Product Marketing
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January 2, 2020

How to build habit-forming products in the Product-led era

By Aggelos Mouzakitis

Not many books about product design have been referenced as the book Hooked by Nir Eyal. As you’ll read later, in his first book called Hooked, Nir presents a 4-step framework that software companies can use to create habituated users. Or, as Nir put it when we asked him what his job is…

“My job is to help companies build the kind of products that change consumer habits for good as well as help consumers understand the deeper psychology of their behaviour so that they can design the behaviour that they want to see in their own lives.”

In this interview, we ask Nir what his opinion on habit-forming products is, what it takes to create products with short Time to Value (TTV), how a software company can optimize its onboarding and more. Read it until the end.


The Rise of Product-led

The Four Steps of the Hook Model 

Time to Value (TTV)

Onboarding & The GrowthEngagementMonetization (GEM) Framework

How to Define Product Engagement Metrics


The Rise of Product-led


More and more companies nowadays choose product-led growth (PLG) as their go-to-market strategy. Of course, as we’ve mentioned in one of our latest articles, product-led growth is not for everyone, since many modern software companies can’t go fully self-served or design a seamless onboarding that leads to the first meaningful outcome in a timely manner. 

The question is: What is the role of the Hook Model in that landscape and how Nir’s ideas have affected the way companies build products? As Nir shared with us, “my contribution to the product development landscape is to understand the deeper psychology of how to build the kind of products and services that people want to use, as opposed to feeling that they have to use.”

Image Source: Amazon

“The idea behind my first book Hooked was to democratize the techniques that the gaming companies and social media companies use to get us hooked so that the rest of us can also use those techniques.” Nir continued. But this begs the question: Where can we apply these techniques and how effective can they be?

As Nir explained, “the idea was never to help the Facebook and Instagrams, and the WhatsUps of the world; that was never my goal. My goal was always to use those companies as the case studies we can learn from, to build the kind of products and services that can help people build healthy habits in their lives.”

Believe it or not, you, the people around and almost everyone you know and are connected to, are affected by the principles of the Hook Model. As Nir told us, “in the five years since Hooked was published, we have companies like Kahoot!—which I was lucky to be an investor in—the world’s largest educational software, that builds healthy habits for kids inside the classroom.”

Image Source: Kahoot!

So, contrary to popular belief, technology can help users form healthy habits, develop new skills, and stay focused on their goals. “What could we possibly find wrong with forming a good exercise habit?” Nir asked. And, even though this is a rhetorical question, Nir’s point is correct. Products can be used for good, and many of them luckily are.

According to Nir, “this is how we can use technology to help people live better lives—not only on the consumer side but also in the enterprise when it comes to SaaS products.” It is in fact that many software companies have managed to create habit-forming products—products, which according to Nir, “we use because we have to, not because we want to.”

And as we’ve seen the proliferation of companies in the SaaS and the enterprise space, building their products so that they’re adopted from the ground up as opposed to being stuffed down, because management says you have to use it. Nir explained. Think of products like Slack, GitHub or Salesforce.

Image Source: Slack

As Nir explained, “these and other companies that serve the enterprise, are adopted by frontline employees, and then they percolate up the organization; and that only comes if you can successfully get people hooked to use your product.” This means that you need to build a product that makes users stick around. How can you achieve that? By using the Hook Model. 

The Four Steps of the Hook Model

How can the Hook Model help companies build habit-forming products? And what are the exact steps that the user takes, while into the Hook? The four steps of the hook model are as follows:

  1. Trigger
  2. Action
  3. Reward
  4. Investment

Nir elaborated on each of these steps and explained how tech companies can build products that make users stick, without having to use any external triggers whatsoever (more on that later). The following is the analysis that Nir made for each with regards to the four steps of the Hook Model. 

1) Trigger

We have two types of triggers: 

a) External triggers

“The external triggers are anything that prompts you to action with some kind of information in your environment. It can be a ping, a ring, a notification, anything that tells you what to do next with some bit of information. (More on internal triggers later.)” Nir explained. 

As an example here, we can mention Ahrefs’ Notifications. Ahrefs is an all-in-one SEO tool that helps you get higher rankings and monitor competition. While in the app, you may have noticed these notifications that prompt you to get out of the app and read a piece of content that the Ahrefs’ team has published either on their blog or on the YouTube channel.

Image Source: Ahrefs UI

2) Action

The external trigger is what makes a user take an action. According to Nir, “the next step would be the action phase of the hook. The action phase is the simplest behavior the user can do, in anticipation of a reward. It can be opening an app, checking a dashboard, scrolling through a feed. All of these behaviors are very simple actions done in anticipation of a reward.”

In this case, the user takes action based on the external trigger that we’ve just mentioned. In our example, the action could be to read a blog post or watch a video on how to do keyword research the right way (using Ahrefs). This brings us to the next step of the Hook Model: the Variable Reward.

3) Reward

“The next step of the hook is called the reward phase. This is where the user itches its scratch. This is where we give them what they came for and it typically involves some kind of variable reward, some kind of uncertainty around what they mind find the next time they engage with the product.” Nir told us. 

Can you think of what the reward could be in the case of Ahrefs’ in-app notifications? For a user who doesn’t know how to do keyword research yet—or doesn’t feel so comfortable with the process yet—it could be to learn how to identify keyword opportunities for her/his business or the business she/he is working at. 

Image Source: YouTube

4) Investment

“Finally, and perhaps the most overlooked step of the Hook Model, is what’s called the investment phase. The investment phase is where the user puts something into the product, in anticipation of some kind of future benefit, some kind of future reward.” Nir explained.

As Nir told us, users “might put in data, content, accrue followers, reputation. Any of these things improve the product with use, so through successive cycles through the Hook.” In our case, they may invest time to do keyword research using Ahrefs’ Keywords Explorer properly.

Image Source: Ahrefs UI

“This is how customer habits are shaped, and eventually, a company that successfully can create a habit no longer needs those external triggers. Imagine how amazing it would be if you didn’t have to spend money on advertising to get people to come back to your product or send them spam-y messages.” Nir concluded.

And he explained that saying that “a successful habit-forming product doesn’t need external triggers at all; they use internal triggers. And internal triggers are these uncomfortable emotional states, that we seek to escape by using a product.” This is what product designers should aim for nowadays: to build products that don’t need external triggers to get people hooked. 

Because, as Nir put it, “whatever that discomfort might be, anxiety, uncertainty, fatigue—whatever it might be—your product, whether it’s a consumer or enterprise product, has to figure out what’s that internal trigger, that emotional state, that we are looking to associate through the use of our product.” 


Time to Value (TTV)

How can all these affect Time to Value (TTV) and is there really a relationship between the Hook Model and TTV? Nir explained that “we want the user as soon as possible to feel like ‘ah, this is scratching my itch, this is giving me what I am looking for.’ So, the sooner we can do that, the better.”

“We want to make sure that we realize that the only reason people use any product or service is to satiate pain. That’s it, pain. Even to pursue pleasure.” Nir further explained. This is why tech companies should think in terms of solving pain points and alleviating problems.  

“As product designers, our job is to solve problems. And if you can’t identify the pain, chances are the pain doesn’t exist.” Nir told us. And he continued saying that “you always want to ask yourself: What’s the discomfort? What’s the itch? What’s the internal trigger that prompts the user to use the product?”

What is the role of external triggers in all that? As Nir explained, “we need to make sure that we appropriately time these external triggers. Many people just send notifications whenever they feel like, but they consider the users’ schedule when the user needs the product or service.” External triggers are useful, as long as they are used properly. 

“The difference between an external trigger (that feels like spam), and one that feels like magic is one word, and that one word is context. So the closer together you can couple the external trigger with the internal trigger (the moment the user feels the itch), that’s when they should get the notification.” Nir explained. 

“So the trick of forming these habits is connecting together the external trigger with the internal trigger,” Nir concluded. The first meaningful outcome, or the Aha! moment as product and marketing professionals call it is something that usually occurs in the onboarding process. Here’s what you need to know about it.

Onboarding & The GrowthEngagementMonetization (GEM) Framework

As you already know, user onboarding is one of the most critical stages of the customer lifecycle. Unfortunately, the reality is that most SaaS businesses don’t pay as much attention to user onboarding as they should since 82% of companies without a free offering report that their onboarding is non-existent or that it lacks at best.

According to Nir, “onboarding includes activities that we do just once, and once we do them, we don’t have to do them ever again. Anything that occurs before you get into the Hook is not an engagement challenge; it’s a growth challenge. These are separate entities.”

“So what can do in terms of how we can get people onboarded is follow this rule of making the product as easy as possible to experience. We make the onboarding as easy as possible to get people into the hook as quickly as possible.” Nir explained. This makes us realize that inefficient user onboarding is not the same as keeping users engaged with the product.   

As Nir told us, “the three pillars that every successful product needs are:

  1. Growth
  2. Engagement
  3. Monetization

These are three separate pillars that are each necessary but not sufficient that you need for every successful product.” It’s easy to understand why you need all of the three elements of the GEM framework to grow a tech company successfully. As per Nir’s explanation:

  • You need growth—meaning to find a way to profitably acquire customers
  • You need engagement—a way to keep them (the users) active
  • You need monetization—if you want your business to be viable you need to find a way to make money

Nir further explained that saying that “engagement is what is Hooked is all about. Hooked is all about how to keep people coming back and want to use the product.” This means that if your user onboarding doesn’t work, you basically have a growth problem and not a product engagement problem, as most product designers and marketers think.

“Another strategy we can use is to get some of the efforts that the user would do in the onboarding and put it into the investment phase. So that through successive use of the product, we are asking every time just a little bit of information; a comment, a like, changing a preference, small bits of work that make the product better and better with use, as opposed to putting it all in the onboarding phase.” Nir Explained. 

Of course, this is not always possible. As Nir told us, “sometimes—with some products—there is a heavy burden of getting people to use the product in the first place.” An example here, as Nir further explained, can be financial services that do a great job of keeping users once they are onboarded, but struggle to get them onboarded in the first place.

How do products that put the Hook Model in action look like? Keep reading to find out. 

Example of a Product That Uses the Hook Model

“I don’t know about you, but I hated school; I wasn’t excited about school at all, because at school there is usually some teacher reading to your from the book all day long, and you had to somehow learn from this terrible process that we have today to teach people things.” This is how Nir introduced us to his example, Kahoot!

Image Source: Kahoot!

“What Kahoot! did is get kids to help other kids learn through this interactive platform that allows them to make quizzes inside the classroom.” Nir explained. “The idea here is that you should take something—that is otherwise boring—but should be engaging, and by using the Hook Model, you can make it more engaging.” He continued.  

Of course, a question arises here. How can we apply this approach to a product that has no social elements? According to Nir, “there are three types of rewards; one of them is social elements. But, there are two others that have nothing to do with other people. Rewards of the hunt, and rewards of the shelf.” 

The truth is that most of us would think that most products that don’t have social elements as rewards could be boring or uninteresting and wouldn’t be in a position to use the Hook Model effectively. According to Nir, this is not true. “A good example is learning a new language. Sitting with the textbook, the way people used to learn a new language before they could interact with technology is really boring.” Nir told us. 

He explained that using Duolingo as an example, saying that” they don’t have many social components at all, but they use many elements of the Hook as well. So, they use rewards of the hunt (searching for information), and then rewards of the shelf like completion, mastery, competence; all of these things can be variable rewards.”

Image Source: Duolingo

As you can imagine, this doesn’t apply only to games or educational platforms—it applies to SaaS companies as well. B2B Products can also be exciting, but for different reasons. As Nir explained, “you would be amazed how exciting you can make a marketing dashboard as long as it has variable rewards.” 

“This comes from Skinner’s work when you have something that changes, that is uncertain—it doesn’t necessarily have to have a social component—seeing your campaign go up or down, can be very exciting. If it’s properly displayed, if it’s built with the Hook Model in mind, you can make any kind of variability into something that keeps people very engaged.” Nir concluded. 

What is the role of marketing in all this? And how can marketing help tech companies grow, in a time when the product is under the spotlight? This is what we cover next. 

The Role of Marketing In the Product-led Era

“People think that marketing is advertising. No, it’s not. Marketing is about creating a product-market fit between the consumer and the product design. You can always buy growth. You can’t buy engagement.” Nir told us. This is a fundamental truth that most tech companies seem to ignore. 

The fact that a company raised money by some investors doesn’t mean that it can keep users engaged with the product. It can “buy” new users, but it can’t keep them engaged with the product. “That’s why marketing’s role should be to be the intermediary between the customer and the product designers because you have to design engagement into a product,” Nir explained. 

“I’ve seen many companies—many of my clients—are these companies who previously used to be “leaky buckets.” They spend tons of money on advertising, they acquire a bunch of users, and nobody sticks around. They wasted all that money on advertising because nobody kept using the product.” Nir told us. 

And he concluded that “this is why engagement is way more important and always must precede, spending money on acquiring users.” Unfortunately though, most tech companies—partly because they want to satisfy their investors, partly because they lack the knowledge—try to acquire new users, without being able to keep them engaged with the product. 

Aggelos Mouzakitis

Aggelos is the founder and Growth Product Manager of Growth Sandwich. He is among the first Customer-led experts in the world, leveraging advanced, Jobs-to-be-done customer research to orchestrate and guide Growth for B2B SaaS companies. A- and B- series SaaS are hiring him to organise, design and execute programs that infuse the whole company with qualitative data, empathy and the necessary knowledge to address any growth dilemma. In the last 4 years, he has worked with more than 100 SaaS companies and trained literally, thousands through my physical and online courses.