How to grow retention by building habit loops

Retention is undeniably among the most important product metrics out there. High retention leads to:

• Compounding growth
• Higher LTV
• More predictable revenue
• Market defensibility

But how does one actually grow retention?

While there are many levers product managers can pull to improve retention, more often than not, it comes down to the strength of the habit customers have established with your product.

The stronger the habit, the more often users want to use your product and the lower the chance of them forgetting about your offering and churning down the road.

Let’s take a look at how habits are usually formed and more importantly, how your product design can reinforce these habits.

What is a habit loop?

On an organic level, a habit is a frequently repeated loop of three steps:

1. Trigger — An external or internal need
2. Action — An action done to satisfy that need
3. Reward — A positive result from fulfilling the need

Let’s take Uber, for example:

1. Trigger — A user needs to travel to some destination
2. Action — They order an Uber to do so
3. Reward — They reach their destination in a speedy and convenient manner, reinforcing their willingness to use Uber instead of commuting

If you have a problem defining your product’s organic habit loop, take a deeper look at what you’re trying to solve for. When does the problem occur? That’ll help you identify the beginning of the loop.

What are the different types of habit loops?

Understanding the organic habit loop is just a first step. Your goal should be to solidify the habit and ensure that users don’t forfeit it altogether.

There are two main ways you can strengthen a user’s behavior with your product:

• Manufactured habit loops
• Environmental habit loops

Now, let’s dive deeper into those two approaches.

Manufactured habit loop

The most common way to build strong habits is by manufacturing more triggers. The manufactured habit loop has four main steps:

1. Manufactured trigger — Some changes appear in the product that are a viable trigger for user action
2. Channel — The user is informed about the change through communication channels
3. Action — The user takes an action based on the change in the product
4. Reward — The action results in a reward that strengthens the habit

Let’s examine how Jira manufactures and solidifies habits around their product. One of their manufactured habits loops is the communication around important project changes:

1. Manufactured trigger — Some changes to the observed issue
2. Channel — User is informed via email
3. Action — Users often react by replying to comments, updating the issue status, or reacting in any other way
4. Reward — Refreshed knowledge about the current state of the issue, which makes further work easier

If Jira relied only on the organic trigger of users’ hunger for information, user engagement, thus also retention, would likely drop significantly.

There are four main types of manufactured triggers:

1. Time-based — An Apple Watch sending you reminders to wind down before bedtime
2. Location-based — The McDonald’s app sends you discount codes when you walk close to the restaurant
3. Change-based — Such as the aforementioned Jira example.
4. Network-based — Any social network where other people’s actions (e.g., adding a new photo) might work as triggers for your actions (e.g., adding a comment to the photo)

To identify manufactured triggers for your product, think about any time/location/change/network dependent events that happen within the product that might be interesting enough for your target user to use your product. I’d recommend scoring them for:

• Frequency — How often does this event occur?
• Relevance — How likely is this event to bring the user to the product?

Environmental habit loop

Although manufactured triggers are usually the go-to solution for reinforcing user habits, they aren’t always a viable solution.

Let’s take Zoom, for example. The primary trigger for using this video-conferencing platform is holding a virtual meeting. However, it’s not a trigger you can easily manufacture, not to mention that making your customers have more meetings than they need would be brutal.

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What you can do is create additional environmental triggers that would motivate users to use your solution whenever the organic triggers occur. This is what this loop usually looks like:

1. Organic trigger — An organic user trigger appears that leads to an action
2. Environmental trigger — While reacting to the organic trigger, the user stumbles on the environmental trigger that motivates them to use your solution to satisfy the organic trigger
3. Action — The user completes the action using your product
4. Reward — The user receives a reward for using your product

Let’s use an example to illustrate better how environmental habit loops work. In the case of Zoom:

1. Organic trigger — An internal or external factor motivates a user to have a virtual meeting
2. Environmental trigger — While scheduling the meeting in Google Calendar, the user sees the option to include a Zoom link in the invitation
3. Action — The user decides to include the link to avoid scheduling hassle
4. Reward — The user experiences a high-quality conversation that motivates them to include Zoom links in the future

Closing remarks

Although one could write a whole series of books on user retention, one of the most important drivers of retention is the strength of the habit your users establish with your product.

The stronger one’s habit, the greater the chances they’ll return to your product.

A typical habit-creation process has three steps: an internal or external trigger, an action to satisfy the trigger, and a reward for satisfying the trigger. You can then strengthen the habit loop by manufacturing more triggers and reminding users about your product when triggers occur.

Featured image source: IconScout

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