Marketing

How to Win Customers from Entrenched Competitors

October 10, 2014

Going head-to-head with an incumbent solution? Nir Eyal, author of Hooked: How to Build Habit-Forming Products, provides a three-step playbook for coming out on top.

Taking on an established solution can be incredibly difficult, regardless of how good or bad it is. That’s because often what you’re going up against isn’t just a particular set of features, it’s how habitual use of those features has become.
You know what they say about old habits, after all — they die hard.

“There’s no rule that says the best software has to be the market winner. Often, it’s not.”

— Nir Eyal, author of Hooked

“Instead, what happens is over time, and with enough use, the brain starts to form a strong association between a particular pain and a particular solution,” Eyal explains. Have a headache? You use Tylenol.
“In that way, habits are natural competition barriers that can serve to fortify an incumbent’s position. It’s hard for companies with disruptive solutions to overcome the barrier of getting customers to stop using what they’re used to and try something else.”
It’s that topic — the power of habit — that Eyal explores in his book, Hooked: How to Build Habit-Forming Products. In it, he introduces a new model for how companies can actively encourage users to develop close associations with their product that will serve as a foundation for forming habits.
Hook-Model
The model is called the “Hook Cycle” and it has four parts:

  • Trigger: Either external or internal, these are the sparks that set a particular behavior into action. The idea is to take users from requiring external triggers (expensive advertising or marketing) to instead forming an association between the product and internal triggers (typically a specific pain or emotion).
  • Action: The intended behavior you were hoping to trigger. The easier to do it is and the greater the motivation, the higher the probability of it occurring.
  • Variable Reward: The important part here is variability. Expecting a rewarding result from a particular action can certainly be a powerful motivator, but introduce an element of intrigue and you create desire. Think of opening your fridge to see the light come on (predictable) vs. seeing a different treat appear each time (variable).
  • Investment: Asking the user to provide something in exchange for the reward that does two things: a) stores value in the product (ex: signing up so the product knows your preferences the next go around); b) loads the next trigger (ex: following another user and receiving notification that they have followed you back).

Together, these components form a “Hook” that drives repeat use and engagement that ultimately becomes habit forming. For companies that can develop and leverage this process successfully, it can be extremely effective.
But what about companies that are going up against incumbent solutions? If habits are as powerful as Eyal’s research shows, how can you encourage your prospects to break existing ones?

3 Ways to Attack Existing Habits and Entrenched Solutions

According to Eyal, there are three ways to displace habits that customers have already established on their own or with competitors.

  1. Go Through the Hook Cycle Faster: Look at each stage of the cycle and determine how you can remove friction. What can you do to make the action you’re asking for easier for the user to accomplish? How can you make the investment experience smoother? The quicker a user cycles through the stages of trigger, action, reward, and investment, the more likely it is they will go through it again. Which leads to #2…
  2. Go Through the Hook Cycle More Frequently: Frequency is how habits are formed. The more a user goes through the cycle, the more engrained the connection becomes between the user’s problem and your solution. In addition, with each pass through the cycle, you should focus on making the Hook even easier and more rewarding to go through. Which takes us to #3…
  3. Make Your Reward more Rewarding: This one is simple. If a user finds they are getting more value out of your solution — and that’s it’s quicker and easier for them to do so — then you are going to develop a leg up on your competition.

When a startup targets a specific market opportunity, the founders should look at the existing competitive landscape and determine how they can accomplish each of the above. But Eyal also believes they should ask themselves one thing.
“The critical question to ask yourself is ‘why now?’” Eyal explains. “So you’re going to be the next Salesforce.com. That’s great. What makes you think you can go through a Hook Cycle faster than Salesforce? What makes you think you can go through it more frequently, or that you can make your reward more rewarding? Most importantly, what do you think is different that makes that possible now?
Behavior change is always easier to influence in disruptive environments, and part of being a successful entrepreneur is recognizing there are particular scenarios that can prime the pumps for disruption.
“Any time users find or are presented with new ways to solve problems, that’s when cards get shuffled,” Eyal explains. “The most obvious examples involve interface changes — the shift from PCs to laptops, from laptops to mobile devices, etc. Those shifts present new opportunities for those who can react the quickest. That’s when old habits can get stolen away by new competitors. That’s when little guys can beat the big guys.”




Photo by: George Socka

 

Author

<strong>Nir Eyal</strong> is the author of <a href="http://www.amazon.com/dp/B00HJ4A43S"><em>Hooked: How to Build Habit-Forming Products</em></a>. In addition to writing for TechCrunch, Forbes, and Psychology Today, he is a frequent speaker at industry conferences and for Fortune 500 companies.