User operation: How to build a user points system?

This article mainly targets users in the growth/mature stages, and discusses how to build a points system using the C+B operational mindset. In addition, it introduces the concept of broad points to look at the future development trend of points.

Origin

First of all, let’s talk about the origin of points. It is said that in 1793, a grocery store owner in the United States designed a way to give back to customers. Whenever you buy something in the store, you can get a corresponding number of copper coins based on the amount. The accumulated copper coins can be exchanged for gifts, which became the prototype of early points.

Regarding points, I have sorted out two key words: "feedback" and "redeem". In short, the points system is a means for merchants to meet users' further material needs and encourage users to consume again. After more than two hundred years of development and evolution, offline points have grown into a very mature and complete system. Online points are also widely used in many products, such as airline mileage redemption, credit card points redemption, hotel points redemption, Taobao value redemption, live broadcast reward redemption, etc.

Purpose of the points system

Before talking about the purpose of building a points system, let me first connect the ideas of these two articles I wrote recently. The model that runs through the two articles is the user life cycle model. The operational thinking is mainly based on C-end operational thinking, supplemented by B-end operational thinking. This article mainly talks about the user life cycle model - users in the growth/mature stages, and how to achieve operational goals through the operational strategy of building a points system and a membership system.

The core of an enterprise building a points system is to encourage and guide user behavior, enhance the enthusiasm of existing users and their loyalty to the platform, thereby achieving the operational goals of activation, retention, and repeat purchases, while increasing the cost for users to leave the platform and improving user stickiness.

I have summarized the purpose of building a points system:

1. User Level

(1) Cultivate user loyalty

Users earn points on the platform and improve their membership level and benefits by accumulating points. The higher the user level, the more dependent they are on the platform, the higher the cost of switching platforms, and the higher their loyalty.

(2) Encouraging user activity

Set points rules to stimulate users to use products, issue points to users, increase users' activity on the platform and their in-depth experience of the platform, so as to improve product retention and activity.

(3) Stimulate user consumption frequency

The points redemption is combined with membership benefits, binding users’ secondary consumption, stimulating users’ demand and increasing the frequency of users’ consumption within the product.

1. Enterprise level

(1) Reduce user maintenance costs

Maintaining new users requires new customer acquisition costs + new customer subsidy costs + new customer guidance costs. There are multiple layers of loss in the funnel conversion process. Maintaining old users can save the aforementioned costs. The cost of points can be covered by revenue compared to the value produced by old customers and can be ignored here.

(2) Increase repurchase rate/renewal rate

Point incentives and membership benefits can stimulate the repurchase rate of old users through interest points and user needs. For users of corporate services, providing good customer care for old customers can increase the renewal rate of old customers.

The core of the points system

The two most important points of the points system - points acquisition and points pocketing (consumption) - are the top priorities of the points system.

1. Points Earning

The points earned are related to the path users take when using the product, which I have summarized into the following four categories:

1. Behavior points: Behavior points are associated with the path that users take when using the product. Task points take into account everything from the time the user registers for the product to every operation that is valuable to the product (obtaining user personal information and behavioral preference data).
2. Consumption points: Consumption points refer to the points earned by users when they consume on the platform. They refer to the situation where the payment is completed on the platform and there is no refund. According to the points acquisition rules, they are automatically recharged to the user's points account.
3. Member points: According to the different levels of members, the points acquisition rules are set to overlap, and the rules for exponential growth in points acquisition are set according to the user level. For example, if you spend 1,000 yuan, an ordinary member will get 1,000 points, while a gold member can get 1,200 points.
4. Activity points: Operations staff often carry out some activities. Combine activities with points, for example, the game modules in the product - simple activities such as roulette, slot machines, and nine-square lottery, to improve user stickiness. When setting points for activities, add some high-yield temptations to allow users to gain points and a sense of accomplishment in the game, and cultivate users' habit of opening the product. For example, Air Travel’s national prediction allows people to guess the departure time of flights and share travel beans based on the accuracy of the prediction. It has increased the opening rate of Air Travel, a simple tool product, and has attracted traffic to other monetizable products.

1. Points pocketed (points consumed)

The points system must form a closed loop. Acquisition and consumption are both indispensable. Only the circulation of points can allow users to perceive the value of points. "Points pocketed" generally speaking means points consumption. What users can do with their accumulated points depends on where the points pocketed are going to be directed.

Here are some common points consumption paths:

(1) Redemption of Goods

Redeeming goods means that users can use points to redeem virtual or physical goods. Our common points mall belongs to this category. The mall provides coupons, cards or physical items for point redemption, sets the number of points required for each product, and users redeem according to the points in their accounts.

The exchangeable goods are generally divided into two situations:

1. Direct exchange, no need to pay cash (physical goods usually have to pay for shipping separately);
2. Points + cash, users can purchase goods at a price lower than the market price, but they need to have a certain amount of points to redeem the goods. For example, the redemption rules for a certain product are "99 yuan + 200 points". This redemption method consumes user points while bringing cash flow to the platform, while also increasing the threshold for professional wool-pulling people.

(2) Payment deduction

Points can be exchanged for cash according to a certain ratio, and points can be spent as money. This is not difficult to understand. The pitfall here is cost budgeting, and the cost of redeeming points must be calculated.

(3) Expired

Another way to consume points is to set a validity period, setting the points as permanent points + validity period points. The most common one is annual points. At the end of the year, the points for the year are reset to zero. This is an operational method to allow users to quickly consume historical points and motivate users to earn points again.

The points and membership systems complement each other

The essence of the membership system is the same as that of the points system. Both use a series of operating rules and membership rights to enhance user loyalty to the platform, stimulate users to use products, and consume within the product ecosystem. The two are complementary to each other, and there is no order of priority or importance.

To give an analogy, the points system is like a hook that attracts users from all over, and the membership system is like a box - a free/paid safe where users can put all their "property" in. At the same time, you can upgrade and fight monsters. If it is more complicated, you can add a copy to allow users to get more rewards. Therefore, most people choose not to give up the box easily. It is difficult to go from luxury to frugality. After getting used to taking the fast lane, the gap of having to queue up and wait again will make users pay for the box.

The cooperation of the two can firmly bind users. The cost for users to leave the platform becomes higher and higher, and they become more dependent on the products. In the future, improving member rights and interests will make payment a natural process.

Generally, membership levels are divided into 4-5 levels. Why not other numbers? This is related to user stratification. In most cases, user stratification is achieved through the user pyramid model. With 5 layers, all users can be split according to various dimensions. For products with consumption attributes, the RFM model can be used to group users.

The following is an example of a membership system combined with a points system to make it easier for you to understand.

C+B thinking builds a points system

Companies that provide enterprise services also need to have a clear understanding of their own customers so that they can build a points system based on customer pain points and consumption patterns, and increase GMV, renewal rates, etc.

The cyclical logic of enterprise services for customers is: open source and new products - customer growth - customer loyalty - customer analysis - mining potential customers - open source and new products. This kind of logical relationship is common to us. Since it is already a closed loop, why do we need to add a points system and a membership system? I summarize the following points:

• First, there is a lack of ability to develop new customers. Acquiring customers solely through sales can no longer bring about exponential growth. In addition, if the customer system is not perfect, there is a risk that sales personnel will leave and take away important customers.
• Second, there is fertile land waiting to be cultivated. Many users of enterprise services are administrators, HR, and company employees. In addition to serving the enterprise, enterprise service products actually also have needs as individuals. For example, business travel software, air tickets, hotels, and cars are needed by A as an employee of the company, and A as a member of society also has travel needs. As the customer base of the enterprise stabilizes, this area of ​​​​land will become larger and larger.
• Third, customer value is underestimated. Not considering the customer's life cycle and underestimating the value of a single customer.

In summary, the logic of joining the points/membership system can be optimized as: open source and new customers - customer growth - membership system - points system - customer loyalty - customer analysis - mining potential customers - open source and new customers, thereby enhancing customer value through two major systems.

One thing to note here is that in addition to having obvious C-end attributes, enterprise service product customers that introduce membership and points systems must be in the growth stage during the entire user life cycle. The introduction stage is still sales-oriented. When sales tend to rise steadily without explosive growth, we can then determine whether we can combine the points and membership systems to open up new areas based on customer analysis. If we wait until the mature stage to intervene, there will be a gap in user data.

Building a membership and points system is undoubtedly for B-side companies to increase revenue. It also confirms the previously compiled B-side operational thinking of serving old customers well, and also draws on the C-side operational thinking of motivating users. The essential common point is that they all aim to enhance user loyalty and create more value.

Generalized Integral Hypothesis

In mathematics, there is the concept of generalized integrals. Points and integral systems should also have broader application scenarios. I understand the future trend of integrals as "points +", for example, points + medical care, points + insurance, points + public welfare, points + urban settlement, points + smart travel, points + smart tourism, etc. The application scenarios of points will be magnified, and points with certain correlations can be interconnected. In addition to the interconnection between the same industry, different industries can also be exchanged for equivalent values ​​through a certain ratio.

User data on points acquisition and points consumption can be traced, and the consumption portrait, behavior portrait, credit portrait, travel portrait, etc. of any person in society can be outlined through data and user model algorithms.

In addition, the broad application of points combined with the membership system can form a small-scale ecosystem. The membership card is like an identity ID, similar to a centurion, with various rights and interests, and it is also a symbol of another identity.

Summarize

The traffic dividend on the mobile terminal is gradually disappearing, the number of users is increasing, and the weight and status of user operations in the entire operation system are rapidly increasing. Products in the growth and mature stages will shift their focus to old customers or their employees. This makes it possible to improve conversion and revenue through refined user operations at every stage. The points system and membership system can motivate users, increase stickiness, and improve user loyalty. It is one of the operational means to create revenue for the product.

Building a complete points system + membership system and giving users the feeling that "one is enough" is the goal that operations practitioners want to achieve. Adjusting the company's operating strategy and determining whether it is necessary to build a points system or a membership system at this stage are decisions that operational decision makers or business owners need to make.

All operational methods are a combination of operational strategies. Do not blindly follow the trend or believe blindly. Combining the Tao and the law rather than blindly imitating is the dialectical thinking that operational practitioners and business leaders should have.

To quote a quote from a wise old friend, just choose the one that suits you.

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?

Author: Wang Yanfei

Source: Wang Yanfei