User operation: paid membership, the retention hacker after the death of growth hacker!

From growth being king to retention being king, the internet traffic dividend has been divided up, and the mobile app pie has become a stock market. Competition for any new products will intensify. The so-called wind, unless it blows in the field where one is firmly rooted, the possibility of those who are late to the party catching up with the wind becomes increasingly smaller.

01 Introduction

Zhihu Yanxuan membership, JD Plus, Ali 88VIP, Meituan takeaway membership... Suddenly, like a spring breeze, the pear blossoms in thousands of Internet households have blossomed into Costco.

Paid membership for videos, QQ, and games is not uncommon. The removal of advertisements in videos, the QQ levels we have achieved over the years, and the game point cards we have recharged, the membership privileges in these industries are clearly perceived, and users are very willing to pay.

There has never been a similar model in the industry for paid membership in e-commerce, food delivery, and content. The sudden emergence of paid membership has given the general public, who are unaware of the situation, the direct feeling that the Internet's red envelope grabbing model is now charged.

02 Mission of Paid Members

The paid membership model that has been popularized is not necessarily for the purpose of collecting a few dozen more membership fees. The more important factor behind it is that the "growth hacker" has failed and the "retention hacker" has made a shining debut. Lao Chen has written many articles on the limitations of "growth hacking", and now with the advent of the paid membership trend, this has been verified.

Growth is still king, but mobile Internet traffic has reached its ceiling, and growth hackers have already dug deep into the economy of small towns outside the 5th ring road. They have really run out of tricks.

According to QuestMobile statistics: the monthly active users of the entire mobile Internet market only grew by 34 million in 2018. For the giant unicorns with hundreds of millions of daily active users, this drizzle of traffic competition is meaningless.

Traffic growth has lost its meaning, and user loyalty retention indicators have become the new "North Star" for unicorns. On the one hand, they are vigorously embracing the new engine of cloud computing. On the other hand, those traffic-based products that are difficult to turn around have all started to adopt a paid membership model. A large number of growth hackers have been laid off, and commercial talents have become popular.

The competition for external traffic growth is transformed into a drive for internal user retention, and the core goal of paid membership is revenue. Everyone on earth knows that paid membership is not just about membership and membership fees. It can also stimulate the growth of user LTV. The consumption frequency and activity of paid members are much higher than those of ordinary members.

Revenue growth is the lifeblood of all Internet companies. No matter how Luckin Coffee and Qutoutiao play the game of spending 1 billion to buy 500 million, the capital daddies will recognize it and they can successfully go public and reap the benefits. In order to increase revenue, Baidu has suffered losses for the first time in history. Once an Internet company experiences negative revenue growth, it will collapse in a matter of minutes, and the capital daddy will become a stranger in the blink of an eye. Therefore, the significance and mission of paid membership are enormous.

03 Transformation of driving engine

With traffic capped, it is an inevitable trend for Internet products to shift from growth-driven to retention-driven. However, most of the currently popular paid membership models are still copycats. "Growth hackers" have become "retention hackers" in a different name but in a different way. To paraphrase an old saying from Haidilao, they have not learned the essence of Costco's membership.

This is the author's real experience. He recently bought some "super value" Plus exclusive price toiletries on a certain JD.com mall. Although it cannot be said to be price fraud, the quality of the products after receiving them is so good that I want to swear. The author's trust in a certain JD.com for many years was destroyed. This kind of short-term stimulation driven by "discounts" is simply overdrawing life.

Retention-driven is different from growth-driven, and is fundamentally different from growth hacking.

The illusion of growth from instant data feedback and A/B Testing is short-term thinking, while retention is thinking about the product from the perspective of the long-term value of the user. Therefore, the paid membership model that stimulates short-term growth is likely to remain a dead end after the boom.

Costco, the benchmark for its membership model, has a typical long-term mindset, driving new customers through retention, and more importantly, reflects the efficiency value from single product categories to integrated services.

Products are priced close to cost and of strict quality selection, with only 1/10 of the SKUs of Walmart. This alone is the opposite of the "retention hackers" of low pricing and low quality. In addition, the core of Costco's retention is based on user trust. Paid members not only have a high renewal rate of over 88%, but also have extremely high brand loyalty. Users are willing to purchase more value-added services unrelated to retail products through the Costco platform, such as buying cars, renting cars and various types of insurance.

04 Universality of the paid membership model

Whether the paid membership model is applicable to all Internet industries is a topic worth discussing.

There is nothing wrong with long videos and gaming products, which are inherently suitable for the paid membership model. This is because the demand for removing advertisements from long videos has long had a mass base, and the Netflix model has reference value for all video platforms. QQ is similar to games. Members need to improve the abilities and levels of their virtual characters, and the demand itself has payment rigidity. WeChat is different. QQ is ultimately an online relationship, while WeChat is a real reality scene. If WeChat launches paid membership, the entire society will become unequal.

Amazon has been questioned when it launched Prime, which covers everything from retail. The Prime model has little reference value for domestic e-commerce platforms because the foreign environment is different. In the early days, Amazon Prime focused on the speed of postal parcels. User demand and payment perception were very obvious. What's more, Prime also includes a lot of added value such as free e-books. Domestic e-commerce platforms mainly offer exclusive prices for paid members, which, in the final analysis, is to drive out ordinary users.

The paid membership model for food delivery is more reasonable than that for e-commerce. Food delivery guys are different from e-commerce couriers. E-commerce express packages are almost free by convention, but the fees for food delivery guys' errands have always been clearly marked. Food delivery paid members have more similarities with Amazon Prime. Secondly, e-commerce platforms have many discount activities, and adding exclusive member prices is still an activity in the user's perception. The cash coupons of food delivery paid members can be directly offset by cash, and the perception of value is more intuitive.

Paid members of content platforms are very valuable in vertical fields. The value of general entertainment content is low, and it is difficult for fans themselves to be converted into paid members. For vertical content platforms, the paid membership model is more reasonable than knowledge payment. It is much more cost-effective for users to buy a membership than to just buy a column for a big V. Moreover, as public intellectuals, it is not suitable for KOLs to collect fan fees by sharing fragmented content all year round. Platform sharing or advertising income is very suitable.

05 The embarrassment of retaining hackers

It is easy to acquire customers, but difficult to retain them.

Retention-driven growth is long-term thinking, while growth-driven retention is short-term thinking. The product logic of long-term thinking is based on user rationality rather than impulsive consumption. Users are more autonomous in purchasing and using products. Although the customer acquisition speed is slower, their loyalty to the product is high. Based on user impulsive consumption, although the customer acquisition speed is fast, the loss speed is also fast.

Growth-driven retention is a “growth hacker” mentality, and the retention logic is based on network effects and the famous Metcalfe’s Law. If the number of users increases, the value of the product will increase as the square of the number of users. The more users there are, the greater the product value and the better the retention rate will be. This is of course an indisputable fact.

If we assume that the number of users does not increase in the network effect, and apply Metcalfe's law, the number of users will grow to a peak, and the value of the product will shrink at the square of the number of users lost. This is the direct cause of the collapse of Panda Live and OFO. Before the collapse, most of the choices made by “growth hackers” were to re-launch new product projects and build them into APP factories. #Luckin Coffee has also started to expand its baking business#

According to the logic of App Factory, it is 7 times easier to convert old users into new products than to acquire new users, and old users can accept product price changes and various new model tests. LTV>CAC is the basic business logic. The churn rate of most traffic products is very high, so the multi-product queue of App Factory is a good way to improve retention and LTV.

The ability of new products in the App Factory to absorb old users usually decreases, so "growth hackers" are very much looking forward to another famous theory: the second curve. Just as Tencent gave birth to WeChat, ByteDance gave birth to TikTok. However, the probability of success of the second curve is too low, and the investment cost is not small. Baidu has not bought a new curve in all these years. The probability of the second curve for faster-growing companies such as Luckin Coffee and Qutoutiao is even lower.

The reason why paid membership has become popular is that the network effect that "growth hackers" rely on has failed. It is difficult to buy the second curve by spending money. Once companies like Qutoutiao outside the 5th ring road stop subsidizing red envelopes, user data will plummet, let alone get users to buy memberships. It is also terrifying to think about the fact that products with strong retention capabilities casually launch paid memberships. Imagine if WeChat had paid memberships, the whole society would feel unequal. Who would have the leisure to chat with their family members calmly?

“Retention hacking” is not easy.

06 The difference between growth and retention driving thinking

Single product extension and product factory are two types of enterprises, neither of which is good or bad in a strict sense. Single product extension is based on mission, and retention drives growth; product factory is based on survival, and growth drives retention. Alibaba and Tencent are the leaders of these two types of enterprises respectively. #Let's talk about the facts, neither praising Alibaba nor criticizing Tencent# Especially recently, the two companies have more and more overlapping fields in their layout, but the logic behind them is very different.

People all over the country know that Alibaba is mission-driven. All products are being implemented in a planned manner. User retention has been clearly thought out from the beginning, and products are iterated to achieve the retention goals. There is not much luck involved in the process, and no luck is needed. From PC to mobile, core products such as Taobao, Tmall, and Alipay are all transferred, and new products like DingTalk are mostly value-added.

People all over the country are also familiar with Tencent. All its products consider retention during the growth process. The kind-hearted WeChat has been used to shake girls and flirt with guys, and the internal horse racing mechanism of new products is also well-known in the industry. From PC to mobile, except for QQ, WeChat, Honor of Kings, and PlayerUnknown's Battlegrounds are all heroic rescues in the second curve. Luck plays a big role. If Tencent did not have WeChat, it would be another Baidu. All major companies are not short of talents. Tencent is very lucky to have given birth to WeChat, which is the second curve.

07 Final Thoughts

From growth being king to retention being king, the internet traffic dividend has been divided up, and the mobile app pie has become a stock market. Competition for any new products will intensify. The so-called wind, unless it blows in the field where one is firmly rooted, the possibility of those who are late to the party catching up with the wind becomes increasingly smaller.

From live streaming to short videos, giants are entering the market at an increasingly faster speed. No matter how flexible a small team of entrepreneurs is, they cannot build a Boeing in a garage. Under the premise that the Internet as a whole has become a stock market, the resources of start-ups are completely incomparable to the advantages of giants' scale suppression. Even among unicorns, it is a scene of big fish eating small fish.

During the Internet winter, you need hard-core capabilities to catch the wind, otherwise you will be cannon fodder.

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 perform user behavior path analysis?

Author: Lao Chen

Source: fengqitalk