Demonized growth, fission and community!

If you are doing marketing or in the Internet industry.

You may be familiar with the following phrases recently:

The most interesting but not exaggerated thing I have ever heard was about a little girl who graduated and was looking for a job. I asked her how she prepared for the interview.

She said: "I have almost memorized the entire Traffic Pool!"

Actually, I think it’s smart to prepare like this at this stage.

Everyone is anxious about growth, and the growth hacker theory is regarded as a must-read Bible, especially in the difficult year of 2019, when the group anxiety of the Internet reached its peak. Low-cost growth, sinking, fission, and community, if you don’t do these, then I don’t know what to say~~

The point of this article is not to argue against growth. Many times, our understanding of growth is limited to the level of phenomena and skills, such as the "Sinking of Marketer Skills" that will go viral, and the research on how Pinduoduo does fission.

Every day, articles teaching you how to achieve growth are published and shared in countless work groups.

Few people understand the underlying logic of growth, and without these to support it, this leads to a lot of panic: such as the rush to sink, social fission and communities.

Is something that everyone seems to be doing necessarily correct?

If you can understand the logic of overall growth, scale and profitability. There will be more independent judgment and sense of direction.

This is also the significance of this article.

Not all opinions and conclusions may be accepted by you, but we discuss them in order to see the direction more clearly and soberly.

Rather than being carried away by public opinion.

Let’s first look at Facebook, the originator of growth, which set up an independent growth team for the first time and gained 2 billion users.

Zooming in, Facebook has several clear growth drivers:

It is obvious that the growth momentum both times came from expanding international markets and globalizing products. In overseas markets, it has almost no strong competitors.

Also, don't forget the social attributes and free nature of Facebook itself. In 2007, when growth theory had not yet emerged, wasn’t Xiaonei.com also in a period of rapid growth?

When looking at the growth of a business, if you only apply one logic, it is likely to cause survivor bias and ignore more critical factors.

Therefore, it is necessary for us to understand growth from its source.

This article will focus on the following questions:

Just a reminder, the article is a bit long, it will probably take you 10 minutes to finish reading it, and there are no pictures.

After reading this, I respect you as a hero!

Taking a step back, why do we need growth? Someone says this is nonsense? Can you survive without growth? The essence of a business is to make profits and create profits for shareholders. Does growth necessarily bring profits?

In 2019, too many companies that burned money to attract users and traffic were in a panic. They had no profits and could not see a clear profit model. A friend of mine was working on a new business at a top Internet company (the kind with over 100 million daily active users and no worries about traffic). The boss told him directly that the core of your business is not the size, but making money.

Of course this view is debatable, but it is indeed time to think about the relationship between growth and profitability.

Let me give you two examples:

One is a student-started company called Scarecrow, which provides in-depth travel with first-class experiences for single young people.

Their founder proposed to [control growth] because growing too fast would affect the user experience. It is the ultimate user experience that can create a premium for the business.

Another one is Big Eyes E-commerce by Gugu (Yu Xiaoge). You won’t see any hot selling products on this platform. They are basically just very niche items, such as skin care products. The most popular one is probably Chantecaille.

The founder’s purpose is also very clear, [to create a niche platform for picky people]. What’s interesting is that when she writes for public accounts and directs content, the values ​​she conveys are absolutely unconventional. People who like her love her, but many people also dislike her.

I call this "value discrimination" (just like price discrimination in economics, without any derogatory meaning), which means strictly screening users based on values ​​and prices.

These users are willing to pay very high premiums and are very loyal.

Therefore, not achieving growth does not mean that you cannot survive or make a profit.

The key is to first understand the type of business. Should we do expert business or scale business?

The principle is simple, but once you experience it, you realize it is not that easy.

A very common situation is that after burning money to reach a medium-sized size, a company originally hoped to make a profit through scale, but it is wavering between scale and circle, and cannot eat both, resulting in a severe split in both strategy and tactics.

For example, Xiaomi is wondering whether it wants geeky fans or female fans, which makes people feel that it is a "company with a bit of split personality."

To sum up, from the stage of 1 to 10, everyone is growing. Whether or not we want to grow from 10 to 100 depends on whether we can achieve scale and continue to be an expert business.

The two have different profit models, the former requires rapid growth, while the latter requires controlled growth.

Why does scale effect definitely bring huge benefits?

To start from the beginning, this comes from the essential laws of biology.

When one animal is twice the size of another, it will have twice as many cells. The former requires only 75% more food and energy than the latter.

So, larger animals are actually more efficient than smaller ones because each gram of tissue requires less energy to support it.

The systematic savings resulting from this expansion in size are called economies of scale.

Simply put, the bigger your body is, the less energy you need per person to stay in shape.

An important way for enterprises to achieve economies of scale is growth. However, just as biological growth requires energy, business growth also requires power.

Bioenergy comes from food and air, and the driving force behind corporate growth is market demand.

According to the degree of scarcity of the demand, it can be divided into two types:

1. The product or service is very scarce in the current target market

2. In the current market, the product or service is not obviously scarce

For the first type, the huge driving force of market demand can drive companies to achieve rapid growth at extremely low cost. For example, Amazon in 1995, WeChat in 2011, and Facebook when expanding overseas markets.

The same principle applies to everyone now rushing to go overseas to Southeast Asia and Africa.

The second type is that market demand as a source of power is diluted and dispersed. At this time, the company needs to develop and must actively increase momentum to drive demand for the goods or services you provide.

The larger the scale, the higher the need to stimulate demand momentum.

Unfortunately, the products and services provided by most companies are not scarce. If you want to gain momentum for growth, you must stimulate demand and increase demand in the market.

To stimulate demand, the first step is to find people with demand, and the second step is to find ways to influence this group of people.

In fact, when you mobilize any resources and choose a method to influence this group of people, costs will be incurred.

So when you see [Gaining tens of millions of users at 0 cost], just smile, just like when you see [Eat more of these foods and live to 120 years old without any disease or disaster].

Some people say that it is free for the operations department to organize an activity, but the marketing department must pay the cost. In fact, cost is the biggest price of giving up.

For example, an operational activity takes up your homepage resources, and these resources can also be used for other activities. This cost is the one that can generate the highest value among all the activities that are abandoned.

Some people may also say that by adopting a free strategy to stimulate the market, the development cost of the product itself can be ignored and the cost can be achieved at zero.

Don’t forget that the free model relies on third-party payment. At this time, it is necessary to stimulate the demand of the advertiser market, and the cost paid is often the user experience. Think about why iQiyi’s membership revenue exceeds its advertising revenue.

Back to stimulating market demand, it can be roughly divided into three categories according to the different types of resources used and costs:

- Benefit consumers

- Profit-sharing sales channels

- Profit-sharing advertising media

Among them, the profit concessions to direct consumers (users) have the largest coverage, such as fission, group buying, helping to bargain, etc., and anyone can participate;

The profit-sharing sales channel is to influence a certain group of people through the distribution channel, such as Yunji online, OV offline stores, and the recent popular online celebrity sales share;

Profitable advertising media stimulates the target group's demand for goods or services by placing advertisements in the media.

So which method should be used? Or a combination? In addition to considering the direct monetary costs. What must be noted is that different methods have different effects on stimulating demand.

Giving benefits to consumers is often a direct price stimulus, so high frequency and low prices are important. (Some would say that consumers’ behavior of recommending products to each other also conveys product characteristics, such as word-of-mouth marketing.

However, this part is not quantifiable and controllable, so it lacks replicability during the scale-up stage. ）

It is worth mentioning that these users do not all come from the sinking market, nor do they have low purchasing power. Instead, they are very sensitive to the prices of specific products and services (they come for the price).

For example, a girl would buy Hermes, but would rather borrow a membership from a video website.

When giving discounts to sales channels, they usually provide double stimulation of effect and price. For example, Amway in the WeChat circle of friends often demonstrates the effect very well, and adds an attractive price. Target users pay for usage results or cost-effectiveness.

The essence of giving discounts to advertising media and stimulating demand through advertising media is to rely on the media to allow the rational value and emotional value at the material level to play a role and guide users.

For example, OV’s TV commercials almost never mention prices, but instead highlight the sense of scene in which celebrities use their products. Users attracted in this way are often motivated by material and spiritual benefits, and are often willing to pay the highest premium.

Now it is generally believed that the first method has the lowest cost and the fastest effect. Indeed, but we must also see that this group of people are very sensitive to the price of the goods or services you provide.

If you want to do business based on this type of users and make a profit from the product or service itself, you need to maximize the scale effect to support the profit margin. This also explains why Pinduoduo is now working so hard to transform the industrial chain.

Another point of view is that these people are sensitive to the prices of certain products, but not to some other commodities. So I can attract users by using some low-priced commodities, and then let them buy commodities with large profit margins.

The problem is that users are willing to pay a premium because they can get additional material or emotional benefits. If they cannot perceive this level, why would they pay a higher price?

Now many people are also paying attention to the importance of giving discounts to distribution channels, especially individual distributors. That’s right, profit-sharing distribution channels can play an important role in opening up the market and in the early stages of development, provided that the profits are sufficient to support the channel costs.

Once faced with rising channel costs, it is necessary to consider giving products more premium space through advertising media and then invest in channels.

Finally, let me add that the channels and advertising media should be given discounts. Many people think of brand advertising and performance advertising.

In my opinion, performance advertising can be divided into those that give profit to the channel and focus on product efficacy and price, while brand advertising should emphasize premium (material and emotional).

Some people say that then the product and effect cannot be combined? The integration of brand and effect should actually be the integration of time rather than space.

The so-called time integration means that within a period of time, a user is repeatedly influenced and brainwashed from multiple angles such as functionality, value proposition and price; rather than piling up all factors on the same spatial carrier.

Finally I have written about these two words with extremely high mention rates. I feel a little stressed and I will drink some water to slow down.

Let’s talk about fission first.

The essence of driving fission is to benefit consumers and allow them to stimulate consumption demand in their circle.

Assuming that we are only doing fission marketing now, we can observe the characteristics of this target group from the communication path:

First, most of the users who are willing to help you attract people for profit will think that the original price is too high, so they are willing to pay the time cost to lower the price.

This is based on the same logic as KFC's secret distribution of coupons. Coupons are used for price discrimination. People who are willing to spend time looking for coupons would not have bought the product originally. KFC lowers the price of the product to attract those who originally thought it was expensive.

Second, most of the people who are pulled in are also price sensitive (in addition to relying on personal connections, but personal connections are not replicable).

Because even without understanding the product (service), people can be attracted to it, and a big incentive is the low price.

Of course, as mentioned earlier, this group of people is not without value, provided that the benefits of economies of scale are very large.

Also, it’s worth noting that the cost of fission is also rising. Because every company is doing it, you can send red envelopes when ordering takeout, when taking a taxi, you can form a group purchase through e-commerce, and they can help you bargain, etc.

A normal person has limited time and social resources. Only by increasing benefits can sharing be driven.

Some would say that what motivates consumers is not only interests, but also emotions and content. To put it in an analogy, it's like the magic faction in Game of Thrones.

First, there are very few people who can use magic, so it is scarce, and the effects are uncertain. Second, the scope (time and space) that magic can affect is limited.

It is necessary to have the ability to ignite public emotions and manipulate feelings, and at the same time, this part of the content must be superimposed on commerciality, which is even more difficult.

For example, "Peppa Pig" is a very successful emotional screen-sweeping movie, but what about its effect on box office sales?

Therefore, not all business models are suitable for considering consumer fission by giving discounts as the only way to grow, because the people attracted by this method are extremely price sensitive to the products and services you provide.

However, the replicability of emotion and content-driven approaches is not strong, and their effects are very limited when it comes to scale growth.

Let’s talk about communities. Let’s first look at the attributes of communities.

The formation of a community lies in common points, such as blood ties, geographical ties, professional ties, interests, benefits, and goals.

This group can be online or offline, tangible or intangible.

In the early stages of a business, tangible groups can quickly accumulate initial users and brand fans to form seed users. Xiaomi is of course the best at this.

But in the process from 10 to 100, the role of the social network was very limited, so Xiaomi started to advertise crazily.

The reason is that physical groups (whether online or offline) have limitations. The capacity of a group is limited, and as the scale grows, more groups need to be operated.

An entity can achieve cost reductions through economies of scale. However, the operating costs of multiple decentralized entities cannot be reduced through scale.

Is it possible to operate just one group?

Can

One is the membership model; the other is to become a brand fan. A community is a collection of people who share a common purpose. What all intangible groups have in common is their recognition of the corporate value proposition.

This type of fans are not gathered through forming groups or offline gatherings. Rather, it is an identification with value orientation, such as Apple, Nike, Northface, etc.

If your business is already large enough. Don’t always think about creating a group. In addition to setting up a membership system, you can also think about how to create an invisible group to accumulate fans and super users.

Why do bosses love growth hacking logic? I wish it could replace all other marketing methods.

The first reason is that doing so saves investment.

The second reason is that it is simple and quantifiable. Not only can the data be fully quantified and instantaneous, job performance can also be easily quantified.

There are also many people who simply equate growth hacking theory with fission and community, and use it to replace other growth methods.

To be honest, this neither understands marketing nor growth hacking.

The essence of growth hacking is to verify the methodology through continuous hypothesis-testing and then replication and amplification.

The core role of growth hacking is to discover possible opportunities through data analysis, conduct experiments and draw conclusions.

The prerequisites for this to work are:

1. Complete and accurate data - it is often much easier to obtain data on existing users than on incremental users.

2. Testability – ability to conduct experiments and obtain timely feedback.

Therefore, at the practical level, I believe that the growth hacking theory has greater room for application among existing users and known environments. In other words, its role in user life cycle management is far greater than its role in stimulating target market demand.

Relying on growth hacker logic also has a negative effect: when we focus too much on data and the optimization-iteration process, we tend to ignore creative thinking and insights.

Because these cannot be quantified or even predicted, the space for innovation becomes increasingly narrow, leading to missed opportunities for real breakthroughs.

As Facebook’s head of growth put it: “There’s this myth in Silicon Valley that data allows you to optimize metrics.

But as Facebook’s head of analytics, I believe this myth is fundamentally flawed because the core value of data is its ability to engender empathy.”

1. Focus on profits and business models first, whether to be an expert or scale-based business, and then look at the corresponding growth needs.

2. When we see a business that can grow rapidly at low cost, we first focus on the scarcity of the products and services themselves, rather than attributing all the reasons to the growth method.

3. For most non-scarce businesses, the process from 10 to 100 cannot be achieved at zero cost.

4. There is no absolute good or bad when it comes to giving benefits to consumers, giving benefits to channels, or giving benefits to advertising media. How to choose depends on the target market and profit model.

If you rely on giving discounts to consumers and attract price-sensitive consumers, you must create enough room for scale synergy effects.

Giving profit to distribution channels is very important in the early and middle stages. Once faced with rising channel costs, it is necessary to consider giving products more premium value through advertising media.

5. Brand and effect integration focuses on the repetition and concentration effects in the time dimension, rather than the superposition of information in space.

6. Don’t over-evaluate the value of a single channel, but rather view it as an interactive system that affects each target consumer.

7. Interest-driven fission brings about people who are sensitive to consumption of specific products and services, if there is no mental influence. It is difficult to contribute more premium on the platform. Emotional drive lacks replicability.

8. Group building and operations play a very small role in scale growth and are more suitable for expert businesses.

9. To build an invisible group is to shape the brand’s value proposition and form a sense of identity.

10. Growth hacker thinking plays a greater role in user life cycle management than in stimulating the target market. Be wary of over-reliance on hacker thinking, as it may hinder insight and creative thinking.

Finally, congratulations on being able to see this! I'm very touched. Here's a little Easter egg, something practical.

If I have a very small marketing budget, how should I spend it?

Method 1: You can wait until you have saved enough money before spending. (The smartest way)

Method 2: Repeat to influence a smaller group.

For example, if you want to invest in KOLs, don’t just look for a wave of accounts to invest in. Instead, find a KOL that is most similar to the target audience, concentrate on it for a period of time, and repeat the investment multiple times to influence the same group of people, because users are never as interested in you as you think.

Related reading:

1. Growth fission: Review of the Knowledge Planet distribution fission project

2. Review of the "User Growth Fission" experiment!

3. User growth: build your own traffic pool!

4.100 closed-loop growth research | Mission treasure fission to increase followers of public accounts

5.Case analysis: How does Kugou increase its user base?

Author: Lan Lan

Source: Taro Milk and Cat Talk ( g h _ b 9 5 b b 4 b b 9 7 f d )