The Secret of User Growth | Why is your user base not growing?

The changes of the times and channels will bring new ways of playing. It is better to know before you act.

Three elements of user growth : cognition, strategy, and organizational capabilities

Personally, I believe that in order to achieve user growth, from the perspective of a business manager, we must grasp the three core elements: cognition, strategy, and organizational capabilities, in order to achieve seeing, thinking, and doing.

In the near future, I will write a series of articles around these points, starting with cognition today.

From 2014 to 2018, the concept of user growth was introduced to China from Silicon Valley, took root in the country, and spread like wildfire. In the past two years, I have come into contact with many companies, institutions and people. Suddenly I found that everyone was talking about user growth. It seemed that if you didn’t talk about user growth, you would be embarrassed to say that you were working in the Internet industry.

So what exactly is user growth, who are the people talking about user growth, what are the tricks involved, and what are the differences?

Last November, I published a book about user growth, "Exploding User Growth", which was well received by readers and systematically described some experiences in user growth. I have personally been practicing in enterprises how to efficiently achieve enterprise user growth. Based on the experience of more than a year of practice, I plan to take some time to talk about it.

Several major schools of user growth

1. Technical people

We often hear about "growth hacking", the essence of which is technical arbitrage, and the threshold required is very high.

When it comes to user growth, the cases you hear most about are probably Airbnb, Facebook, Dropbox, etc. I won’t go into detail here. If you are interested, I recommend two books: "Growth Hackers" by Sean Ellis and "Lean Data Analysis", both of which are classic must-reads on user growth.

2. Marketing School

Traditional Internet companies have a marketing department or online marketing department. The most important responsibilities of this department are to build brand and spend money to buy traffic.

User growth is actually not new. Internet companies have always been doing user growth, which traditional Internet companies call traffic acquisition. The difference with user growth is that the marketing department is only responsible for buying traffic, but not for the operation of subsequent users. It is impossible to form a unified user growth system, and the marketing and operations often conflict with each other.

3. Scientific Growth School (There is no clear name for this school in the industry yet, so let’s call it that for now)

I have heard Aatif, LinkedIn's vice president of global growth, share before. He said that he doesn't like to equate user growth with growth hacking. In his eyes, user growth is a scientific marketing system. It is a set of scientific user growth methodologies that integrate products, marketing, channels, and data and provide refined operations. It can be learned and reused.

There’s nothing fancy about it. It’s just about constantly proposing growth hypotheses, conducting experiments, and using data analysis to verify the correctness of the hypotheses, repeating this cycle over and over again.

I personally prefer the last one.

Advantages and disadvantages of several models

1. Growth Hacking Model

The advantage of the growth hacker model is that it can achieve low-cost or even zero-cost customer acquisition through technological means.

The disadvantage is that it is something that can only be encountered by chance. The characteristics of this model are that the cycle is very short, the means of growth can be easily discovered and blocked by the platform, the technical requirements are relatively high, and the replicability is not high.

2. Spend money to buy traffic model

The typical model for buying traffic with money is the AARRR model. In the past, everyone thought this model was classic, but they didn’t realize that the biggest problem with this model is: will the number of users always be decreasing?

Image from "Exploding User Growth"

In a scientific user growth model, retention and fission are the key; the number of users will not only not decrease, but will increase instead.

Image from "Exploding User Growth"

There are several disadvantages to the model of spending money to buy traffic:

1) Huge waste of budget

Departments that spend money to buy traffic generally assess the cost of new customers, not the cost of effective users. However, the reasonable approach is to calculate the cost of effective users, because the quality of new users determines user retention and fission.

As shown in the figure below, Channel D is a very high-quality channel from the perspective of new customer cost. However, the quality of new customers is not high, the subsequent retention is very poor, and the proportion of effective users is very low. In fact, it is a channel of very poor quality. This is a key point in integrating the traffic purchase and user growth systems.

Image from "Exploding User Growth"

2) Failure to form effective linkage

User growth, from contact with users to download conversion, every strategy to guide users to get started is closely related, and it is no longer possible to simply separate traffic and products. The current trend is that every channel source is deeply integrated with the product, and customer acquisition, conversion and operations must be deeply integrated.

3) The paradox of cost and efficiency

The cost of traffic procurement will always continue to rise, and one of the major missions of enterprise user growth is to continuously find traffic value gaps and reduce customer acquisition costs.

4) Limitations of the model of growth through purchasing traffic channels

There are some special products with high profits, low frequency and single channel, and their growth model relies on buying traffic, such as medical care.

5) Will the CGO really replace the CMO?

My personal opinion is that it is a partial replacement. CGO replaces the non-brand part of the CMO's functions, and there is no essential change. If translated into the language of marketing, it means the comprehensive digitalization of marketing.

The historical background behind several models

In 2011, I was in the marketing department of Qunar.com. At that time, it was still the PC Internet era, and the largest source of traffic for Qunar.com was search engines.

At that time, SEO was the most important means of user growth. The method was a bit similar to today's growth hacking, and was mainly achieved through technical means. In that era, SEO was a very popular job.

Image from "Exploding User Growth"

In that era, everyone only had the concept of traffic, not the concept of users. In other words, they only focused on traffic, not user retention. Even when buying air tickets on Qunar.com, users don’t need to log in. Not to mention operations, there isn’t even a basic account system.

It was not until 2012, when group buying began to gain popularity and Qunar started to operate direct hotel business, that it began to gradually build its own account system. But there was still not much concept of user operation. I remember that except for the marketing department where I worked, which often sent out EDMs, there was almost no concept of user operation in the entire company.

Later, I went to Qihoo 360 and fully experienced the feeling of playing with traffic on a super traffic platform. From 2012 to 2014, with the rapid growth of trading platforms such as e-commerce and local life services, user operations gradually began to be valued, and there was a gradual awareness of converting traffic into one's own users.

But in this era, the role of the traditional marketing department is still at the core of user growth, and spending money to purchase traffic is still the most effective means of user growth.

From 2014 to 2018, the period of rapid development of mobile Internet, industries such as group buying, food delivery, travel, and Internet finance took advantage of the golden period of rapid development of the mobile Internet demographic dividend, and began to see a series of low-cost or even zero-cost ways of achieving tens of millions of users based on social fission. Many companies achieved explosive growth in this stage.

The user growth strategy was widely used during this period and gradually began to become mainstream, showing a trend of replacing the traditional marketing department. During this period, the two companies that have implemented user growth most thoroughly are Toutiao and Pinduoduo.

Since the end of 2018, we have suddenly seen the rise of the membership model. I personally predict that the membership model will become one of the most mainstream business models for many Internet companies in the future.

The foundation for the development of the membership system lies in the demographic dividend of the development of the entire Internet. The traffic dividend has ended, and we have entered an era of refined user operations. The previous growth model was based on high-speed traffic growth.

Next, user growth will enter a bottleneck period. At this time, if the company wants to continue to grow, it will need to increase the value of individual users. The membership system will gradually move to the center stage of the Internet business model (there will still be some structural opportunities for traffic in local areas).

In the past, the Internet strategy was to offer it for free first, then think about the business model after increasing the traffic. In the future, business models based on membership and with clear charging models from the beginning will become more and more common. This will be a very big change in future Internet entrepreneurship and corporate growth.

From PC to mobile, from incremental to stock, there is a corresponding strategy for each stage. However, as time goes by, higher and higher capabilities are required for refined operations, and higher and higher requirements are required for a scientific user growth methodology system, which is accompanied by an upgrade in organizational capabilities.

Therefore, as business managers, we must first address issues at the cognitive level. Understand what user growth is and how to formulate a corporate growth strategy so as to find key people, match corresponding organizational capabilities, and achieve user growth for the company.

I will write about these in subsequent articles.

Finally, my personal definition of user growth:

User growth = specific channels + specific marketing tools + scientific methods

For example: Didi user growth = WeChat + red envelopes + data.

In the era of mobile Internet, through innovation in marketing tools, red envelope sharing has been grafted onto the super APP WeChat, enjoying the dual benefits of social dividends and mobile Internet, and achieving explosive growth in users.

Under the premise of a certain era and industry background, the method of deeply integrating classic marketing theories with Internet products to achieve user growth has the characteristics of timeliness, specificity, and scientificity (data-driven, repeated iterative experiments).

Which user growth model does your company belong to?

Author: Hua Da Chong, whose real name is Huang Tianwen

WeChat public account: Dachong Operation Tips (ID: huadachong1986)