User growth, retention and monetization!

When it comes to user growth , there are models such as the AARRR model given in "Growth Hacker", which promotes a closed loop of user growth through product design with five steps: attracting new users - opportunities - retention - monetization - dissemination. There are also models such as "Addicted: Four Major Product Logics That Users Develop a Favorite" mentioned in "Addicted: Four Major Product Logics That Users Develop a Favorite", which achieves the habit of becoming "addicted" to product use through the four closed-loop actions of trigger - action - variable rewards - investment. Regardless of the growth model, it is a means to promote product improvement and improve the North Star indicator through user growth.

The current market is gradually becoming saturated. Logically speaking, the current market growth is gradually moving from a positive-sum state to a zero-sum state. The cost of attracting new users for an Internet product will become higher and higher. Therefore, it becomes particularly important to establish an independent growth line.

1. Attract new customers

Generally speaking, attracting new users mainly refers to the acquisition of new users and the recall of lost users. New users enter a product through both channel distribution and natural acquisition, so the work of attracting new users is actually a journey to get more users to use this product.

1.1 The essence of attracting new customers

Attracting new customers is the first element of growth. Through reasonable methods of attracting new customers, users can be made aware of a product, find the core value provided by the product during use, and stay. In the process of use, they create value for the product and ultimately form a profitable supply of the product. Therefore, the two important factors that need to be considered in the process of attracting new customers are input and output.

For major online products, we evaluate the output per user of a product mainly by calculating the total lifetime value (Life time value, hereinafter referred to as LTV) of this product per user; the investment is to calculate the operating cost + delivery cost of attracting each new user for the entire product. The calculation of natural traffic can be simply calculated as the operating cost of employees, and the calculation of channel processes is the operating cost of employees + the delivery cost of each channel. Therefore, only when the average cost of acquiring new users is less than the average LTV per person, can the user scale of the product develop positively. Otherwise, the more new users are attracted, the closer the product will be to bankruptcy.

The essence of attracting new users is to get more users to come to this product, so the following five aspects need to be considered:

1. Through what channels can users access this product?
2. How to ensure that users download and use it after they come into contact with it
3. How to make it more efficient in attracting new customers
4. How to reduce the cost of acquiring new customers
5. The scale of users faced when attracting new users

Only by thinking through the above five points can we make the step of attracting new customers more effective in delivering growth.

1.2 Factors for attracting new customers

The main elements of attracting new customers are combined with the above five aspects, which can be summarized into five words:

1. channel
2. link
3. efficiency
4. cost
5. scale

1.2.1 Channels

As for channels, traditional common ones include application stores, advertising channels (Google, Meta advertising channels), etc. As the price of public domain traffic continues to rise, offline channels, private domain traffic, business binding and other channels have begun to play a greater role. For example, word of mouth and Carrefour have jointly made a 100-50 offline shopping app download channel, Pinduoduo invites friends to cut down on the private domain traffic occupation, banks require mandatory app downloads and contracts to handle business (I have never been very supportive of this kind of channel), and NetEase's various Moments screen-filling content. Therefore, in attracting new customers, channels are not only online channels for public domain traffic, but also include other channels such as offline channels, private domain traffic, etc. Therefore, our definition of channels should be interpreted as: all places that can come into contact with users and acquire users, such as communities, stores, offline promotions, etc.

1.2.2 Link

After the channel is in place, the next step is to design the link from the channel to the download and trace the data. The design of this part determines the activation status after the user downloads. For example, when a general video platform places an advertisement, it will use deeplink to obtain a collection of advertisements that users have seen outside the site. When the user opens the app, the product will recommend to the user a collection of content materials that the user has seen outside the site based on the deeplink data (long videos will generally go directly to the playback page or the content introduction details page). Currently, the most classic link design on the market is the three-stage rocket designed by Zhou Hongyi at 360 and the product ecosystem of various major manufacturers.

Three-stage rocket:

Normally, the recursive model of the three-stage rocket is to promote the coverage of users' low-frequency scenarios through users' high-frequency scenarios. Correspondingly, the profit per customer is low in high-frequency scenarios and the profit per customer is relatively high in low-frequency scenarios.

For example, in the activities where beauties in bars offer free meals, which we often see, the three-stage rocket is divided into attracting playful women by offering free meals, the second-stage rocket is to attract men by offering beauties in the bar, and the last-stage rocket is to make a profit through men's consumption in the entire bar scene. The three-stage rocket is usually a model of first losing money and then making a profit. The essence is to seize the market and establish industry barriers as quickly as possible by losing money, and after obtaining a large enough market share (usually more than 40% of the market share) and establishing high enough barriers, the money of users or advertisers will be directly or indirectly harvested through other means to complete monetization.

Product Ecology:

In recent years, leading companies have formed product matrices, starting from one point and eventually forming multi-dimensional products and services covering multiple user scenarios using points, lines, surfaces and solids. The ecological approach is mainly applicable to gradually covering people's life services based on the main site products after having a popular product, using the product's accumulated data to effectively solve the problems encountered by users during cold start, and solving business supply problems to the greatest extent possible based on existing data. Facebook and Google are both very adept at using this strategy.

1.2.3 Efficiency

Efficiency is mainly reflected in the entire process from the user knowing the app - completing download and installation - launching it. From a process perspective, the three necessary steps to attract new customers efficiently are downloading-installing-starting. Therefore, product design based on these three steps is a method to improve new customer acquisition by optimizing efficiency. From the overall steps, we can see that efficiency design is mainly reflected in two aspects. One is the optimization of process steps, and the other is the design of user psychology.

Optimization of process steps: We can see that from knowing the app to opening the app, two processes are required: downloading and installing. In traditional computer systems, an automatic pop-up window asking whether to install the app is displayed after the download is completed provides operational guidance. Today, with the popularity of smartphones, the two steps of downloading and installing are combined into one to reduce the number of steps. For some less complex usage scenarios, with the improvement of H5 technology, after users learn about the product, they can directly use simple functions through H5, and then convert from H5 to download and activate, which also reduces the steps of downloading and installation, thereby shortening the steps from knowing to starting.

User psychological design: Usually, in the channel delivery design, hooks will be added to make users interested in opening the product, thereby increasing the opening rate after installation. For example, use video trailers to guide users to download video apps, and distribute app coupons to users by registering via mobile phone numbers outside the site to encourage users to complete product launch after installation.

1.2.4 Cost

As mentioned earlier, cost is mainly reflected in whether the average user value can be higher than the cost of attracting new users. In channel selection, link and efficiency design, the overall cost and benefits need to be considered. It is necessary to obtain higher benefits by compressing costs. The bottom line is that the cost of attracting a single user is <= LTV.

1.2.5 Scale

The scale is actually taken into consideration when launching the app, namely how many user groups are there and whether they are the main user groups of the app. When a product is launched into the market, whether in the initial stage, stable stage or breakthrough stage, it is necessary to consider how large the user scale is, whether it is cost-effective to operate and launch it for a certain user scale, whether the overall human cost can be offset by the additional investment, and whether the user scale is worth implementing a systematic launch function to attract new users.

For example, Intel targeted middle-aged and elderly female users in its advertising campaign. Although this expanded the user base, this natural group of people has inherent deficiencies in their awareness of Intel products and their scale is not large enough. Therefore, if the campaign is carried out, there will be no scale effect.

2. Use and Activation

After users enter the product, in order to retain users and monetize as much as possible, what needs to be done is to let users use it and register and activate them at the appropriate time. After the new page reaches the user, the user will go through the three major processes of contact-learning-satisfaction during this period, from exposure to new business to activation and deep retention.

2.1 Reach

When the user completes the new user acquisition stage, the first step of activation is for the user to access the corresponding products and services. Generally speaking, the most important thing for new users is to provide core product value or to prioritize the simplest and most fun parts of the entire product for users to use.

For example, in Alipay’s Double Eleven “Collect Five Blessings” activity, the simplest way is to give users a blessing card at the beginning, so that users can access this activity first. Qutoutiao uses a simple and crude method of giving cash red envelopes directly to users for reading content to attract users to engage in basic consumer browsing behavior.

2.2 Learning

Learning is the step after reaching out. When users have a basic understanding of the core functions of the product, the platform needs to provide users with corresponding growth education so that users can learn about the product. The steps of education and learning are what need to be done after reaching out. It is necessary to use the points of attraction of reaching out to users to gradually expand them into a long line to pull users through the learning process on the platform. Therefore, the most important task of the product is to make this line longer and thicker.

The long definition is to make the complex user learning process simpler, and the rough definition is to enable users to ultimately complete the indicators through multiple ways. A relatively classic example of learning is Ant Forest. The platform tells users that they can accumulate raw materials through a series of actions to plant trees in China. The ways to accumulate raw materials include one's own efforts and obtaining them from others. Users exchange saplings through continuous energy accumulation. This is a typical learning process.

2.3 Satisfaction

After users have learned about the business and completed the operation during the learning process, the platform needs to provide users with timely feedback based on the process and completion of the user's operation, so that users can have a deeper understanding of the platform products. We call this part the design of timely satisfaction.

If a business environment allows users to participate and provide feedback to them after a certain period of time, such as when a user posts a video on YouTube, after a period of time, they will find that they have gained followers and have a lot of positive feedback (likes, positive comments). After a period of time, the user will feel a sense of accomplishment for the things they have worked hard on before. In order to allow users to enjoy this sense of accomplishment as soon as possible and to screen out high-quality users, the design of delayed gratification is not only a functional design but also a strategic design.

3. Retention

The core of product retention is to keep more users staying and continuing to use the product. Therefore, the core of user retention lies in two aspects: staying and using. Staying means that users think the product is simple and convenient to use, has a high degree of similarity to previous usage logic, can cover certain aspects of user demands, will not delete it after use, and will continue to use it when encountering similar scenarios later (the simplest one is the calculator that comes with the system).

When faced with more user usage scenarios such as production, consumption, and tools, the main focus is on users appreciating the core value of the product during use, and product-related businesses can cover as many aspects of user life as possible. Therefore, the key to retention here is to allow users to learn to explore after use, and ultimately keep them.

In order to get users to stay from contact to retention, the main things involved include whether the user path is simple, whether the product functions or strategies are specific and easy to understand, how to extend the user life cycle, and how to increase the speed at which users become familiar with the product and business (the vector must be positive).

3.1 Path Exploration and Optimization

When users face a product, getting satisfaction in the shortest path is the most important means of retention. Often in product growth data analysis, we can draw a rough growth data funnel. Through the funnel data analysis, we can get the key indicators with the largest proportion of user retention. After eliminating some interference indicators, the method of improving retention by optimizing the behavior of key indicators is the process of exploring and optimizing the path.

Let's take video consumption as an example. The final indicator points to retention. At this time, after our users enter the product, there will be so many indicators such as browsing the video cover and introduction, clicking on the video cover, watching the video, watching the video for an effective time, paying attention (chasing the drama), and commenting. Through analysis, we found that watching and reaching an effective viewing time are the two most important indicators for user retention. Then we continued to analyze and found that simply optimizing the viewing rate may cause a decrease in retention (attracted by clickbait titles), but increasing the effective viewing ratio does have a significant improvement on the retention indicator. Therefore, improving effective viewing becomes a very important method at this time.

At this time, some products, based on the corresponding population and product form, gave up displaying the video cover in a flat manner on the page to attract user clicks. Instead, they directly found videos with high effective playback data and let users start playing them directly after entering the app. This eliminated the two steps of cover viewing and video clicking, thereby improving retention through path optimization.

The same logic can also be used in login and registration. When we find that the retention rate of logged-in users is much higher than that of non-logged-in users, we can optimize the login path. The most traditional method is to register first and then log in. Later, it evolved to bind registration and login through mobile phone number and verification code. Since the product can directly obtain the user's mobile phone number through the operator, the one-click login method now shortens the login path, thereby improving retention.

3.2 Undertaking capacity

The carrying capacity determines the growth design from the time users enter the app to the time they find something they like. Therefore, in the overall design, the general ways to deal with the ability to undertake include teaching guidance, core function recommendations, and profit sharing. Therefore, we can find that after the user downloads for the first time, a novice guide will appear, such as basic guidance in the video editing tool (video import, editing, music adding prompts, etc.).

For video products, such as TikTok, new users will see a prompt to swipe up and down after downloading, guiding them to try out the functions. In addition, with the support of matrix ID and new user recommendation algorithms, users can be given content that they are likely to like as much as possible (whether they like young men or young women), thereby strengthening the product's ability to carry on and improving ultimate retention.

3.3 Extending the User Lifecycle

In fact, every product and every business has a corresponding user life cycle. The core of growth design is to extend the user life cycle of the current product. There are two main ways to extend the user life cycle. The first is to increase the corresponding data during the product introduction period, growth period, maturity period, and decline period, so that the user's life span in different periods can be extended and smoothly transitioned. The second is to develop peripheral businesses and special gameplay within the product, so that the product can cover more life and entertainment scenarios of the user.

Let’s take the information flow short video product as an example: during the introduction period, growth design usually allows users to familiarize themselves with the product as quickly as possible and find the content they like. At this time, cold-start content pool and product matrix push are the most important means; the most important thing for users in the growth stage is to allow users to develop in the platform. At this time, it is necessary to continuously provide users with content they like, and at the same time, it is necessary to discover users’ other preferences so that the platform can cover users’ diversified content consumption demands; mature users need the platform to allow users to settle into another form as much as possible (such as from video consumption-comment-production) in addition to the growth stage design, so as to enter a new round of growth cycle; finally, in the decline period, users can be brought back to the product through relationship chains, recalls, etc.

Among these, developing multiple businesses is mainly applied in the mature stage, using high-frequency consumption to combat low-frequency consumption (such as short video consumption to live broadcast consumption or e-commerce or local life) to extend the user's maturity period.

IV. Dissemination

The core of dissemination is to spread it to more users through existing users at a very low cost. The way of attracting new customers at a lower cost than the cost of advertising can be summarized as dissemination through user dissemination, public domain traffic or private domain traffic. During the entire communication process, the product may face two situations: the blue ocean market and the red ocean market. Depending on the different market and business development conditions, a variety of methods will be used in product communication.

4.1 Blue Ocean Market

A blue ocean market can be defined as one where the current product is relatively scarce in the market. For products developed for this type of market, our common approach is to emphasize the scarcity of the product, and usually the way is to use the principle of limited quantity to cause market popularity. A relatively mature example of this is Nike’s appointment lottery for the release of the Jordan series. A typical example in Internet products is the internal testing and invitation code mechanism.

The most typical example of the internal testing mechanism is Zhihu. When Zhihu was first established, it mainly invited celebrities to share and answer questions, driving content consumption through celebrity utility, and then gradually allowing users to become content creators.

The invitation code mechanism is relatively mature in current use. Products such as Clubhouse and Xiaozhou use the mechanism of issuing invitation codes to quickly find initial seed users for the products, and then use the personal influence of seed users and the brand tone and scarcity of the products to promote the products in the blue ocean period, thereby playing a role in attracting new users through dissemination among users. When there are relatively many products of the same type, the invitation code mechanism is useless. At the same time, the invitation code may also cause a burden on product growth.

4.2 Red Sea Market

If a product is born to face a red ocean market, then the communication needs to do at this time is to open up lower-priced communication channels to attract and recall new users. What needs to be achieved here is that the cost of user communication and attracting new users is less than the cost of channel placement and attracting new users. At this time, there will be many growth designs that revolve around the cost of user communication and acquisition < the cost of channel placement and acquisition. The most direct way is to use the user's private traffic to acquire customers. Common examples include Pinduoduo's "cut the price", the front-end personal content sharing entrance for camera and video products, the red envelopes obtained after downloading the app in video products, and the 2018 live quiz show where big money is given out.

The above method is to convert the money traditionally given to merchants into money given to users while maintaining traditional investment. By changing the links and channels for the circulation of investment funds, centralized traditional investment (application market, advertising alliance, etc.) is transformed into decentralized interpersonal communication, thereby reducing investment costs and promoting new users or recalls. The advantage is that companies can transfer the cost bargaining power from advertisers to the platform itself, while costs can be controlled and the scale of subsequent development may be larger.

5. Growth and Innovation

Faced with the current situation where the existing market size is getting smaller and smaller and the top companies are becoming more and more concentrated, users have gradually moved from a positive-sum market to a zero-sum market. At this time, growth innovation has become increasingly important.

Innovation in growth currently focuses on two aspects. The first is to attract users in a zero-sum market by innovating business models facing users. The second is to increase growth by optimizing efficiency and allowing users to have more direct contact with specific businesses.

5.1 Business Innovation

There are two main ways of business innovation: one is to optimize by learning from others, and the other is to optimize yourself.

A typical example of innovation by learning from others is Henry Royce, who created the pinnacle of Rolls-Royce by researching and optimizing French automobiles. An example of innovation through independent revolution is Walter Owen Bentley, who developed Bentley's super sedan by constantly transforming his automobile engines. A typical scenario for domestic Internet companies is Pinduoduo's "Kanyidao", where community e-commerce converts public domain traffic into communities where it can communicate more directly with users and consolidate profits.

5.2 Efficiency Innovation

Efficiency innovation mainly revolves around reach, conversion, growth, and depth, which requires selection based on the scale of user coverage, and the priority of selection is to optimize efficiency from large scale to small scale. The most typical innovation in reach efficiency is the product form of Douyin that plays directly when the screen opens. By opening and playing, users can reduce the process of selection and clicking when consuming videos, greatly improving consumption efficiency.

The most typical conversion at present is the issuance of Kuaishou coins in Kuaishou live broadcasts. If you want users to change from simple live broadcast consumption to live broadcast consumption users who will give rewards, the simplest way is to give some Kuaishou coins (Kuaishou's virtual currency for rewarding anchors, which can be used to buy gifts) to users who consume live broadcasts for the first time, allowing users to complete the simplest consumption and thus form a consumption conversion; Pinduoduo Video uses the method of directly distributing cash to users after watching videos and allowing them to withdraw money through WeChat to allow users to complete the conversion. Growth is reflected in the user's greater familiarity with the product, such as tutorial guidance, so that the user can enter the maturity stage as soon as possible in the life cycle and understand all aspects of the product. Depth means that users are very familiar with the product, can have fun using it and can continue to bring in new users. Typical examples include Pinduoduo encouraging friends to cut down on their spending and Ant Forest protecting or taking away friends’ energy.

6. Postscript

Growth design has developed into a huge and complex system engineering project, covering the optimization and establishment of user-side functions, the output and data integration of server-side system capabilities, business understanding of the strategy part, and other collaborative development tasks.

For growth, the most important thing is to understand the business, figure out the core demands of users in the product and the business coverage. By constantly understanding the business, you can skip the intermediate data indicators, find the key data indicators pointing to the North Star, form a large-scale and systematic optimization method, and ultimately achieve data growth.

Author: Big Orange-Video Products

Source: Xue Huiqing