User Operation: How does paid membership increase user stickiness?

The paid membership system can not only encourage users to continue consuming, increase user stickiness, and extend the user life cycle value, but also increase revenue and enhance brand value to a certain extent. Paid user operations are different from ordinary user operations. The former focuses on "users" while the latter focuses on "services". Only by grasping the key point of "service" can we increase the consumption frequency and value of paying users and achieve the purpose of operation.

There are many types of operations, and different types of operations can be derived according to different scenarios, such as: event operations, community operations, etc.

However, the operation object is always inseparable from our users. I once said in an article about user operation: "User operation" is the operation based on user behavior data, using user incentives and rewards as a means to continuously improve user experience, promote user behavior conversion, and extend the user life cycle value.

Therefore, providing user stickiness, value and life cycle is the biggest goal of user operation. In order to achieve this goal, paid membership seems to have quietly become a new means of operation in all walks of life.

On August 8, 2018, Taobao's "88 Membership" suddenly came into everyone's attention, and the term "paid membership" became apparent due to Taobao's own mass traffic.

However, as early as 2005, Amazon launched the Prime membership paid membership. There are currently more than 100 million Prime members worldwide, and the average spending of Prime members is 4.5 times that of ordinary members, which is a remarkable achievement.

1. What is a paid membership?

Before understanding "paid membership", let's first talk about the most common "non-paid level membership".

I believe that everyone has heard of the commonly used membership level terms "Silver Card, Gold Card, Platinum Card" in major shopping malls and department stores more than ten years ago.

Obtain corresponding levels through personal consumption or contribution value, and divide user value according to user level. High-level members also get the greatest benefits, for example: Platinum cardholders can enjoy 20% off on purchases, Gold cardholders can enjoy 15% off on purchases, and Silver cardholders can enjoy 10% off on purchases.

Simply put, tiered membership means that merchants establish a tiered system based on user value, and give users different levels of discounts based on membership levels.

It has the following three functions:

• Improve user retention and stickiness;
• Encourage users to convert consumption;
• Increase user ARPU value.

This is the original level of membership and what it means.

Let’s talk about “paid membership” again. In the United States, paid membership is actually called a subscription model.

Subscription is easy to understand. We subscribe to public accounts, newspapers and magazines, and follow celebrities on Weibo. The subscription model can better cultivate user loyalty and obtain continuous and stable traffic.

The epitome of paid membership abroad is none other than Amazon and Costco, which are currently the two most successful paid membership systems in the world. China has quietly entered the "paid membership era."

The above screenshots are from: e-commerce APP-JD.com, travel APP-Ctrip, music APP-NetEase Cloud Music, reading APP-WeChat Reading.

Paid membership has penetrated into every aspect of our lives, so what is paid membership?

I think:

• By paying, users can obtain multiple types of high-yield exclusive rights and interests provided by merchants;
• Merchants use user payments to screen users and increase their stickiness and activity to products, thereby increasing and improving user life cycle and value.

2. Typical Case: JD PLUS Member

Since its launch in October 2015, JD PLUS has had over 10 million paying members.

Below, we will take JD PLUS as an example to deeply understand the definition of paid membership from both the user and enterprise perspectives.

1. User perspective

Paid membership price:

The activation price for PLUS paid membership is based on membership level - the higher the membership level, the lower the activation fee.

By retaining high-value members through high-level and low-threshold methods, they can gain higher stickiness within the APP.

Paid membership benefits:

The benefits of paid membership are often the most direct factor in attracting users to subscribe.

JD PLUS has more than 10 membership benefits, including: "shopping", "logistics", "after-sales consultation" and other online and offline scenarios, giving users a higher quality user experience in their field.

The privileges here must be granted to users by merchants in their professional fields. For example, Ctrip super members can enjoy VIP rest, fast security checks, VIP ticket grabbing and other privileges in the travel field.

In order to enjoy these benefits, users need to shop on JD.com frequently and with high consumption, so that they can fully enjoy the various benefits provided by JD.com PLUS.

On the other hand, as an exclusive benefit of payment, the differentiation of membership is also reflected, satisfying the user's vanity and sense of accomplishment.

Cross-border joint members:

In addition, cross-border rights and interests are also becoming a new direction among existing paid rights and interests. Rich cross-border rights and interests not only meet users' scenario needs in different dimensions.

The iQiyi VIP annual card among the JD PLUS membership benefits is its cross-border benefit in the video field.

Shopping is a relatively low-frequency behavior, but video browsing is a relatively high-frequency behavior. The combination of low-frequency and high-frequency scenarios, through ultra-high cost-effectiveness, can further consolidate membership barriers, improve membership renewal rates and loyalty, allow users to feel the value of membership in more diverse scenarios, and retain new users attracted by the video end.

This is also the reason why many APPs have established joint memberships with iQiyi or Tencent Video.

In fact, if we think about it carefully, it seems that QQ did something similar many years ago. For example: by opening green diamonds, red diamonds, pink diamonds, etc., you can obtain different rights and interests in multiple fields such as Tencent Video, Tencent Games, QQ Music, Da Wang Card, etc.

1. Enterprise perspective

Improve user activity:

Users pay to become members and gain access to a number of exclusive benefits, and are bound to return to use the JD APP more frequently. As the number of return visits increases, the repurchase rate also increases significantly, which results in daily growth for the company.

Enterprises provide a variety of benefits, and users enjoy them frequently, which is easy to understand:

For example: You spent 50 yuan to open a membership card for the steamed bun shop downstairs from your home. The store promises to offer a 20% discount on all buns using its membership card. Therefore, whether you are hungry or not, or want to eat or not, you know that the card in your pocket can save you money, and you will want to check out what's worth buying in that bun shop when you pass by. Because you think: if you buy it, you will make a profit.

Improve user loyalty and stickiness:

When users open a paid membership, they will inevitably develop a sense of dependence on the product due to the cost of opening the membership.

Let’s use the example of a steamed bun shop:

You spent 50 yuan to open a membership card for the steamed bun shop A downstairs to get shopping discounts. When a new steamed bun shop B opened next to steamed bun shop A, you would still choose A. Why?

Because when you apply for a paid membership, you have:

1. Payment costs are incurred.
2. Obtained payment rights.
3. Deeper member perception.

After paying the sunk cost of the activation fee, users will be much less likely to use other products. After multiple consumptions, users develop a habitual understanding of the company, which also deepens their dependence on the platform.

Moreover, through the payment system, users with high recognition and loyalty to the company can be screened out, which can easily form good word-of-mouth communication and reduce the cost of brand marketing. Through paid membership, a moat can be established for the company.

Improve user value:

Improve the Arpu value and increase the average income of users within a certain period of time.

To sum up: We found that paid membership can increase user consumption frequency and stickiness. Therefore, within a fixed period of time, the value benefits of paid members are often higher than those of ordinary members.

JD.com’s public financial report shows that as of June 30, 2018, the number of active users of JD.com in the past 12 months was 313.8 million. Based on the number of 10 million paying users, the penetration rate is about 3.18%, and the repurchase rate of JD PLUS members reaches 80%.

With a repurchase rate of nearly 80%, it is difficult for us to tell whether it is because JD PLUS has led to high consumption among PLUS members, or because the original high-value members have become JD PLUS.

From a business perspective: this kind of interlocking chain creates an ingenious closed loop of value, in which consumer value continues to flow.

Let’s go back to the example of the steamed bun shop:

The steamed bun shop has launched a paid membership - the membership fee is 90 yuan per quarter. In addition to enjoying member-price buns, users can choose a free meal within 30 yuan each time they visit the store for the next five times.

At that time, I asked the manager curiously: Won’t this be a loss?

If you want to increase sales and there is no room for price increase on individual products, there is only one way - that is to increase user return visits and repurchases.

If the average quarterly visit of a steamed bun shop user is 2.4 times, and a paid member consumes less than three times during the validity period of the paid membership, then the membership fee is profitable; but if the member consumes more than four times, although the membership fee is a loss, the number of meals nearly doubles, and the total revenue continues to grow, so the paid member still creates incremental value.

(An additional point needs to be mentioned here: personal risk control of paid members is also crucial.)

Ensure corporate cash flow:

According to the 2017 financial report of Costco in the United States: merchandise revenue was approximately US$126 billion, operating profit was US$4.11 billion, tax paid was US$1.33 billion, and the company's final total profit was US$2.68 billion.

Can you guess how much its paid membership income is?

Costco's membership fee revenue that year was US$2.85 billion.

It can be seen intuitively from the data that the membership fees received by Costco from paid members account for 70.64% of its total operating profit.

Simply put, the profit Costco finally makes is the activation fee of all paying members.

Combined with the merchandise dimension of paid membership, Costco has adopted a strategy of selecting SKUs and large-package sales to cover all categories of daily life needs.

Therefore, users can reduce time costs, increase the turnover speed and bargaining power of single SKU, reduce inventory pressure, reduce warehousing, logistics and other costs, obtain membership fees, and perfectly guarantee the company's cash flow.

III. The Nature and Key Elements of Paid Membership

The essential difference between operating paid members and operating ordinary members is that the former focuses on "service" while the latter focuses on "users".

How to serve paying members well and thus increase the consumption frequency and value of paying users has become the key to paid membership operations.

Through the above introduction to paid members, I would like to summarize the following four points about paid members:

1. Find the user pain points in this field

To become a paid member, you first need to find the pain points of users in this field, such as:

• The postage for overseas shopping is very high - Amazon offers free postage for overseas shopping for members;
• If you can’t catch up on TV series, there are ads - iQIYI has launched a special privilege of watching TV series in advance without ads.
• Travel security checks are cumbersome and the journey is tiring - Ctrip has launched fast security checks, VIP rest privileges, etc.

Identify the user pain points in the field. The foundation and starting point of the paid membership system is this pain point, that is, the basic rights and interests of paid members, which are separated and made into rights and interests exclusive to some people.

1. Provide paid solutions

From the product perspective, we can solve user pain points by offering various exclusive paid benefits to paying members.

However, as I said above: the focus of paid membership operations is "service".

On the basis of solving user pain points, increase other rights and interests.

To put it simply, it means: "What you don't have, I have; what you have, I have more."

We can see this from JD PLUS’s 10 times JD Beans return privilege. The difference in JD Beans return between ordinary members and paying members is obvious.

1. Resolving user payment resistance

There are two types of payment resistance: one comes from the activation amount, and the other comes from the activation psychology.

The activation amount is a very important factor in designing paid membership, and it plays an important regulatory role.

If the threshold is too low, users will easily quit; if the threshold is too high, it will be difficult to attract users. Amazon originally set two activation fees at $39 and $49, but ultimately settled on $79 based on this factor.

Psychologically, I describe paid membership as “great value for money.”

Value for money is another important factor for users to pay for subscription: the value of paid membership service (basic rights and interests) + user expectations (service content that is constantly iterated around basic services) + surprises (unexpected rights and interests, such as cross-border rights and interests) = actual payment price

When the above two points are met, the user activation resistance will be easily resolved.

1. Operation of paying users

Paid user operation is another big topic, which will not be explained in detail in this article today.

The essence of paying users is still users, but their life cycle is completely different from that of ordinary users.

In simple terms, it can be divided into the following life cycle nodes: not tried → in trial → trial expired → paid → paid expired.

Through data analysis, combined with event operations, we enrich the types of benefits, promote return visits and repurchases, and improve its Arpu value...the road is long and arduous. Nowadays, every platform for paid membership is constantly innovating, but to truly become a good paying user, you still need to work hard to gain more.

Source: Goodnight (wdyNo-1)