Habits vs Incentives
Should your Agents Leverage Discounts or Cultivate Quality Experience?
A common disconnect between Product Managers and Marketers is how they think about Habits vs Incentives in their customers' behavior.
Product managers say stuff like: "Let's make our product so good that using it becomes a Habit for our users. Then we won't have to worry about retention."
Marketers say stuff like: "We have to keep running these discounts and vouchers or our CTR rates will drop and our growth will stall."
The paper "A Neuro-Autopilot Theory of Habit: Evidence from Canned Tuna" (with the neat dataset and use-case of the canned tuna market) illustrates the value of bringing the two perspectives together:
"Two modes of decision-making are proposed: a “habitual” mode in which the previous choice is automatically repeated, and a “model-based” mode in which utility is maximized using all available information. To arbitrate between these systems, the consumer learns utility predictions and tracks their reliability. The consumer enters a habit when outcomes are reliable (i.e. when choice outcomes match predictions) and exits habit mode when there is sufficient doubt about their utility predictions."
"Overall, we estimate that 12% of consumers are in a habit before the can size change, dropping to 10% during the can introduction, with roughly 17% of habitual consumers exiting a habit during the new can introduction."
Agentic AI - where agents are trained to model and evaluate precisely these kinds of factors in customer responses and decisions - offers teams the ability to evolve past dogmatic arguments between Habits and Incentives. Habits and Incentives can be integrated more fluidly and continuously through their interactions with your customers.
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