6 “pyramid models” you must know when operating Internet finance products!

1. The Pyramid of User Demands for Internet Finance

In 1943, American psychologist Abraham Maslow proposed the Maslow's needs pyramid model (Figure 1) in "A Theory of Human Motivation", which divides human needs into five types from low to high like a "pyramid", namely: physiological needs, safety needs, social needs, respect needs and self-actualization needs.

Specifically for Internet financial users, as shown in Figure 2, the author divides them into the following levels of needs from low to high: security needs, profitability needs, liquidity needs, product and service needs, and value and honor needs.

Among them, "security, liquidity, and profitability" are also known as the "three financial characteristics". They are not only the three principles that financial institutions must follow for sound operation, but also the three basic needs of Internet financial users for investment and financial management.

Security is the foundation, profitability is the goal, and liquidity is the "blood". Generally, on the basis of meeting these three basic needs, users will further pursue product & service, value and honor needs. That is, the five levels of demand are like a ladder, from low to high, and increase step by step. However, the order of the steps is not completely fixed and needs to be changed according to the actual demands of each user.

2. Wealth Distribution Pyramid

As shown in Figure 3, Credit Suisse released the 2018 Global Wealth Report. From the Global Wealth Pyramid diagram, we can intuitively see that there is a clear imbalance in the distribution of global wealth among the population:

(1) There are 42 million people in the world with wealth of more than US$1 million. They only account for 0.8% of the world's population, but own 44.8% of the world's wealth.

(2) People with global wealth between US$100,000 and US$1 million account for 8.7% of the world’s population and own 39.3% of the world’s wealth. The two parts together, that is, the 9.5% of people at the top of the pyramid, account for 84.1% of the world's wealth, while the remaining 90.5% of the population only account for 15.9% of the world's wealth. As early as 1897, Italian economist Pareto discovered that the distribution of wealth among the population was unbalanced, with about 20% of the people in society owning 80% of the social wealth, which was summarized as the well-known "80/20 rule".

The wealth of users of Internet finance platforms also has a 28 distribution structure. For example, the Internet finance platform I work for is one of the largest national Internet finance platforms in the industry. In daily product operation work, this rule is also confirmed - that is, 20% of the top "big players" on the platform contribute more than 80% of the platform's funds.

Based on this, we stratified users according to the "pyramid" structure of user funds distribution, and selected the top "20% users" with investment funds ≥ 50,000 yuan, thereby building a VIP system for financial management users and operating it in a refined manner.

The benefit of doing this is that it can help product operators distinguish between the primary and the secondary, and give priority to capturing 20% ​​of the key population with limited resources. Of course, the remaining 80% of long-tail users are not unimportant, but they need to be differentiated in terms of operational strategies such as subsidy intensity and incentive methods. In addition, the top 20% of users can be further divided according to their wealth levels, which also conforms to the "pyramid" distribution structure.

3. Family Asset Allocation Pyramid

Standard & Poor's is one of the three most influential credit rating agencies in the world. It surveyed 100,000 families with steadily growing assets around the world, analyzed and summarized these families' financial management methods and the proportion of various types of assets, and thus came up with the Standard & Poor's family asset four-quadrant diagram, as shown in Figure 5.

This chart is generally recognized as the most reasonable and stable family asset allocation plan.

It actually constructs a "pyramid" model of asset allocation based on the needs of family financial management and the risk level of assets (Figure 6), which divides family assets into the following four accounts:

1. Cash account: money to be spent, that is, money used for short-term household consumption or emergencies. It emphasizes flexibility and is mainly allocated with liquid assets such as bank deposits, money funds or bank cash management products, accounting for about 10% of household assets.
2. Protection account: Money for saving lives, mainly used to solve sudden large expenses of the family, with the emphasis on earmarking funds for designated purposes and making small investments for big returns. It is mainly equipped with protection-type insurance such as major disease insurance, life insurance, general accident insurance and traffic accident insurance, which account for about 20% of household assets.
3. Investment account: Money that makes money is mostly used to obtain investment returns. While obtaining higher returns, it also takes on higher risks. It is mainly allocated to alternative investments such as stocks, real estate, foreign exchange, and futures, which account for about 30% of household assets.
4. Value-added account: Money that is intended to preserve principal and appreciate in value. The focus is on achieving long-term, stable returns to protect the family's future planned expenses for retirement, education, and other expenses. It is mainly allocated to financial insurance such as pensions and children's education funds, which account for about 40% of household assets.

Behind every user on the Internet platform is a family. From the perspective of user needs, every user needs to make good family asset allocation when investing in Internet financial products.

Therefore, when operating an Internet finance product, it is not the case that we encourage users to invest as much as possible in the short term. If excessive funds are absorbed due to the pressure of the product's periodic KPI, it will easily cause "false prosperity" within a certain period of time. For example: some users transfer excessive funds due to the stimulation of short-term activity rewards, causing an imbalance in the structure of their "family asset allocation pyramid". Once the activity expires and the funds are unlocked, this part of the "wool" funds will be the first to be lost.

A more reasonable operating strategy is to reduce short-term volume-pulling behavior, and conduct refined operations through modules such as the VIP level system and investment coaches. On the premise of helping platform users to make reasonable asset allocation, it promotes users' long-term stable investment to achieve sustainable growth of the platform and users.

In addition, Internet finance platforms with multiple product business lines also need to do a good job in the asset allocation of the platform itself. If current products account for too large a proportion of the platform's total investment, it is particularly easy to cause a liquidity crisis once the platform encounters policy changes or market "explosion" events.

4. Funnel Conversion Pyramid

The funnel conversion model is a general methodology for data conversion analysis. It was first applied to product sales and marketing of enterprises, and has now been widely used in traffic monitoring, new user conversion, life cycle management and other businesses of Internet platforms.

From the graphical representation, the funnel conversion model also presents an “inverted pyramid” structure.

As shown in Figure 7, through the "funnel conversion model", we can clearly monitor and analyze each link in the conversion chain of the Internet finance investment business, from downloading to the final completion of the first investment, and quantify and measure data indicators through the conversion rate between two adjacent links. This enables monitoring and analysis of the overall business conversion chain, locates weak links for optimization, improves the overall business conversion rate, and better achieves business goals.

In addition, when talking about the funnel conversion model, we have to mention the AARRR Pirate Model, which has been widely used in Internet product operations in recent years.

As shown in Figure 8: The AARRR model breaks down the user life cycle into Acquisition, Activation, Retention, Revenue, and Referral, namely, five key conversion links: user acquisition, user activation, user retention, revenue, and user self-propagation.

Based on the five key links and combined with the business characteristics of the platform and the product itself, we focus on data indicators such as download and installation volume, number of activated users, user retention rate, total user lifetime value (LTV), and communication K factor, and formulate corresponding operation strategies for each link, so as to promote user growth at all stages of the platform user life cycle.

Based on the AARRR model, Silicon Valley has developed a growth hacker theory system that is well-known in the field of Internet growth operations. It is especially recommended to read Qu Hui's "Silicon Valley Growth Hacker Practical Notes" to learn more.

5. Career Growth Pyramid

Every profession has its own development path, and product and operations personnel are no exception. This article takes the career development path of Internet operations positions as an example to analyze and explain.

As shown in Figure 9, the career development of Internet operations can be roughly divided into five stages, namely: primary operations, intermediate operations, senior operations, operations experts, and senior operations experts.

Each level has corresponding job requirements:

1. Junior Operations: 0-1 years of work experience, learning and mastering junior operations professional skills, but with a shallow understanding of the business, mainly focusing on basic execution operations work.
2. Intermediate Operations: 2-3 years of work experience, at least proficient in one operational professional skill such as user, event, content operation, etc., gradually deepening business understanding, starting to independently formulate strategies and implement them, and being responsible for certain business indicators.
3. Senior Operations: 3-5 years of work experience, starting to be independent in product operations, with the ability to go from 1 to 80. In addition to a deep understanding of the business, you also have a macro understanding of the industry, are responsible for core business indicators, and have the ability to manage a small team.
4. Operations Expert: 5-8 years of industry experience, familiar with the business and have independent insights, have the ability to go from 1 to 100, have accumulated certain industry resources, are responsible for the overall indicators of the business line, and have team leadership and management capabilities.
5. Senior operations expert: To reach this level, in addition to many years of experience, you also need a certain level of professional talent, a high-level professional vision, and the ability to integrate multiple operations modules. Possessing the ability to go from 0 to 100, in addition to leadership roles within the company, often also has a certain degree of industry influence and voice.

When one reaches the level of operations expert, one often starts to take on more management roles. Many companies will introduce a "dual ladder" development model - that is, adding a management grade sequence assessment on the basis of the original professional grade sequence.

In addition, the working years between two adjacent job levels are often vague. It does not mean that you will be promoted to the next level immediately after reaching the working years. This is also affected by factors such as market environment, opportunities and personal interview ability, which will not be elaborated here.

6. Geographical Distribution Pyramid

From a geographical perspective, the distribution of my country's Internet financial companies also presents a pyramid structure, which to a great extent affects the choice of work location for Internet finance product operators.

As can be seen from the "2018 China Unicorn Enterprise Research Report" of the Zero2IPO Research Center: In 2018, a total of 25 financial companies were included in the unicorn list in the country, and almost all of them were Internet financial companies. The total valuation was approximately US$284.516 billion, accounting for 30.29% of the total valuation of all unicorns in the country. It is the industry with the largest valuation share among all industries, which shows the important position of the Internet finance industry in the national economy.

Judging from the geographical distribution of these companies, Beijing has the largest number of financial unicorn companies, with as many as 12, accounting for 48%. Zhejiang and Shanghai rank second, with four unicorns each. Financial unicorns in these three places account for 80% of the total.

In terms of corporate valuation concentration, Zhejiang Province has the highest valuation of financial unicorns, totaling US$153.272 billion, accounting for 53.87% of the total valuation of financial unicorns nationwide in 2018. The valuation of Ant Financial alone is as high as US$147.692 billion.

It is clear from the data proportion that the Internet finance industries in Beijing, Zhejiang, Shanghai and Guangdong are undoubtedly the regions with the most development prospects in the country.

Conclusion

The above are the six "pyramids" that Internet financial products and operators must know, which I have summarized based on my own industry experience and public information. I hope it will be helpful to you.

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Author: Yunzhou

Author: Yunzhou