Interested in boosting customer desire? A classic study reveals an interesting quirk of human behavior that may hold a clue.
In 1975, researchers Worchel, Lee, and Adewole wanted to know how people would value cookies in two identical glass jars. One jar held ten cookies while the other contained just two stragglers. Which cookies would people value more?
Though the cookies and jars were identical, participants valued the ones in the near-empty jar more highly. Scarcity had somehow affected their perception of value.
There are many theories as to why this was the case. For one, scarcity may signal something about the product. If there are less of an item, the thinking goes, it might be because other people know something you don’t. Namely, the cookies in the almost empty jar are the num-numier choice.
It’s About Context
Classical economic theory starts with two key assumptions: First, consumers are armed with “perfect information.” Second, people behave rationally. However, in the real world, these two conditions are more the exception than the rule. In fact, marketers do their best to trigger cognitive quirks, like the scarcity heuristic, to influence behavior.
Even though it may make no objective difference regarding what is actually being sold, marketers know context matters just as much as the product itself. The near-empty jar with just two cookies left in it conveys valuable (albeit irrelevant) information.
The first thing Don Draper does when he gets to his office is give his busty secretary a suggestive wink. The second thing he does is take off his fedora. Finally, depending on the severity of the previous night, he completes his morning routine with a stiff drink.
What can we learn from Don’s habits? First, that scotch and submissive secretaries always equal drama. But what of that fedora? There’s a lesson there too.
As any Mad Men fan knows, it was once popular for men to wear hats everywhere they went — except that is, when they stepped indoors. When a gentleman went inside, he removed his hat and placed it on the nearest rack. It was a required social norm, a sign you were ready for business.
Though hats have long gone out of fashion, the custom should be a guide for how we adapt to the increasing pervasiveness of personal technology. It’s high time we started doing with our digital devices what well-mannered men did with their fedoras. We need a digital hat rack.
It seems that whenever people meet in person these days, they do so while separating their attention between the people in the room and the devices in their hands. Somehow, it has become socially acceptable to digitally masturbate in each other’s company. You might say, “but I’m taking notes or responding to an important request!” No you’re not, you are digitally dicking around.
We are caught in an endless cycle of messaging hell and the pattern is always the same. First, a new communication system is born — take email or Facebook, for example. Ease-of-use helps the product gain wide adoption and reach a critical mass of users. And then things turn ugly.
Some crafty entrepreneur figures out how to exploit the system and starts building a business around it. He reaches millions of people and opens the floodgates to countless others who seek to emulate his methods. Inevitably, the messaging channel is deluged with crap, clogging the pipes of what was once an efficient mode of communication — again, email or Facebook.
The latest messaging onslaught is hitting the notification systems on our smartphones. Those little red badges hovering over our app icons and urgent graphics along the top of our screens incessantly remind us of some task that needs doing. They crowd out real priorities with bits of tiny triviality. Notification spam has many up in arms, but the flood of distractions continues.
This is the story repeated ever since telemarketers started ruining dinners across the land. It was not until federal legislation effectively put them out of business with the Do Not Call Registry did they stop their pestering.
To date, platforms have been responsible for policing spammers on Facebook, Twitter, Android or Apple’s iOS. But keeping exploiters out is only half the challenge. The real problem is keeping the channels useful as they grow. Exhibit A:
Exhibit B – A Google search for “I hate email” returns 586 million results, more than twice the results for “the Beatles.” Very scientific, I know, but you get the point.
Step 1: Build an app. Step 2: Get users hooked to it. Step 3: Profit. It sounds simple and, given our umbilical ties to cell phones, social media, and email inboxes, it may even sound plausible. Recently, tech entrepreneurs and investors have started to look to psychology for ways to strike it rich by altering user behavior. Perhaps you’ve read essays on how to create habit-forming technology and figured you’d give it a shot?
Well hold your dogs Pavlov! Though I’m an advocate for understanding user behavior to build high-engagement products, the reality is that successfully creating long-term habits is exceptionally rare. Changing behavior requires not only an understanding of how to persuade users to act — for example, the first time they land on a webpage — but also necessitates getting them to behave differently for long periods of time, ideally for the rest of their lives.
The good news is that that companies that accomplish this rare feat are the ones associated with game-changing, wildly successful innovation. Google, Apple, Twitter, and Android come to mind. As we enter a world where, according to Paul Graham, everything is becoming more addictive, the companies that successfully form and control habits in the future will come to dominate the industries of tomorrow.
Habits or Hype?
But claiming that habits are the keys to success is a tall order. If people like me provide ready-made formulas and guidebooks on how to create habits, why isn’t every company that alters user behavior succeeding?
If you’re like me, you’ve had enough of the Facebook IPO story. For tech entrepreneurs struggling to build stuff, the cacophony of recent press is just more noise. That’s why when my friend Andrew Chen posted an insightful analysis of Facebook user data, I was happy to get back to learning from what the company did right instead of debating what its bankers did wrong.
Chen calculated Facebook’s historical ratio of daily active users (DAU) to monthly active users (MAU) and the stats are startling. Since March 2009, when the earliest data is available, approximately 50% of Facebook users logged in daily.
As other technology companies struggle to maintain DAU to MAU ratios of 5% or less, Facebook’s numbers appear stratospherically high in comparison. But what is equally surprising is the consistency of that ratio over time. Despite periodic user revolts in reaction to changes in the site, the ratio remained strangely stable. In fact, the number has risen over the past year and is now hovering at 58% as of March of this year.
It’s as if Zuckerberg has steered the company by this golden ratio. Which raises the question: is there some wisdom here regarding this ratio as a predictor of Internet success? Obviously, there are no guarantees and starting cutting edge tech companies will always be risky business. But, assuming you have a solid business model, there are good reasons to believe that if there is one metric to focus on while building your business, it’s the percentage of users who come back daily as expressed by this ratio.
Today Facebook will sell shares in one of the biggest tech IPOs in history. New investors will gobble up the stock to get a piece of the global phenomenon famously started in Mark Zuckerberg’s dorm room in 2004. But while owning the stock will have quantifiable value when it trades on the open market, few buyers will be able to say truthfully that they understood the value of the company just a few years ago.
Ask yourself candidly, what did you think of Facebook the first time you landed on its homepage? Were you blown away? Could you see how it would fill a gaping need in the lives of nearly a billion people? If you’re honest with yourself, and you’re not Peter Thiel, your answer is probably, “No, not really.”
Don’t feel bad. Like many of the astoundingly successful web companies of the last decade, it was hard to appreciate the value of Facebook at first glance. But one person who “got Facebook” early on was Noah Kagan, who in October of 2005 joined the company as one of its first product managers. In 2006, Noah was the source for an analysis of Facebook written by Nisan Gabbay. The essay identified one of the most important reasons for the company’s ascent to Internet glory and offers a prescient description of opportunities still to come:
“The Facebook success story is most interesting to me because of how daily offline social behavior drove usage of the site. There are plenty of activities in our daily life that could benefit from a complementary online product … Facebook demonstrates you have a great Internet service if offline behaviors can drive nearly daily usage online.”