Habit is a powerful product feature

I have seen many product teams or start-ups focus on building customer value, improving user experience, or creating network effects. These are all great ways to build strong products. However, there is one feature which is often forgotten that might be more powerful than anything else. It’s building customer habit.

Habit is a state when your customers or users no longer need to think before using your product; it becomes second nature. Your product is the go-to-solution for the designed use cases, and your customers use it without considering other options. Habit is particularly important for products such as consumer or small business products targeting individual users. For these types of products, the user and the purchase decision-maker is the same person, so building consumer habit acts as a defense mechanism against competition.

Habit drives loyalty

In one of my previous articles I focused on the importance of customer retention and loyalty to build sustainable businesses. Habit is an incredibly powerful tool to build customer loyalty. To illustrate this, let’s consider an example of two products, both of which have high customer loyalty.

• Product A forms no customer habit. When their customers need to solve a relevant problem, they consider their options, and still choose to use Product A as the best solution on the market .
• Product B forms strong habits among its customers. When their customers need to solve a relevant problem, they use Product B out of habit, without thinking about other options.

While both have strong customer loyalty, Product A is in a rather difficult position. Remaining the clear winner for a given problem is extremely difficult in the long run. Even for truly disruptive companies, strong competitors will emerge over time and catch up. Different customers care about different things, such as quality of customer experience or price. To remain the absolute winner among all of the customers, Product A will not only need to be the best, but also needs to be among the cheapest solutions on the market.

On the other hand, Product B achieves loyalty by default. Its customers don’t compare it to other options before using it. And as long as the product is “good enough”, they will continue using it. “Good enough” does not mean the company can sit back and relax. Nevertheless, it does mean that the product only needs to be “among the best”, rather than “universally the best”. Habit forms a moat around the product that protects it from competitors. This gives the company more pricing power and an unfair advantage in a competition for its customers.

A great example of a product with strong habit is Google search. Most people in the world use it without thinking about other options at all. As long as Google continues being “good enough”, few people will switch. Even if other search engines, such as Bing, Yahoo or other startups came up with better results or offered better privacy control, few users would even consider them.

Frequency of use is a key driver of habit

To build habit among your customers you need them to use your product as frequently as possible. If people do something over and over again, it will eventually become a habit. Let’s take a look at a simple model to demonstrate the importance of frequency of use. When a customer engages with your product, he or she forms an experience. Let’s assume it’s a good product, so the experience is positive. As time passes, the customer’s ability to recall this experience decreases over time.

As time passes, memories fade over time, and people simply start forgetting. However, as the the customer engages with the product again, the recollection of this experiences comes back up, and the clock resets. You can thus plot the product experience recollection curve above on a single graph, with the function resetting to the high every time the user engages with the product. Then you can draw a single function of the customer’s recollection of the experience of your product over time. Below you can see what such function would look like for three hypothetical products with low, medium, and high frequency of usage.

You will notice that the product with high frequency consistently stays at the top of the mind for the customer, whose ability to recall the product experience remains high throughout time. This is in stark contrast with a product with a low frequency of use, which almost drops off their customers’ radar at various points.

This pattern matters. When a customer’s ability to recall the product experience is low, the company is vulnerable to competition. It’s at these points when customers are much more likely to evaluate the options on the market, rather than habitually use their regular product. Products with high frequency of use experience these moments much less frequently than ones with low frequency of use, enabling them to build more defensible businesses.

How to build frequency of use and habit into your products

The natural pre-requisite for your customers to form a habit is that your product drives value. However, how frequently your customers use your product depends predominantly on the problem your product solves, and whom you are solving it for. Therefore it is generally rather difficult for a product to create a need for itself and artificially increase the frequency with which customers use it. For example, you can’t really get normal people to compare or book flights on a weekly basis; they simply have no need to do so. However, there are definitely things you can do. There are two broad approaches to increase the frequency of use for your product:

1. Focus on frequent customers — Identify types of customers that have a more frequent need for your existing product. For example, while regular people don’t search and book flights very frequently, businessmen, admins or travel agents do.
2. Expand your product’s use cases — Identify complementary problems you could solve that occur more frequently. For example, many people might want to read about different destinations on a more regular basis before searching for flights.

You can see these tactics don’t quite work for early start ups though. At that stage, you should focus on solving a problem big enough that people care about for product at all. Thinking about building a defensible business without product market fit in your core area makes no sense. Therefore focusing on habit is most important for later stage companies.

Examples of companies with and without strong habit

For an outsider it’s rather difficult to tell whether or not a product drives sufficient habit among its users. Data on frequency of use, customer loyalty, or qualitative customer habit simply isn’t available to the public. However, below are some examples of products that I believe form a habit among their customers:

1. Amazon video — My best guess would be that Amazon Prime video’s main purpose is to drive frequency of use and form a consumer habit of going to Amazon’s site. People simply watch TV much more often than they shop online.
2. Online groceries — The UK has a thriving online grocery market, with all major chains offering deliveries. I’d imagine most of them see fairly high frequency of use among their customers. This is especially the case among families, which do an order 1–2 times a week, based on my experience. My hypothesis is also that this is a key reason for Amazon to push into the online grocery business with Amazon Pantry and the acquisition of Whole Foods.

I also thought I would include some counter-examples of products that I don’t think form a strong customer habit.

1. Airbnb — They have a great and innovative product. However, most people simply don’t book accommodation often enough to form a habit of using Airbnb. This does not mean people don’t use Airbnb regularly, it just means people’s user of the product is not habitual. I suspect many people consider other options and Airbnb still comes on top as the best product.
2. Flight booking engines — My best guess is that most people don’t search for flights often enough to form a habit (though I am definitely an exception).This might be part of the reason why Priceline spends 35% of their revenue on marketing.

Final note: Not all products can or need to form a habit

A more general way to think about habit is that it simply increases the cost of switching to other products. However, habit is not a relevant way to increase switching cost. This is particularly the case when the user and the purchase decision maker are not the same person, such as enterprise business products. For example few customers use Amazon’s cloud solutions (AWS) out of habit. They do so because AWS powers their organization, and switching to a different product requires heavy investment. I will write a separate article on such products, and the more general concept of product switching costs in the future.

Disclaimer: The opinions expressed in this article are my own and do not reflect those of my employer. This article is not based on any confidential data.