triggers.
Financial Costs: Some methods (buying/partnering) might increase the cost per activated user.
Additional Costs in Friction: Many of these methods may introduce extra steps in the user activation process, potentially deterring some users.
By strategically placing your product in the user’s environment when they experience an organic trigger, you can encourage the formation of habits around your product, ultimately driving user engagement and retention.
SECTION 6: Recap of Key Points and Application
As we’ve seen, these habit loops are more than just theories — they are potent strategies that can form the very lifeblood of successful product engagement. They tap into human psychology, creating patterns of behavior that sustain engagement and foster the formation of habits. As such, understanding and implementing these habit loops can significantly enhance your product’s growth trajectory.
Key Points and Final Thoughts
In our journey through this examination of habit loops, we have tackled key aspects of user retention and its paramount importance for the sustained growth of any product or brand. We delved deep into habit loops, unveiling their role in bolstering user engagement and fostering improved user retention. Through a series of detailed examples, we cast light on the dynamics of Organic, Manufactured, and Environment Habit Loops and how they are strategically employed to entrench product usage habits.
As we look toward the future, it’s evident that evolving technology will continue to reshape the way we approach habit loops. I anticipate that new strategies will emerge, driving a continual evolution of user engagement methodologies. As we navigate this ever-changing landscape, I believe the principles of habit loops will remain at the heart of successful product growth.
About the Author
Hey, I’m Anthony Bertolino. I’ve been obsessed with start-ups, marketing, product, and growth since a very young age. For the past 7 years I have been focused on Ethereum and the new open global coordination system we’re all building together. Feel free to read some of my other work, and connect with me on Linkedin or Twitter.