User growth methodology!

According to the 2019Q1 Mobile Internet Ecosystem Traffic Insight Report released by QuestMobile, the user growth rate fell below 4% for the first time. It can be seen that the traffic dividend has gradually disappeared and has now completely disappeared, and the Internet has bid farewell to the era of wild growth.

During the traffic dividend period, the cost of acquiring customers was only a few dollars, but now it costs dozens, and in some industries it even costs two or three hundred. Companies in every industry are very concerned about the cost of acquiring customers. How to acquire customers through low prices and increase profits is the biggest challenge facing almost every company now.

Regarding user growth , I will talk about my understanding in three parts:

1. What is user growth?

In my understanding, if we only talk about growth without talking about commercial monetization, it cannot be called real user growth without a complete closed loop. User growth should be a complete closed loop, so it can only be called user growth if there is considerable ROI at the same time as user growth. Growth without considering monetization is just hooliganism and a waste of company funds.

1. What forms does user growth take? ··

There are two main forms of acquiring user growth. One is to acquire user growth through purchases, which can be called purchasing traffic. The other is to acquire user growth through daily activity operations, including lotteries, games, group buying, and fission promotion, which can be classified as operational traffic acquisition.

About Procurement-Based Traffic Acquisition

As the name suggests, it is to purchase traffic like a commodity. Common purchasing channels include Tencent's Guangdiantong and WeChat advertising, Baidu's Baidu promotion, Toutiao's huge engine, Weibo's Fantong, etc.

About operational traffic acquisition

In 2018, the two most popular marketing words were fission and community. But today, fission is indeed the lowest-cost way to acquire customers in this era of social networking among acquaintances. A successful fission is inseparable from three important elements: high-quality content, high-quality channels and the operation of fission activities. In summary, fission = high-quality content + high-quality channels + fission activity operation

Conventional fission includes the following five forms:

1) Word of mouth fission

When a user experiences or uses a product and finds that the product is very good and the user experience is also very good, the user will then have the idea of ​​recommending it to their relatives and friends, and at the same time, word of mouth will form in the social circle. This is undoubtedly a very good way of communication and can acquire a large number of users at almost zero cost. The prerequisite for generating word-of-mouth communication is that your product must be good enough and attractive enough to users. For example, Haidilao and Xiaomi are the best examples of word-of-mouth communication.

2) Group buying fission

As the name suggests, group buying fission means two or more people buying together. Users initiate a group buying and share it with friends through social means. Friends participate in the group buying and jointly purchase a certain product or service at a price lower than the price of a single item. Both the inviter and the invitee can get the group buying price. For example, Pinduoduo, which has mastered the art of data mining, has gained hundreds of millions of users in just a few years. (In July 2018, Pinduoduo was listed on the Nasdaq in the U.S. It took only three years from its founding to its listing, and the company has become a dazzling new star in the mobile Internet.)

3) Assisting fission

Assisting fission means using friends to help you gain benefits. The way to achieve this is by sharing with friends and letting them perform certain operations to enable you to gain benefits. For example, Pinduoduo.

4) Distribution fission

Most paid knowledge courses use this model, which is to generate their own exclusive distribution QR code to the circle of friends, and then they can earn profits after others purchase it. For example, Sanlian Life Weekly

5) Invite fission

Invitation fission is to use old users to attract new users, and to attract old users to attract new users through certain rewards, such as cash back or coupons. While rewarding new users, old users are also rewarded, and both the inviter and the invitee can profit. Now many apps and mini programs are split in this way.

For example: Luckin Coffee, after a user comes in, as long as he invites a friend in, he will get a cup of coffee. If he gives a cup of coffee to the newcomer, the user will also get a free cup himself - buy one, get one free, give one, get one free. (Luckin Coffee was founded in October 2017 and submitted an IPO application to the United States in April 2019).

1. User growth model

The most common model at present is AARRR, which students who work in operations should be most familiar with. It can also be called the pirate model (the origin of the pirate model is Captain Jack Sparrow in "Pirates of the Caribbean". He always makes an "aarrr" sound before he speaks. At that time, the entrepreneur and investor in Silicon Valley was his fan Dave MacLeure, and it was he who proposed the AARRR model, which is called the pirate model).

AARRR also represent the five stages of the user life cycle. The following is an analysis of these five stages: 1) Acquiring users The so-called user acquisition refers to the two main forms of acquisition mentioned above, which are paid acquisition and free acquisition. Regarding channel distribution, since the number and quality of users acquired through different channels are different, the product, operation and distribution teams (generally small companies do not have their own distribution teams, they are all operated by agents) should pay attention to the number and quality of users coming from each channel, list them according to different channels and calculate the corresponding customer acquisition costs, focusing on which promotion channels have good ROI effects. When choosing channels before launching a product, you should also understand the user profile of your industry in advance. For example, if your target audience is moms, it would not be suitable for you to promote sports-related products.

2) User activation User activation is the process of guiding users to discover the value of the product, find their Aha moment (surprise moment), and generate motivation to use the product repeatedly. Generally speaking, the most commonly used data to measure activation is registration volume, so tracking the ratio between registration volume and download volume can indicate the degree of activation of your service. If there is no registration in your product, you can also measure it with other common indicators, such as: session duration, number of completed guide page displays, number of users who use the main function at least once, etc.

3) User retention After solving the user activation problem, another problem that needs to be solved is how to retain users. Often, users of an Internet product come and go quickly. If the product lacks stickiness, the result is that new users continue to pour in on the one hand, but quickly leave on the other hand, resulting in a very low product retention rate and a greatly shortened product life cycle, which ultimately directly affects the monetization effect. Over time, the product is bound to die. For example, if you go to a restaurant and the food and service experience are terrible and it is unhygienic, I believe you will never go there again. Such a restaurant will close down soon. To give another example, before Facebook was founded, the leading social network in the United States was MySpace. MySpace has a long history, a large number of users, and is backed by its financial sponsor News Corporation. From any perspective, they should have been able to easily crush Facebook, which was founded by a few college dropouts, but they were defeated miserably. There are certainly more than one reason for this, but MySpace's main operating indicator is the "number of registered users", while Facebook, under Zuckerberg's guidance, used the "number of monthly active users" as the main indicator for external and internal operations in the early days. Facebook paid more attention to user retention.

4) User monetization is the product’s business model, which is how to increase revenue and create profits through the product’s business. This is an issue that all Internet products must consider, because the nature of a business is profit-seeking. To put it bluntly, the goal is to make money, and a company that does not make money is unethical. Currently, there are three main ways for Internet products to make profits: advertising, value-added services, and commissions.

4.1 Advertisements Let’s talk about advertisements first, because advertisements are truly everywhere. As the price paid for the free Internet era, advertisements are everywhere on the Internet. The two main forms of Internet advertising at present are: search ranking and information flow advertising. Search ranking includes Baidu search, Taobao bidding ranking, bidding ranking of major mobile application markets, etc. Information flow advertising products include Weibo, Toutiao, Douyin, various news products, Moments, etc. In addition to search rankings and information flow ads, there are also traditional homepage recommendations, splash screen ads and other forms. There are various forms of advertising, and every large company has its own advertising platform. The revenue generated through advertising accounts for an important part of the overall Internet revenue.

4.2 Value-added Services The Internet has pioneered a free model, but some people also say that free is the most expensive model. Regardless of the model, the ultimate goal is to make a profit. How to make a profit if it’s free? The answer is cross-subsidy, charging for value-added services on top of free services. The profit model of most Internet games is value-added services, such as Honor of Kings, where you can buy a cool skin. For example, some commonly used tools such as Evernote, Mubu, and Baidu Netdisk have basic functions free of charge, but advanced functions are charged.

In addition, the paid videos on video websites also follow a similar idea - basic content is free, and premium content is charged. In order to be able to watch one more episode of One Piece in advance every week on iQiyi, I also recharged my membership.

4.3 Commission Most Internet giants belong to the platform model. The platform does not directly produce or create value, but rather integrates value by connecting different business groups. O2O giants such as Meituan Dianping, Didi Chuxing, Ctrip, and Ele.me all make profits by facilitating commercial transactions such as group buying, taxi-hailing, hotel and travel, and food delivery, and extracting a certain amount of commission from them. Commission, transaction commission, transaction fee, etc. all mean the same thing.

In addition to O2O platforms, payment tools such as Alipay and WeChat Pay also use commissions as their profit model. All commercial transactions must ultimately go through payment settlement, which is why the two Jack Mas attach great importance to the layout of the payment link. Grasping the key point of payment means grasping the pulse of business.

The commission method seems to be the simplest profit model: as long as you trade, I can make money without doing anything. However, this model requires the platform to have sufficient influence, and only giants can play this game.

5) Spreading and recommending is also a way to acquire customers. Why are these two separated in the growth model? Mainly because the main source of customer acquisition is channel delivery. The traffic through channels is more of a one-time traffic, which requires continuous investment to obtain continuous traffic inflow. Once the delivery is stopped, the traffic in this channel basically stops. By establishing a referral mechanism, we have an additional way to generate traffic continuously, and it is free.

User recommendation is a way to acquire new users by leveraging the social influence of existing users. For example, Airbnb, Dropbox, and Luckin Coffee.

From acquiring users to spreading recommendations, this is the entire process of the AARRR model. A quick look at this model reveals that it is also funnel-shaped, completing the entire life cycle loop of the product in a spiral manner.

Related reading:

1. User operation: new funnel model for conversion analysis!

2. User operation: How to use B-side operation thinking to increase user growth?

3. Product operation: How to use data analysis to drive product user growth?

4. APP user growth: One model solves 90% of growth problems!

5.How to increase users? Take Pinduoduo and Xiaohongshu as examples

6. Triggering user growth: Is user operation just about attracting new users?

7. User operation: What else can you do to attract new users without fission users?

8. User operation: how can financial products awaken dormant users?

9. User operation: How to make use of private domain traffic?

Author: Wang Chao_df23

Source: Wang Chao_df23