General Social Games Business – Page 27 – The Business of Social Games and Casino

The secret to creating a hit habit-forming product or game

The hottest book in Silicon Valley currently is Hooked: How to Build Habit-Forming Products by Nir Eyal, and for good reason; it is an incredibly valuable book for building a business. As Eyal points out, amassing millions of users is no longer good enough. Companies’ economic value is a function of the strength of the habits they create. User habits become a competitive advantage. Products that change customer routines, where users become hooked, are less susceptible to attacks from other companies.

Users who continually find value in a product are more likely to tell their friends about it. Frequent usage creates more opportunities to encourage people to invite their friends, broadcast content, and share through word-of-mouth. Hooked users become brand evangelists: Megaphones for your company, bringing in new users at little or no cost.

Habit-forming products change user behavior and create unprompted engagement. The aim is to influence customers to use your product or play your game on their own, repeatedly, without relying on overt calls-to-action such as ads or promotions. Once a habit is formed, the user is automatically triggered to use the product during routine events such as waiting in line at Starbucks. Eyal uses the Hook Model to show how to create a product or game that become habit forming for users, that have a long term competitive advantage and are more likely to generate word of mouth.

The Hook Model

The Hook Model describes an experience designed to connect the user’s problem to a solution frequently enough to form a habit. Eyal defines habits as behaviors done with little or no conscious thought. The convergence of access, data, and speed is making the world a more habit-forming place. – Businesses that create customer habits gain a significant competitive advantage. It has four phases: trigger, action, variable reward, and investment. Continue reading “The secret to creating a hit habit-forming product or game”

The empty chair and how it can make your business succeed

I recently read about techniques Amazon CEO’s Jeff Bezos uses to create a great customer experience and one has really stuck with me as a brilliant way to get the whole organization focused on creating a product users love. It is something I am planning to replicate and it can help any company create products that delight users and get them to switch from competitors.

According to the article, even during the fledgling days of Amazon, Bezos worked hard to establish the philosophy of a company that obsesses over their customers from top to bottom. An overwhelming figure that used to always set the tone of his meetings was “the empty chair.” From the first days of Amazon, Bezos brought an empty chair into meetings and informed his top executives that they should consider that seat occupied by their customer, “the most important person in the room.” Throughout these meetings, a different weight was held on all decisions as the invisible but clear presence of the customer was always considered.

Multiple benefits to the empty chair

There are at least three benefits of Bezos’ empty chair strategy:

First, features and new products are evaluated through the customer’s perspective. Think of all the products that have come to market, particularly technology products, that did not have a clear value to customers.
Second, it keeps you from putting in features that are not in your customer’s or player’s interest. If people would be embarrassed to discuss a feature or new product openly in front of a real customer, there is a problem with that feature. Products that work against the customer will fail immediately or be replaced by a product consistent with the user’s interests, over time there are no secrets in product design.
Third, if the product is an improvement or substitute for an existing good, the empty chair forces you to understand if you are creating enough unique value to prompt the user to switch. By having the customer in the room, you need to consider whether that customer would use your product and why they would switch to it from their current product. Given that a product must be 5 or 9 times better to get someone to switch, you can use the empty chair to determine if and how your new offering is that much better.

Continue reading “The empty chair and how it can make your business succeed”

The value of toughness for tech companies

I recently finished Toughness: Developing True Strength On and Off the Court by Jay Bilas and was surprised how many of Bilas’ ideas from sports were also relevant to success in business. There are many examples from sports that can help you be successful in business, and Bilas’ analysis of toughness is at the forefront of these lessons. Since reading the book, I have asked my team to read regularly the article that led to the book. The underlying principle for Bilas is that toughness is not about bravado and conflict. It is found in the heart of an individual willing to devote him- or herself to what s/he knows is right. Toughness isn’t physical. It has nothing to do with size, physical strength or athleticism. It’s an intangible, an attitude, a philosophy.Toughness comes from how you handle your experiences, what you learn from them, and how others guide you through them in your life. Most importantly, it is a skill that can be improved by working on it.

Bend but do not break

Bilas uses physical materials as a means of defining real toughness. In metallurgy toughness is a measure of how much energy a material can absorb before rupturing. Scientists have devised ways to measure a metal’s toughness through lab impact tests, such as swinging a hammer from a pendulum at a metal object to calculate how much energy is required to break the object. Hardness— in metallurgy, at least— is related to toughness, but it’s not the same thing. Hardness describes how much energy it takes to bend or change a material. Being able to bend under pressure without breaking is a more important attribute than hardness. Someone who bends without breaking and bounces back up will prevail over the “hard” athlete or person, i.e., someone who is resistant to bending under pressure but will break with enough force. Persevering, getting up when you have been knocked down, is what true mental toughness is. Soccer great Julie Foudy likens her spirit to a kids’ toy, an inflatable punching bag that pops back up when it is hit. True toughness is mental toughness, and has little to do with physical toughness. As we learned from metallurgy, it is mental toughness that makes a person, player or team unbreakable, whereas physical hardness can be more easily broken. Persistence is not just about pushing forward; it is about pushing through to reach a new height, exceeding a limit you thought you had . That takes mental toughness. Toughness is not about being big or strong, or being a bully. That displays the least amount of toughness. This is lesson number one for the entrepreneur: It is most important to take a blow and be able to bounce back.

You do not need to be a jerk to be tough

Toughness has no relationship to how nice a person is. There is no reason you can’t be exceedingly nice and incredibly tough at the same time. Those two traits are not mutually exclusive. Some people feel they must create confrontation to display toughness, but confrontation just shows the ability to create confrontation. What actually shows toughness is the ability to get through a task without complaining. It is not getting rattled by challenges in completing the task, but showing concentration and patience. Instead those truly tough meet these challenges head on. Lesson number two: Toughness is not acting tough; it is not letting anything stop you from accomplishing your tasks. Continue reading “The value of toughness for tech companies”

Lifetime Value Part 16: Using lifetime value to target prospects

One of the most valuable applications of customer lifetime value (LTV) modeling is using it to target the highest-valued customers or players. I have written many times about the importance of LTV and how to calculate it. One of the most powerful applications of LTV is online customer targeting.

As an article on MarketingProfs points out, LTV targeting starts with a deep understanding of your current customer base so you can develop high-LTV and low-LTV customer segments. Doing so will allow you to create a profile of the “personas” that will have the best retention, highest word of mouth and spend the most on your products.

High-LTV personas could be “women over 35 who spend most of their day at home.” By knowing the persona, you can create personalized messages to strategically target customers who match that profile, and reach them through a variety of channels.

Once you have built personas for your players or customers, there are four ways to leverage this understanding: Continue reading “Lifetime Value Part 16: Using lifetime value to target prospects”

Lifetime Value Part 14: Machine learning and LTV

Last week I discussed how you need to manage your customers based on their expected lifetime value, and machine learning technology is a powerful tool to execute this strategy. When applied effectively, machine learning can reduce your service and support costs while increasing your profit margin. Machine learning lets you tailor virtually any part of your business to each individual customer so you optimize the value of that customer.

Predicting and placing users in the right bucket

The first key in maximizing profitability is segmenting your customers based on expected lifetime value. You can accomplish this manually by examining their past behaviors and key metrics, but most analytic teams do not have the resources to analyze how all the metrics and data interact. Machine learning algorithms, however, can not only incorporate hundreds of variables, but also predict future behavior based on these patterns. Thus, two customers who may have both spent $500 may warrant very different treatment, if the first one is likely to spend $20,000 while the latter is projected to spend $750. Machine learning is a strong tool for making these projections and optimizing the segmentation of your users. Continue reading “Lifetime Value Part 14: Machine learning and LTV”

Lifetime Value Part 13: Managing users and customers profitably

I have written many times about the importance of customer lifetime value (LTV), about its central role in determining a company’s success and how to impact it. In this post, In this post, I will address how to manage users (customers, players, etc.) based on LTV.

Profitability, success and LTV

The success and growth of your company comes down to one basic principle, your customer LTV needs to be greater than the cost of acquiring and servicing the customer. The larger the difference between the value you get from a user and the costs associated with that user, the greater your profits. The greater the difference, the more resources you can devote to user acquisition. The greater the difference, the more someone will pay for your company.

The key to optimize the value of a customer versus their costs is not treating all customers the same. Each customer has a different LTV, which can be estimated from everything nearly all the data you are collecting, including from how you acquired the user, their demographic, their initial behavior, etc. The first step to optimizing your business is to determine your different customer segments (VIPs, heavy spenders, occasional spenders, one time spenders, social whales, browsers, etc.). You then put all of your users (hopefully automate this process) into these segments.

Managing a customer portfolio

Once you have segmented your users based on their behavior and predicted lifetime value, you need to manage actively this portfolio of users to optimize your profitability. For each segment, you need to build a strategy that maximizes the difference between the LTV and the costs. For users who spend frequently, you may want to give them enhanced customer service and free gifts so they come back (and spend) even more often. The costs of this additional service and gifts are more than offset by the additional revenue you generate. Conversely, for the one-time purchasers, you want to minimize expenses tied to them. Since they have a low lifetime value, you do not want to devote any resources (costs) to them. By allocating resources only where it increases the difference between LTV and costs, you optimize your profitability. Continue reading “Lifetime Value Part 13: Managing users and customers profitably”

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The Hook Model

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Multiple benefits to the empty chair

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Bend but do not break

You do not need to be a jerk to be tough

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The Amazon example

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Predicting and placing users in the right bucket

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Profitability, success and LTV

Managing a customer portfolio

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