Book Reviews
Book Review of ‘Hooked’

How do some products become habit-forming?

 

How many new ideas and innovations succeed? Maybe one out of 100. Or even less. Why is it that such few new ideas succeed, even among the ones that are supposed to, much to the disappointment of the innovator and early adopters? A paper by John Gourville, a professor of marketing at Harvard Business School, explains the cold hard truth about new ideas: “Many innovations fail because consumers irrationally overvalue the old while companies irrationally overvalue the new.” In other words, hooking people onto something new is extremely difficult. 
 
Readers may recall that I had reviewed The Power of Habit by Charles Duhigg, just a few issues back, which explored the same theme. It was from the users’ angle: how to get rid of bad habits and inculcate better ones. Hooked, by Nir Eyal, is for businesses like Contagious (also reviewed here) and Made to Stick by Chip and Dan Heath. It methodically explains how to create habit-forming products. 
 
It’s not easy. Only a few like Google, Facebook, Twitter, etc, achieve this because, for new entrants in any field to make a mark, says Professor Gourville, it is not enough for them to be just better; they must be nine times better. Newcomers need to cross this high bar because ‘old habits die hard’ and new products, or services, need to offer dramatic improvements to our lives to shake us out of our existing routines. 
 
To all young entrepreneurs dreaming to make it big with viral applications, Gourville has a grim sermon: products that require a high degree of behaviour change are doomed to fail even if the benefits of using the new products are clear and substantial.
 
Nir Eyal offers the most obvious example from our day-to-day life, to prove this point. All of us use the QWERTY keyboard which was first developed in the 1870s for the typewriter with commonly used characters spaced far apart. The rationale was that typists should not jam the metal type bars (of the early machines). This physical limitation is an anachronism in the digital age; yet QWERTY keyboards remain the standard despite the invention of far better layouts. 
 
Indeed, Professor August Dvorak’s created a keyboard design, patented in 1932, which increased typing speed and accuracy, by placing the vowel in the centre row. The Dvorak Simplified Keyboard was a grand failure. QWERTY survives because, once we get over the initial problem of handling the keyboard, we get used to it. Soon, we instinctively know where the letters are. The bad design of then becomes effortless to use. We don’t want to switch again. 
 
This is why Google is the default search engine—not Bing or Yahoo. In a head-to head comparison, there is not much difference between Google and Bing. So why haven’t more Google users switched to Bing? People don’t want to change their habit. 
 
“If a user is familiar with the Google interface, switching to Bing requires cognitive efforts. Although many aspects of Bing are similar to Google, even slight change in pixel placement forces the would-be user to learn new ways of interacting with the site.” This makes Bing look inferior, not the technology itself.
 
“Internet search occurs so frequently that Google is able to cement itself as the one and only solution in the habituated user’s mind. Users no longer need to think about whether or not to use Google: they just do.”
 
What comes in the way of forming new habits is past behaviour. This is also why two-thirds of alcoholics, who complete a rehabilitation programme, will pick up the bottle within a year. Research shows that nearly everyone who loses weight on a diet gains it back within two years. “Even when we change our routines, neural pathways remains etched in our brains, ready to be reactivated when we lose focus. This presents an especially difficult challenge for product designers trying to create new lines or businesses based on forming new habits.” 
 
If proven cases—of changing long-term user habits—are exceptionally rare, how do new companies’ products come from nowhere, once in a while, and become immensely popular, especially those using technology? How are Facebook, Pinterest and Twitter able to muscle into our lives even though we are more hard-pressed than before? “Altering behaviour requires not only an understanding of how to persuade people to act,” writes Eyal “but also necessitates getting them to repeat behaviours  for long periods.” This can be done if you follow certain rules. 
 
Firstly, since new behaviours have a short life, as our minds tends to revert to old ways, for new habits to take hold, they must occur often. Frequent engagement with a product—especially over a short period of time—increases the likelihood of forming new routines. How can a new company use this? Eyal suggests plotting the product’s habit-forming potential along by two axes: frequency (how often the behaviour occurs) and perceived utility (how useful and rewarding the behaviour is in the user’s mind over alternative solutions). 
 
Googling occurs multiple times per day, but any particular search is negligibly better than that of rival services like Bling. On the other hand, we may use Amazon much less; but we derive great utility knowing that we will find whatever we need at the one and only ‘everything store’. The chart represents the interplay of these two factors. Products that fall into this habit zone—enough frequency and perceived utility become the default behaviour. How to get there? By putting the users though the following cycle: triggers, actions, reward and investment. 
 
Triggers are spark plugs of habit-forming engines. Examples of triggers are an email, or a website link or an app icon. They have to be attractive enough, in a given context, for users to take action such as creating a login id, posting a picture or a comment, etc. Users will take action only when there is a reward to do so. It could be chatting with others in an online forum or seeing pictures that others have served. If the reward is one-time, it will not work as well. If it’s a variable reward like creating a surprise element each time for the users to come back, it will be a big hit. This is why one gets addicted to Facebook or Pinterest or Twitter, because there is a continuous and endless stream of information, pictures, opinion, video etc to keep the user hooked. 
 
But smart companies will not leave it at that. They will try to get users to part with something at this stage, such as time, data, effort, social capital or money. This becomes the investment phase when the ‘IKEA effect’ kicks in. IKEA is a Swedish company that sells ready-to-assemble furniture kits. Studies have shown that this simple act of fixing their own furniture makes people more attached to the furniture (they have invested time and effort) and thereby, to IKEA as the brand. 
 
This is a terrific new book in the hot area of exploring consumer psychology. It has become the must-read for start-ups, especially in the consumer-facing technology businesses. If you are into one of these businesses, or just interested in knowing how certain services can attract millions of  users, this book will answer many of your questions.

User

Nifty, Sensex, Bank Nifty continue to remain weak– Thursday closing report
For the weak trend to reverse, Nifty has to first close above 8,730 and Bank Nifty above 18,700
 
We had mentioned yesterday that the weakness on Nifty may continue, if it remains below 8,752. Today, the index opened slightly above this level and after hitting the day’s high, the stock moved lower to hit a six day (including today) low. 
 
Sensex opened at 28,876 while Nifty opened at 8,757. After hitting a high at 28,876 and 8,760 the indices moved lower to the level of 28,498 and 8,646. Sensex closed at 28,666 (down 134 points or 0.46%) while Nifty closed at 8,707 (down 44 points or 0.50%). Bank Nifty witnessed a volatile session. After opening at 18,732 which was also the day’s high it moved to the low of 18,505 and recovered in the afternoon session to close at 18,637 (down 79 points or 0.42%). NSE recorded a volume of 80.41 crore shares. India VIX rose 2.26% to close at 14.9500.
 
Indian Oil Corporation announced a reduction in the retail selling price of petrol by 80 paise per litre at Delhi (including state levies), with corresponding price revision in other states.
 
Prime Minister Narendra Modi on Wednesday said that he seeks Canada's cooperation and investment in every area of India's national development priority - Energy and Infrastructure, Manufacturing and Skills, Smart Cities and agro-industry, and Research and Education.
 
Reserve Bank of India on Wednesday issued a notification allowing banks to offer differential interest rates on term deposits based on whether the term deposits are with or without-premature-withdrawal-facility, subject to certain conditions.
 
India has the potential to make 9%-10% growth rate "a new normal", Finance Minister Arun Jaitley said today while asserting that high growth was essential to meet the challenges posed by the country's burgeoning young population.
 
Bank account penetration in India increased from 35% to 53% between 2011 and 2014, but the country also suffers from high dormancy rates, says a World Bank report.
 
India's manufacturing contracted sharply in April as build-up in new orders and capacity utilisation remained "patchy and erratic", SBI Composite Index said today.  The index fell to 46.8 in April, from 58.5 in March.
 
KEC International (9.13%) was the top gainer in ‘A’ group on the BSE. It was in the news for having entered into a binding agreement for sale of its telecom assets, for a consideration of Rs81 crore, in the states of Chhattisgarh, Meghalaya and Mizoram consisting of 381 telecom sites to ATC Telecom Tower Corporation Private Limited. 
 
PMC Fincorp (15.42%) was the top loser in ‘A’ group on the BSE. The stock hit its 52-week low today. ONGC (3.25%) was the top gainer in the Sensex 30 pack while Hero MotoCorp was the top loser (3.76%) in the pack.
 
On Wednesday, US indices closed in the green. The Empire State manufacturing index plunged, falling to a negative reading, while, industrial production fell by more than expected in March. Both reports suggested a deceleration in economic growth. A gauge of confidence among home builders rose in April, according to the National Association of Home Builders/Wells Fargo housing-market index released yesterday.
 
Except for Straits Times (0.24%) all the other Asian indices closed in the green. Shanghai Composite (2.71%) was the top gainer.
 
Chinese Premier Li Keqiang today said that it will not be easy for China to grow its economy by 7% this year, but he ruled out currency devaluation to promote growth through exports.
 
European indices were trading deeply in the red. US Futures were also trading lower. The European Central Bank, as anticipated, left the official interest rates unchanged yesterday.
In Greece, Germany's finance minister reportedly said yesterday that there was no prospect of the euro zone reaching a deal with Athens next week on economic reforms that would unlock bailout funds, potentially leaving Greece perilously short of money.
 
Crediting rating agency Standard & Poor's Ratings Services yesterday, 15 April 2015, slashed its credit ratings on Greece's debt deeper into junk territory.

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Former chairman of Helios and Matheson among three top executives arrested
Chennai police have confirmed the arrest of H&M’s ex-chairman V Ramachandran, CEO & MD GK Muralikrishna, and director Sai Yerra subsequent to our report
 
The Economic Offences Wing (EOW) of Tamil Nadu police has reportedly arrested three directors of Helios and Matheson Information Technology (H&M) for failing to repay deposit and interest to several depositors. Those arrested by the EOW include, H&M’s former chairman V Ramachandran, the company’s chief executive and managing director GK Muralikrishna, and director Diwakar Sai Yerra. According to our sources, these people are behind the bars since 1st April as the lower court denied them a bail.
 
After receiving several mails and messages from depositors and shareholders of H&M about the arrests, we have been trying to get the news confirmed by authorities for the past four days. However, our emails, SMS sent to top officials of Tamil Nadu EOW remained unanswered until writing the story, and we would incorporate their views as, and when we receive it. We sent emails to Dr Prateep V Philip, Additional Director General of Police (EOW), with a copy to Superintendent of Police (EOW). We also sent SMS to Jesu Rajan, in-charge DSP, who is investigating the case, as per the information provided by the office of SP, EOW, Chennai.
 
H&M also not informed the stock exchange about these arrests. Its last regulatory filing talks about the company’s petition before Company Law Board (CLB) seeking more time to repay depositors and investors.
 
Earlier, the Madras High Court has issued a notice to (H&M), an unfancied software company, after admitting a winding up petition filed by investors and depositors. H&M has been defaulting on repayments for fixed deposit and interest dues since last several months. Chennai-based senior lawyer R Venkatavardhan had filed the winding up petition, a copy of which is available with Moneylife.  
 
While several depositors and investors are sending letters, notices to H&M for bounced cheques, while the company continues to report good results. Earlier in January, H&M reported a 35% jump in its net profit to Rs74.12 crore for the 12 months to end September 2014, even though it was unable to pay salaries or repay fixed deposit-holders.
 
The complaint alleges that H&M is in such a grave cash flow crisis that most of its post-dated cheques (principal and interest) for fixed deposits have bounced due to of 'insufficient funds'. This fraud is evidently being perpetrated to prop up the valuation of the company so as to fraudulently obtain loans from the banks through pledge of shares and to present a façade of credibility to the public at large. This issue has all the makings of a major scam that is bound to affect thousands of investors, depositors and creditors including banks," the complaint reads.
 
Another interesting aspect in this episode is the share price movement of H&M. The company recorded its 52-week high at Rs145.50 on 7 October 2014. After that, it continued to fall till 27th March, when it hit its 52-week low of Rs38. On the same day, H&M issued a release claiming 'revenues' from a skill development programme. In addition, the company also informed the stock exchanges about its petition before the Company Law Board.
 
On 27th March, when H&M share price hit a 52-week low on the BSE, the company issued a statement about its skill development program. It said, "...the group's business in skill development program under the National Skill Development Corp National Skill Certification and Monetary Reward Scheme (STAR Scheme) in its first year has gone well. Second year of operations is to comment for the skill development program under the aegis NSDC. Similar programs under Ministry of Rural Development (MoRD) are also underway. This is yet another initiative by the group to create a revenue stream that is non-linear unlike the classic information technology business that is directly proportionate to the number of employees deployed."
 
The H&M regulatory filing on 31st March says, "the Company has filed an application before the Company Law Board, Chennai, as provided in section 74 (2) of the Companies Act 2013, seeking extension of time up to 12 months for all deposits that fell due for repayment after March 31, 2014. Necessary public notice has been published in newspapers and also intimation sent to all the depositors in this regard."
 
No wonder, after hitting a 52-week low at Rs38, the share price of H&M jumped 54% as on 10th April.
 
 
But is this new or is this happening for the first time? Moneylife readers know that we have been writing about H&M’s failure to pay back fixed deposits (FDs) since July 2014 when the advance cheques issued by it had bounced. But the stock exchanges, which mechanically verify news reports, apparently do not bother to read such signals or question the declarations made by H&M. However, investors began to panic and the stock price dropped 3% on 21st January (after our report was published) and another 12% (to Rs66) on 22nd January. What is rather shocking is that the share continued to hold firm even when employees are tweeting about not being paid and the notice for a winding up petition was been served on the company by unpaid depositors.
 

User

COMMENTS

Lakshmi Jandhyala

9 months ago

it is high time the court puts a stop to this fraud and repay all the investors. Small and retired personnel have invested their savings with H&M and survival has become a challenge. Need help ASAP !!

kannan

1 year ago

I am a small investor and bought H&H stock during 2006 till now there is no gain. Need help.

kannan.r

1 year ago

I am holding H&H share since 2006 and it is loss to small investor like me.Need help.


kannan.r
Mobile : 9841576796

Ravi

2 years ago

I am a victim of H&M worked for BankOfAmerica, hyd. They have not paid my salary. After deducting taxes, they are not giving the form16.
What about of the future of lot of ppl like me, who when join other companies, required to show form-16s and other IT proofs.

Govt. should immediately shutdown the company and not to allow to continue this Fraud any further.

lalit

2 years ago

what hearing have not recd any such communication from the company about the case being filed in High Court...
My Fd matured on 20.12.2014.please help.

Vinay Pareek

2 years ago

Any updates on the H&M High Court hearing which was scheduled on 13 July 2015. Hope for investors like us there is some positive news....

REPLY

s k sethuraman

In Reply to Vinay Pareek 2 years ago

i am a depsoitor in helios andi have got cheque bounced 2 lakhs i got a letter from high court registrar aksing me if i am objecting to extension of time to helios for repayment of deposits i replied i need my money and will not agree this was the meeting on july 15th

Vinay Pareek

2 years ago

Any updates on the High Court hearing which happened on 13 July 2015? with regards to H&M?
Any updates would be of great help. What is equally important is Investors like us who have been cheated by H&M and media like Moneylife should constantly follow-up on this update and keep us posted.

anitha

2 years ago

Please sign our petition as Helios & Matheson is not paying our full & final settlement salaries and also PF amount.


https://http://www.change.org/p/helios-matheson-managem...

REPLY

Praveen

In Reply to anitha 1 year ago

Hi Anitha,

when we are clicking on the link provided it is going to error page.
Hope you have started that petition , plz share that like so that we can vote

Thanks,
Praveen.

Ravi

In Reply to anitha 2 years ago

Send me the correct link

Rajesh Gupta

2 years ago

for fd concerns please make complaint on pgportal.gov.in/
under minstry of corporate affairs. u will get better results.

shamili

2 years ago

How dare you people can give useless cheque, really appreciated you guys guts and acting as smart in front of employees!!! who will be answering legal notice? Mahesh you are the responsible to answer to the employees. I also want Mr. Mahesh from finance arrested soon as he has caused lots of troubles to employees and because of him my family pushed to financial issues and I resigned my job from hell helios and struggled like anything to got new job, everything because the hell helios irresponsible and stupid management. I want my salary asap or else you people should answer to the court.

REPLY

hmemployee

In Reply to shamili 2 years ago

*

s k sethuraman

In Reply to shamili 2 years ago

Please move the Labour commission against the company management for all the frauds. The Labour commission will put everybody in. Just move the Labour court on your own directly thru a speed post

s k sethuraman

2 years ago

who is managing the company?
who will repay the creditors depositors?
who will be answering legal notices?
How long will the directors be in court custody.
What assets are available for settling depositors

lalit

2 years ago

Also has visited OMNITECH INFOTECH SOLUTIONS andheri diagonally opp pletico pharma...No one is willing to meet the investors,They have only one reply case is with the court...
Mr Gaurav company secretary and Ms Shruti legal dept are never available.even contact nos have changed..
i think its time the MCA/CLB should arrest the directors and put them behind bars like Mr S.Roy of Sahara India, only then we may seem some movements by the defaulting companies of some action.

ACCHE DIN AA GAYE INVESTORS KA HARD EARNED MONEY DUB GAYA..

lalit

2 years ago

Dear Investors,
Had visited pletico pharma. at there andheri office last week, but it seems the said company had shifted from there probably to indore lock, stock and barrel as informed by the security personal about 4 months back without intimidating/informing the investors...
Has any of this so called investors protection agencies such as CO.LAW BOARD, MINISTRY OF CORPORATE AFFAIRS aware of such move if so why no intimation was given to investors???
What action can we investors take now

lalit

2 years ago

Dear Investors,
Had visited pletico pharma. at there andheri office last week, but it seems the said company had shifted from there probably to indore lock, stock and barrel as informed by the security personal about 4 months back without intimidating/informing the investors...
Has any of this so called investors protection agencies such as CO.LAW BOARD, MINISTRY OF CORPORATE AFFAIRS aware of such move if so why no intimation was given to investors???
What action can we investors take now

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