How can product operations achieve the goal of adding new users and retaining users?

We have heard many summaries of user growth and many methodologies, both AARRR and RAARR are very useful. But based on my own summary of growth cases, I think most of the current domestic products only need to do two things in terms of growth: one is new additions, and the other is retention.

Although it sounds simple, it takes up tens of thousands of words. The details and collaboration involved cannot be easily solved by methodology. You will even find that many product leaders have an absolute bias against growth. For example, they only focus on new additions. Although they think retention is important, they are not willing to invest resources in it. Another example is that they think new additions are merely channel purchases.

Therefore, next I will summarize my understanding and methods on new customer acquisition and retention. I summarize these two points as [New Customer Acquisition Model] and [Retention to do list] respectively. I hope it can help those who are working on growth. Let me start with [New Customer Acquisition Model].

1. Add a new customer acquisition model

The new customer acquisition model consists of two parts: one is to increase the number of new users, and the other is to increase the number of effective new users.

The model includes three growth techniques, namely, channel addition, word-of-mouth communication, and marketing promotion.

It is difficult to distinguish which of these three points has a greater effect and brings more quantity. In fact, there is no need to distinguish them because all three points are indispensable.

After observing the new strategies and effects of nearly 100 apps, we found that it is impossible to separate the decision of an average user to download and use a new app from the influence of his living environment, friends, and product perception.

For example, restoring an ordinary user's download and use of TikTok allows us to have a deeper understanding of three essential reasons.

John, 25 years old, is a bank clerk and lives in Chengdu.

He remembers the first time he saw TikTok was when he saw a colleague sharing a lip-syncing video of himself on WeChat Moments. At that time, he didn’t know the name of this product. Later, when he was queuing for hot pot, he saw several pretty girls next to him swiping through videos of similar singing and dancing content on their phones. That day, he also found in his circle of friends that his elementary school classmates had also shared short videos they had taken, but he still did not take any action.

It was not until a few days later when colleagues were having a dinner together that he heard several colleagues talking about "finger dance" and "seaweed dance". He felt a little embarrassed at the dinner because he could not join in the topic. I happened to see this video ad while browsing the news, so I clicked to download Tik Tok. The more I played, the more fun I had, and soon I became addicted to it. During the Spring Festival holiday, he spread Douyin to his cousins ​​and took them to shoot videos together.

It is not difficult to see from this real restoration scene:

1) Users download a new app not only because of one factor

We know that it is very costly for users to download a new product now, and the apparent reason is that traffic is expensive. Essentially, this is because mobile Internet users have become very mature users. When it comes to choosing new products, they are no longer as curious about them as they were in the first few years of the development of mobile Internet.

Now their fragmented time has basically been occupied (for example: WeChat, Taobao, news, Weibo), the purpose of new products must be to compete for this fragmented time. For users, if you don’t tell them the most compelling reason and tell them repeatedly, they will not change their usage habits.

2) Circle influence is a means to attract high-value new users

Who will tell users a compelling reason is also crucial. Friends, classmates, and colleagues are the people users trust the most. Similar tastes, hobbies, and consumption levels all allow users to trust the information they provide more quickly. We call the social groups of individual users circles, classmates circles, colleagues circles, circles of people working in the Internet industry, circles of people who love lolita, and so on.

The core of communication in the circle is word-of-mouth communication, where the most active factors in the circle (liaisons + experts + salesmen) try out the products, summarize them in their own language, and recommend them to other users in the circle. The new users brought in this way have the highest stickiness to the product. They have a master like the "active factor" to guide them in using the product and remind them to return to the product.

Therefore, circle-based communication is the key to acquiring new customers. We should refine customer acquisition, start from the circle, use word-of-mouth communication as the core, and increase the penetration rate of circle-based communication.

3) Participation is the biggest motivation for users to download a new app

In analyzing the motivations for an average user to actively download and use a new product, we found that "sense of participation" is the most powerful and largest of all motivations.

What participation implies is that users are unwilling to leave the group, fall behind, or be isolated. We saw that John noticed that two of his friends shared new products on WeChat Moments. Although this gave him a superficial understanding of the new products, it was not enough to motivate him to try them. The real final blow was that he was unable to join the topic at an offline gathering. He had no idea what two or three colleagues were discussing, and he did not want to be isolated, so he took action.

Therefore, when operating the new customer acquisition model of the product, we must think for the users and create some topics and content so that they can talk about it at the dinner table, at parties, and in group chats.

For example: the "finger dance" created by Douyin has become a distinctive representative of this product. It is also very topical and is very easy to be talked about at parties. Participating in this discussion is the biggest motivation for a user to download.

1. [New customer acquisition model] - New channel

Regarding channel acquisition, we often hear many legends like "The secret to growing hundreds of millions of users without spending a penny", "Taking inventory of all channels, this is the most useful", and "The lowest-cost channel for acquiring new customers". Everyone is eager to be told about the most effective channel for acquiring new customers.

However, does such a channel really exist?

Although a channel has brought in a lot of new equipment, it has also invested a lot of money. In addition to looking at CAC and LTV, what other data do you need to look at to determine whether this channel should continue, reduce investment or even be abandoned?

Fan traffic not only has large traffic, but is also cheaper than precise delivery. Is fan traffic necessarily effective? If a fixed entrance is opened for you on high-traffic products such as WeChat and Taobao, will it definitely be effective?

1. What data can be used to observe the value of a channel to a product?

Before commenting on whether a channel is effective and making various delivery strategies, we can conduct a small-scale delivery on a certain channel, monitor and collect data, and then perform data analysis after a period of time.

The data contains two dimensions. The horizontal dimension is split according to user identity, including new users, inactive users, and lost users; the vertical dimension is CPA, ARPU, ROI, next-day retention, 7-day retention, and monthly retention.

Why do we need to consider inactive users and churned users?

For a channel, no matter it is an existing market or an information flow, no matter it is Weibo or Douyin, first of all, the users of the channel itself are also growing on their own, and there is also overlap between the users of channels. More importantly, the launch of channels can bring back users who are about to or have already lost the product.

Therefore, when looking at users brought by channels, we need to not only look at new additions but also whether the user has been here before and whether they have not opened the product for more than 30 days.

Basic data in vertical direction:

• User Lifecycle Cost CPA: CPA = COST / Number of New Users (Number of Silent Users or Number of Lost Users)
• Average payment amount per active user (ARPU): ARPU = median daily revenue to date * 365 / number of new active users
• Total lifetime value of a user: LTV = LT * ARPU

LT is the average number of active days of users in a certain period of time. For example, for a group of new users, those who are active for 1 day are a1, those who are active for 2 days are a2, those who are active for 3 days are a3... and so on. The average number of active days is (a1 1+a2 2+a3 3...+an n)/(a1+a2+a3...+an), which can be simplified to: LT=R1+R2+R3+...Rn.

In actual operation, the activity rate of a group of new users will decline rapidly in the first n days, and then tend to decline steadily. If this happens, it is recommended to calculate it in segments.

ROI=LTV/CPA. When ROI is less than or equal to 1, it is not worth continuing to invest in this channel. After all, an independent company has to calculate fixed costs.

For example, when the budget is limited, how do we analyze the choice between channels A and B?

We observe the 7-day data for channels A and B:

1) Characteristics of Channel A: a large number of new users, but low retention; the larger the number of new users, the lower the retention.

Characteristics of Channel B: High retention rate of new users, better than Channel A.

2) The retention rate of channel A tends to be stable after 30 days of decay, and the LT after segmented calculation is 2.5; the retention rate of channel B tends to be stable after 45 days of decay, and LT is 22.1.

3) Channel A: CPA is 1.22, ARPU is 18, and ROI is 0.9.

Channel B: CPA is 2.13, ARPU is 25, and ROI is 0.3.

Although the CPA of channel B is significantly higher than that of channel A, considering other data, users of channel B value the product more highly. If your budget is limited and you can only choose one channel between A and B, you should choose B. Increasing investment in B will gain more effective users. However, the users of Channel A are not accurate in understanding the product. If more investment is made, it is likely that the income will not cover the expenses and the city construction will suffer losses.

When purchasing and placing ads in channels, we also need to look at an indicator called CAC (cost to acquire a single user). When the product’s business model is mature and stable, even if the CAC is high, the LTV is also high, and the ratio of the two (LTV/CAC) is greater than 3 or even higher.

Then, the users of this channel or this method of acquiring customers can be further strengthened, which is a virtuous circle. On the contrary, if LTV is less than CAC, it is not appropriate to continue spending money on a large scale. Instead, you should focus on intercepting traffic and finding ways to convert users.

2. Finding the target circle and obtaining accurate traffic is the way to optimize channel delivery

When I was working at Alibaba, I would often hear the envious voices of non-Ali workers: "What's so difficult about your business? Just go to Taobao Mobile and open a channel. With so much traffic, you can easily start a business." I would also hear practitioners in the industry envy JD.com, 58, and even Weishi. These products all have fixed entrances on WeChat. They believe that the traffic-drawing effect on a product with 900 million daily active users must be good, and the product will definitely grow rapidly.

In fact, it's just the opposite. Although Fan traffic has a large amount of traffic and can bring a lot of new users to the product at once, the CAC is too high and is not very helpful for the healthy development of the product.

Of course, there are also problems with the product itself, such as whether the retention design needs to be optimized and whether there is strong conversion of new users. But assuming that all these are done and the retention rate of the product itself is not low, large-scale traffic will not be of much help to the product.

The purpose of optimizing channels is to expand the ratio of LTV and CAC, increasing the numerator while reducing the denominator. The more accurate the users are, the lower the CAC will be, which is why the way to optimize channels is to obtain accurate traffic. So how do you get accurate traffic? You need to find a circle.

Although the development of the Internet has broadened our horizons and made it easier to obtain information, it has also created a grid for us.

Take Moments as an example. The messages we see in Moments basically come from our friends. When everyone shares information in Moments, they subconsciously assume that others will also be interested, or that this is information related to other people.

Why are you so sure?

Because our friends on WeChat are either from our colleagues and partners at work, classmates, friends, or family members. This is based on a social circle with similar social background, academic background and interests. Their cognition, interests and life-related information will not be too different.

If you are a corporate employee living in the core area of ​​Beijing, by the time you know Kuaishou, its size has already become a giant. However, even though you know this, you will still choose to use TikTok more often. In addition to the content tone, it is also because your friends and colleagues are discussing and using TikTok.

This is the impact of circles on users, and it is also the handle that needs to be used when products acquire customers.

So how do you find the circle?

We need to label users as much as possible, and these labels are not limited to age, gender, social identity, occupation, and hobbies. For example: Although we would generally say that the users of our products are young people, how young are they exactly? Is it 0-30 years old?

If we differentiate according to the living conditions of young people,

• Young people of younger age are divided into: elementary school students, junior high school students, and high school students;
• Young people in their rising years: college students;
• Single young people who have just entered society: 22-25 years old;
• Newly married young people: 25-30 years old.

Then, looking at the retention of these users in the product, we found that the retention rate of younger people is particularly poor, although this group of people accounts for a relatively high proportion of new users. Among younger people, primary school students have the worst retention rate.

Is it because the product does not meet their needs?

After a sample survey, it was found that the purpose of primary school students purchasing the product is different from the direction pursued by the product itself. If their needs are not met, they naturally cannot be retained. At this time, a decision needs to be made on channel placement, that is, purchases can no longer be targeted at primary school students (for example: Xiaohongshu).

On the contrary, judging from the product’s behavioral performance, the retention rate of young people in their rising stages and those in marriage still has room to increase as long as the content provided to them is more precise. Therefore, when purchasing channels, SEM, and information flow, you can increase the budget for these two groups of people.

Therefore, don’t expect to wash out cheap users through fan traffic. The direction of channel optimization is to find the right circle and dig deep into precise traffic.

3. The best way to acquire customers is to achieve a win-win situation with the traffic source

When communicating about traffic acquisition, we often hear these requests: What other resources do you have, and what other forms can you give us? Is this location effective? Can we have a “buy one get one free” deal…

In fact, the best way to acquire the required users from the other party’s channels is to consider it from the other party’s perspective and achieve a win-win situation for both parties.

For example:

Xianyu first obtained traffic from Taobao Mobile through the focus image on the homepage. In the beginning, it was only once a week and could be seen by all users who opened Taobao Mobile.

Later, as the size of Taobao Mobile continued to grow, more and more business departments wanted to use the focus image position. After the resource scheduling, Xianyu could only obtain the resource position once a month.

Later, Taobao Mobile began to optimize its homepage. In order to increase user browsing time and improve user retention, all resource positions became different for different users. Xianyu’s monthly resources are also invested in users who have never downloaded Xianyu, and the resource effect is much less than before.

At this time, if you want to get more traffic from this channel, you must consider the other party’s goals.

As operators of the Taobao mobile homepage, their goal is to occupy a longer period of users' fragmented time, meet users' needs more comprehensively, and allow users to more deeply perceive the "all-powerful" Taobao.

Xianyu is a community where users resell second-hand items. It contains a large number of unique, rare and historically valuable items that are relatively inexpensive. For example: some users sell Coke bottles collected from all over the world, discontinued figures, rare Lolita clothes, handmade felt toys, etc. on Xianyu.

Since there is no large inventory of these items, it is impossible for merchants to open a Taobao store specifically for one or two products. Therefore, the items available on Taobao Mobile will be cheaper when resold second-hand by Xianyu users; and the scarce items that Taobao Mobile does not have are available but are available to Xianyu users. If these products appear on Taobao mobile app, it will improve the "versatility" of Taobao to a certain extent.

Therefore, Xianyu no longer seeks to utilize the resources of Taobao Mobile, but instead obtains traffic from Taobao Mobile by exporting individual product products.

In order to allow users to stay on Taobao Mobile longer, Xianyu will output individual products in the product recommendations on the Taobao Mobile homepage based on the different needs of each user. In the infinitely scrolling product list, the algorithm will continuously present to you the products that "you like" from Xianyu and Taobao, prompting you to keep browsing.

Users click on the products they are interested in and jump to the terminal or download them at the appropriate time. This content output-based traffic acquisition model, which is carried out during the normal user behavior process, has brought a sharp increase in the number of new users to Xianyu. Compared with the previous resource position, the new effect is very obvious. (This idea can also be applied to other purposes, such as retaining users and increasing attention between users.)

Related reading:

1. Product operation and promotion: How to compete for traffic?

2. Community Operation丨The essence and gameplay of "private domain traffic" in 2019!

3. Product operation: 2 major ways to get started to accurately capture private domain traffic!

4. Promotion and marketing: A brief discussion on vlog’s brand marketing and traffic monetization!

5. User operation: user growth in the post-traffic era!

6. Online marketing promotion: How to spend big money? Fine-tuned operation of large traffic!

7. Product operation and promotion | 5 underlying ideas for traffic growth!

8. Product operation: application of data system under the growth model!

9. How can product operations conduct good competitor research and analysis?

Author: Ruining Rita

Source: Miss Chatterbox