User operation: How to balance the effect and cost of customer acquisition and retention?

An old reader asked this question: Can we talk about the activation and retention of new users? Because during activation we may offer discounts in order to lower the threshold, and in order to retain users we will definitely try our best to make the first experience a good one, so we will provide the best product experience. So this isn't very costly?

This question reminds me of Uber’s actions when it entered China.

After Uber entered China, it offered heavy subsidies in order to seize the market. Through User Referral, for every successful invitation of a new user, both parties would receive a reward of RMB 100 balance; six months later, it became RMB 50 balance; after another six months, it became RMB 30 balance; then, it became a ride opportunity worth RMB 30; finally, it became a ride opportunity worth RMB 15.

Although Didi later won a great victory in the domestic market, Uber's actions were an inspiring solution to the contradiction between effect and cost.

Because the essence of balancing the effects and costs of customer acquisition and retention is actually to solve the problem of long-term stability of ROI.

When it comes to ROI, whether you are acquiring, retaining, engaging, or converting, the demands are the same:

• 1. Within a certain time frame, the more controllable the ROI, the better
• 2. Within a certain user scale, the higher the ROI, the better

The controllability of ROI is actually a requirement. When a budget is spent, we will know how long it will take to achieve the desired effect and whether it is roughly the same.

Of course, I guess you will say that ROI depends on the final conversion. What if the product is free, or you don’t assess the ROI KPI yourself?

Obviously, if there is no clear amount of income, then cost thinking may be needed.

Let’s take a slice of the story. Let’s assume that the ROI monitoring report for a new customer coupon for a product that will eventually bring in paid conversions looks like this:

We can improve ROI by optimizing the three aspects of "advertising costs", "number of paying users" and "average order value".

For example, if the coupon is targeted at a category or has a set discount amount, we can choose:

• 1. By adjusting category restrictions, more preferential leverage is given to categories that are easy to convert, allowing users to complete conversions faster and more often.
• 2. Allow users to complete their first purchase as soon as possible by adjusting the discount limit

In this way, the ROI may look good.

In terms of ROI, if the average customer spending is RMB 100 and 1,000 people pay, and if the average customer spending is RMB 10 and 10,000 people pay, the ROI will remain unchanged if the cost remains unchanged. However, there will be different feedback at the level of user numbers and ARPU value.

However, if the product we are responsible for does not currently involve conversion payment, then the ROI method may not be applicable. At this time, we need to change our way of thinking and switch to the logic of cost monitoring. The monitoring report of a cost-monitoring product may look like this:

At this point, the discussion becomes:

• 1. If the fees are reduced, can the user scale-related data be kept from experiencing a major decline?
• 2. If the cost is not reduced, is it possible to achieve greater growth in user scale-related data?

To achieve the above two topics, the direction becomes:

• 1. Get sufficiently accurate users
• 2. Enhance the value of the product to precise users

For the first point, it is actually a process from user profiling to user community positioning and then to new user acquisition. For the second point, it involves the description in the question. In order to activate users, part of the cost must be given up, and in order to retain users, costs need to continue to be given up. However, if only by giving up costs, it may not be possible to form long-term effective and sustainable competitiveness.

So, for this situation, my suggestion is this:

• 1. Complete the process of portrait - positioning - attracting new customers and open up more traffic entrances.
• 2. Find the key functions that can activate and retain users by transferring costs, strengthen them, and continue to stay ahead of competitors.

The reason why Uber was able to play the game of decreasing costs back then was that it was easier to get a taxi than Didi during peak hours and in areas with high demand, and it solved the core user demand - being able to use a car more quickly when needed - at least for me, Didi had never helped me get a taxi at locations like Century Avenue and People's Square at 5 or 6 pm, but Uber had always satisfied me - so, for me, even if the discount was decreasing, as long as there was a car, my problem was solved.

In fact, quite a few products have similar practices. It's just that the level of expression is different.

Some are data-dependent, such as iOS and Android. Through one account, the cloud and local are connected. When you change the device, you can quickly transfer the data on the old device to the new device to achieve seamless connection.

Some are path-dependent. For example, Baidu and Taobao occupy the traffic entrances of search and e-commerce. You cannot avoid them if you want to search or buy something. Even after long-term use, they allow you to fully enjoy the fun of "laziness".

When you think about this, you will find that no matter "activation" or "retention", the essence of thinking is already pointing to how to make users actively interested in the product and become dependent on it in a short period of time.

In fact, at this time, our way of thinking will fall into another level:

What kind of product will make users actively interested and become dependent in a short period of time?

Then, you will find that the only legal thing is "games". At this time, if you know enough, you will naturally enter the framework of "gamification".

The so-called "gamification" is to make products that do not originally have game characteristics closer to games in terms of design and operation. It is complicated to say, but the core is two points:

• 1. Fun
• 2. Instant Feedback

The reason why people like to play games is that games can bring fun. At the same time, everything the user character does in the game will have instant feedback.

In a game, when a user character appears in the game, he will get instant feedback on every move (bringing changes in the scene), every behavior (bringing feedback on the behavioral goals), and every upgrade (bringing new experiences). This is what makes players addicted and is the core of gamification.

Therefore, it is not about making the product as complicated as a game, but about making the user feel as fresh and interesting in the product as in the game.

It's like, Taobao has endless products to choose from, and gives buyers a sense of satisfaction from product selection to ordering. As for whether you are dissatisfied after receiving the goods and ask for a refund or return, that is a matter for later; the most satisfying thing about WeChat group red envelopes is not when you open it and find that you only got 100 yuan, but when a group of people are grabbing it together, and you only got 1 cent.

Therefore, I never think that the level of experience is positively correlated with the cost. Low cost can indeed produce good results. The question is how to design it. Of course, when it comes to cost, having a sufficient budget is always better than a tight budget.

Finally, for operations, the user experience on which customer acquisition and retention effects depend should be what operations care about most. If this is the case, it is more important to bring together product managers and R&D colleagues to brainstorm and see what fun things they can come up with.

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: Zhang Liangleo

Source: Zhangji Grocery Store