The underlying logic of Internet growth strategy

There is a strange phenomenon.

Internet companies attach great importance to strategic positioning, but rarely use positioning theory.

We have never heard the founders of the top 10 Internet companies in China publicly use positioning theory to introduce their companies.

who I am?

Reason for consumption?

Letter of trust?

So how do Internet companies (including traditional industries + the Internet) conduct strategic positioning? Today, we will interpret it from three perspectives:

First, the actual positioning of the Internet growth strategy;

Second, the ten elements of the Internet growth strategy positioning;

Third, the essential difference between Internet growth and the strategic positioning of consumer product companies.

1. Practical application of Internet growth strategy positioning

Let’s take four real cases as examples.

The first one is 2C, the social e-commerce platform - Pinduoduo;

The second one is 2B, the textile trading e-commerce platform - Baibu;

The third one is 2C, mainly sold online on Tmall - Ramen Says;

The fourth one is 2B, the smart canteen service provider - Xiongwei Technology.

How does Pinduoduo implement its growth strategy?

From 0-0.1, three arrows are fired at the same time. I made Fruit Match, Pinduoduo, and games respectively.

From 0.1 to 1, we took fruits as the starting point, completed the business cycle, and grew into a regional online fruit wholesaler.

From 1 to 10, backed by Tencent, it has become the largest online traffic portal for offline 10-yuan stores in China.

From 10-100, China's largest online fruit wholesaler and China's largest agricultural product upstream platform.

From 100 to now, we are working towards becoming the largest factory alliance in China.

To summarize:

Pinduoduo focuses on user growth first: its product advantages are not huge, but it has a unique vision in using fruit as the entry point for product selection.

Forming cognitive advantages in social e-commerce: The product form and the massive number of WeChat users form a chemical reaction.

It has a comparative advantage over social e-commerce: free shipping at 9.9 yuan, replacing the 10 yuan offline stores across the country. It is easy to remember, spread and make decisions.

Ultimately, it formed a differentiated competitive barrier that is different from Tmall and JD.com: they all bring urban products to the countryside (making money from rural areas), while Pinduoduo brings agricultural products to the countryside (helping the rural areas and farmers make money).

We are currently implementing the factory strategy of upgrading our Taobao brand to Tmall.

How does Baibu implement its growth strategy?

From 0 to 1, we first built China’s largest textile fabric database to form a strategic tool.

From 1-10, China's largest textile fabric trading platform.

From 2010 to now, we use AIoT+SAAS to empower upstream and build smart cloud factories.

To summarize:

Baibuxian has created the largest textile fabric database in China, which has both tool attributes and consultative sales attributes.

It is very similar to Dianping in the 2C field: China's largest catering consumption reputation database.

Because of its tool nature, Dianping's monetization capabilities are not strong, but it has the largest online catering traffic in China, and when combined with the Meituan Takeout trading platform, it forms a competitive barrier.

With the fabric database as a traffic source, Baibu achieved a dimensionality reduction attack in the B2B textile fabric transaction, and soon surpassed its competitors in transaction volume, reaching a scale of tens of billions.

At this time, traditional B2B trading platforms can no longer threaten Baibu, and its biggest competitor is a cross-border company called Zhibu Internet. It starts from the smart cloud factory and can naturally also conduct fabric trading.

Therefore, Baibu was separated into Quanbu, which specializes in smart cloud factories to meet the cross-border challenges of Zhibu Internet.

How does Ramen Say implement its growth strategy?

From 0-0.1, Japanese ramen eaten in restaurants can be sold at a high price and quickly. So is there a kind of Japanese instant ramen that can be eaten at home?

This is a strategic assumption. In fact, there are already reference benchmarks in the market that are small in scale but sell well.

From 0.1-1, it ignited the food Up master on Bilibili, established relationships with the first batch of core customers, and changed customers' perception of traditional instant noodles.

From 1 to 10, it just caught up with Tmall’s traffic dividend and became the number one in Tmall’s high-end instant noodles category.

From 2010 to now, we have expanded our omni-channel and full-category sales capabilities (in progress).

To summarize:

In the past 2-3 years, many Internet celebrity brands have grown from 0 to 1 very quickly, mainly by seizing the platform traffic dividend.

Just like Pinduoduo captured the existing users of WeChat, Ramen Says just happened to catch up with the traffic dividend of Tmall. If Tmall wants to become the world's largest new product launch platform, it urgently needs a large number of cutting-edge brands with brand tone that young people like.

Ramen said that in addition to the trading platform, it conducted content marketing on Bilibili to detonate the first batch of core customer groups.

This is commendable, as it immediately differentiated the product from traditional instant noodles in the market and established a brand tone with subculture characteristics.

We are currently in the process of making a breakthrough from 10 to 100, which is extremely difficult. Our strategic positioning will also undergo a very fundamental adjustment accordingly.

How does Xiongwei Technology implement its growth strategy?

From 0-1, starting from hardware technology, we developed Zhipan. There is a chip in the tableware that automatically identifies the amount and nutritional content, reducing the waiting time in the company cafeteria.

From 1 to 10, we have formed multiple hardware + software solutions and become China's largest smart canteen service provider. Well-known large companies such as Tencent, ICBC, and Tsinghua University have become benchmark customers.

From 10-100, it has covered 2,500+ units and more than 4 million employees. With annual catering transaction volume exceeding 20 billion, a competitive barrier has been formed.

From 100 to now, we have started to develop the employee welfare e-commerce platform - Fuyiguo along the customer lifetime value, forming a new business profit growth point.

To summarize:

The business model of an Internet company generally has three steps:

Traffic import - relationship accumulation - value realization.

Although Xiongwei Technology is a 2B company, it also conforms to this business model.

It started with hardware technology and quickly seized customer resources - traffic import.

As customer satisfaction increases – relationships build.

The money that cannot be spent in the staff cafeteria is usually spent on retail in the cafeteria’s canteen.

Therefore, Xiongwei Technology incubated a platform internally - Fuyiguo.

Fuyiguo’s From 0-1 is the online traffic entrance for offline canteens and convenience stores.

Fuyiguo, from 1-10, is a corporate welfare group buying platform and is currently experiencing rapid growth.

What is the difference between Fuyiguo and traditional corporate group buying or employee welfare malls?

Two indicators are enough: employee catering is an employee benefit and a high-frequency necessity, so that the frequency of online traffic entrances to the employee canteen and convenience store is as high as: within three months, the average number of visits per person was 9.5 times, and the number of orders was 7.9.

For a platform whose retail transaction volume has just started, these two indicators alone are a competitive barrier that will help it defeat its competitors. Of course, the customer pool of the parent company Xiongwei Technology is the underlying logic of the competitive barriers.

2. The underlying logic of the Internet growth strategy

Internet companies have data, portraits, traffic, technology, and new business models. The factors they consider in strategic positioning are much more complex.

There are usually ten elements:

Products, customers, scenarios, markets. These four are the elements of growth strategy.

Sales, marketing, categories, brands. These 4 are the elements of growth operations.

Strategy and business model. These two are growth lever elements.

1. Growth strategy elements

Growth strategy elements are a set of basic business strategies that we must develop before we achieve growth.

01 Products are solutions to the specific needs of target customers

A product should not just be a collection of functions or a list of selling points. A product must have three elements.

A product is a solution to a specific need of a target customer.

We call this definition the three elements of a product:

The first one is the target customer;

The second is specific needs;

The third is the solution.

Obviously, the three elements of a product are the basic research and development of a growth strategy.

Some Tmall customers care about new and fashionable products;

Some JD.com customers care about the fastest logistics;

Some Xiaomi customers care about high cost-performance.

02 Customers are the chemical reaction between buying and selling points

The biggest difference between the Internet and traditional offline sales is that there are no offline shopping guides and on-site experience.

Therefore, when selling goods on the Internet: the touch point is the terminal and the copywriting is the store.

If within 2-3 seconds, the customer sees a bunch of pictures and texts on a web page with 6 product selling points, and none of them can produce a chemical reaction with the customer's potential buying point, the customer may be lost forever.

Therefore, each target customer group has the biggest product selling point in a certain dimension, and there is a chemical reaction between it and the biggest buying point of this segment of the population, which can be matched efficiently and quickly.

03Scene is the medium between demand and product

Regardless of whether it is an Internet company or not, if the demand far exceeds the supply, we do not need to emphasize the product usage scenarios. Customers will actively generate high-desire consumption demands at regular intervals based on the frequency of use.

On the other hand, when supply exceeds demand, customers are faced with product surplus and information overload. If they are not in a specific application scenario, their desire to consume is very low.

Nowadays, more and more consumption on the Internet is triggered in low-desire life scenarios. What does it mean?

You see a movie review posted by a netizen in your circle of friends, which may trigger your decision to watch the movie even though you have no desire to consume the movie.

You are watching a makeup video on TikTok, and suddenly the host says that you can buy this lipstick by clicking the link below. You may have no desire to buy lipstick, but the limited quantity and price promotion may trigger a lipstick consumption decision.

We must delve into specific application scenarios to gain insight into customer needs and decision-making motivations. Because the scene is the medium between demand and product, and it is a tool to stimulate and upgrade consumer desire.

04 Market is the commercialization path and user touchpoint

Some products are not of poor quality nor do they lack target customers, but they have always been lukewarm.

Before Ramen Says, there were several high-end instant noodle brands, and there were even more boutique coffee brands that started at the same time as Santonban Coffee, but unfortunately none of them became big.

What is the reason? These brands did not seize the Tmall traffic dividend like Ramen Shuo and Santonban to achieve low-cost marketing. The marketing costs for them to find their target customer groups are too high. Customer contacts are too sparse, resulting in insufficient order density and a particularly slow growth rate.

One point that needs to be emphasized here is that Internet companies generally attach importance to cross-industry marketing cooperation. In the eyes of traditional industries, these are just icing on the cake.

In fact, this is a cognitive upgrade.

Traditionally, we determine the scope of an industry based on the social division of labor. For example, raising chickens and making fast food are two upstream and downstream related but different industries.

The new economy does not see it this way. As long as they serve the same target customer group, games (NetEase Onmyoji) and

Fast food (KFC) is a peer.

The inter-industry concept of the new economy has greatly reduced the cost of user touchpoints and expanded the audience range of brand influence. It's not just icing on the cake, but rather a timely help.

2. Growth Operation Factors

Internet growth operations = sales + marketing + category + brand. It requires a higher degree of integration, is more difficult and more complex than traditional industries.

05 Sales is about merchants finding customers

There are three major pain points in sales:

First, who are the target customers?

Second, why do customers buy from you?

Third, what are customers buying?

After any industry is added with the Internet, the first and most important thing is traffic operation. Because the Internet is essentially a traffic business.

Internet companies all have digitized user portraits, so they have an advantage over traditional industries in sales.

However, the Internet also has its own shortcomings. Many tool applications have extremely large traffic and may have hundreds of millions of daily active users, but they cannot find suitable commercial monetization methods.

06 Marketing is about customers finding merchants

There are three major pain points in marketing:

First, is there any cognitive impairment?

Second, do you have the desire to buy?

Third, are there any behavioral habits?

For any industry + Internet, after traffic operation, the most important thing is retention operation.

How many customers actually stayed?

Will the customer take the initiative to visit us again next week? How can we get back lost customers and how can we do it?

The customer hasn’t come for half a year. What’s the reason?

In addition to traffic operation and retention operation, there are two other issues that are particularly confusing.

What is a brand? Brand is customer willingness to pay.

What is a category? Category is the customer decision path.

Let’s look at these two questions below.

07 Category is the customer decision path

How do customers make decisions? Which keywords are customer decision points?

For example, when smartphones first became popular, business, long standby time, clear screen, no heat, and smooth gaming were all decision-making points for customers.

Gradually, the market is fragmenting. Apple focuses on fashion, Samsung focuses on business; Xiaomi follows Apple, and Huawei replaces Samsung.

Later, Xiaomi began to focus on user operations and economies of scale, while Huawei focused on GPU software and hardware and customer single decision points.

In the end, Huawei turned camera phones into the single biggest decision point for customers; Xiaomi turned young people's first small home appliance into a circle-based consumption decision point.

Now it’s not difficult to understand, right? Category is the customer decision-making path and also the industry education cost.

08 Brand is the customer’s willingness to pay

When talking about brands, we must talk about customer structure.

In simple terms:

Customers = traffic customers + relationship customers + behavior-induced customers + memory-inspired customers + two-way screening customers + mental pre-sale customers

Traffic customers are customers who cannot be labeled with an identity, cannot be repeatedly contacted at low cost, and cannot have behavioral data.

Relationship customers are customers who can be identified, can be contacted repeatedly at low cost, and have behavioral data.

Guiding customers through behavior is the strength of Internet customer acquisition.

Memory and inspiration for customers are the strengths of advertising communication.

Two-way screening of customers is the strength of the brand’s tone.

Mental pre-sale customers are a quasi-commercial religion that achieves the mental anchoring effect.

Most consumers rely on mental accounts such as memory, induction, and anchoring to guide their actions. If it is a traffic customer or a channel customer, it is often difficult to get this customer back. The possibility of customers buying from us again next time is unreliable, unstable and has a low probability.

And those commercial and religious type of customers are more likely to come to us again on their own initiative.

In fact, the core of a brand is whether customers keep repurchasing. The price is determined by supply and demand. If customers keep repurchasing, the price will have a brand premium.

We often say that a brand is actually the precipitation of keywords. What does it mean?

When customers think of your brand, what keywords do they think of? When customers think of which keywords, they associate it with your brand?

Can these keywords help customers make decisions?

3. Growth leverage factors

In the growth of the Internet, strategy and business model, including entrepreneurial vision, are all growth levers that can achieve twice the result with half the effort.

09 Strategy is cognitive advantage and comparative advantage

Darwin said: Those who survive are often not the strongest species, nor the most intelligent species, but the species that can best adapt to change.

In biology, this is called: survival of the fittest.

This rule also applies in business. So what kind of companies can best adapt to change?

One is cognitive advantage, and the other is comparative advantage.

Companies with cognitive advantages are able to predict trends. Companies with comparative advantages can outperform their competitors.

What is the relationship between these two and strategy?

The starting point of strategy is to seize opportunities.

The end point of strategy is to build barriers.

In plain words:

Having cognitive advantages makes it easier to seize opportunities, and having comparative advantages makes it easier to establish barriers.

10. Business model is a transaction structure with stable expectations

Different companies have very different business operations.

Some companies sell products;

Some sell services;

Some sell solutions;

Some sell feelings;

Some sell traffic;

Some sell IP;

Some sell big chains;

Some sell infrastructure, and so on.

What exactly is the business model of an enterprise?

When examining a company's business model, the focus is on examining the logical relationship and variable relationship between its product structure, customer structure, and revenue structure, and ultimately forming a stable expectation.

Drucker once said: The competition among enterprises today is not the competition between products, but the competition between business models.

Let us also add: it is not just a competition of business models, but also a competition of entrepreneurial vision and mental models.

Let's summarize. Internet strategic positioning essentially means sorting out the ten major elements:

Elements of the growth strategy include:

Products are solutions to the specific needs of target customers.

Customers are the chemical reaction between buying points and selling points.

The scene is the medium between demand and product.

The market is the commercialization path and user touchpoint.

Growth operational elements include:

Sales is about merchants looking for customers.

Marketing is about customers finding merchants.

Category is the customer decision-making path.

Brand is the customer's willingness to pay.

Growth levers include:

Strategy is cognitive advantage and comparative advantage.

A business model is a transaction structure with stable expectations.

3. Internet companies and consumer goods companies

The essential difference in strategic positioning

Traditional positioning theory is often limited to consumer goods companies. There are several reasons for this:

Traditional positioning theory focuses on sales professionally and does not involve product development, technology iteration, and organizational capability building.

Traditional positioning theory aims to capture the minds of users, and is more about allowing users to: see, distinguish, and remember.

Traditional positioning theory is mainly based on centralized advertising dissemination, either on CCTV, Focus Media, channels, or shelves, implementing a saturation attack.

According to traditional positioning theory, the use of the Internet is still limited to advertising and public relations event communication, and the use of value is somewhat marginalized.

Traditional positioning theory tends to be more creative and rarely uses Internet tools such as data-assisted decision-making.

The strategic positioning of Internet companies is a dynamic game that is comprehensive, full-ecological, and full-factor.

First, the competition is about the cognitive advantages of entrepreneurs.

The local life service platform is the second generation e-commerce platform.

Self-driving cars are the next generation of intelligent terminals.

The past three years have been Tmall’s new product traffic dividend, and the next three years will be Douyin and Kuaishou’s e-commerce dividend.

These are the underlying logic of strategic positioning.

Second, the competition is about the overall comparative advantages of the enterprises.

The entire instant noodle industry is shrinking, so why can high-end instant noodles develop so rapidly?

The initial marketing cost of traditional liquor is 25%, why is Jiang Xiaobai’s only 5%?

Coolhome is a technical tool, why does it attract 8 million designers to use it?

What makes you better than the industry average? How is this organizational capability built?

Third, the competition is about the ability to develop and operate customer lifetime value.

Different from the memory enhancement of traditional advertising:

The Internet places more emphasis on behavioral induction.

The Internet prefers to separate products from commodities.

Internet business users have data, tools and means.

The efficiency of mining the lifetime value of Internet customers is something that traditional industries cannot catch up with by capturing the minds of users.

Not on the same level.

Fourth, the Internet’s business model can also be divided into two types:

One has pre-competitive barriers, and the other has post-competitive barriers.

Simply put, those barriers that can snatch customers away by using financial subsidies are mostly post-competitive barriers. Only after a monopoly is objectively formed can a network effect be realized, and then a strong pricing power can be possessed. This requires massive advertising in stages.

For example, during last summer vacation, it was reported that several leading online education brands spent tens of billions on advertising. At this point, certain characteristics of consumer goods strategic positioning emerge.

If there are pre-emptive competitive barriers, it will not be easy to fall into a brutal competition situation of burning money. For example, even though Alibaba and JD.com are so rich, they cannot strangle Pinduoduo in the cradle.

Positioning is not a panacea, but without positioning, nothing is possible.

No matter how good something is, the best one is the one that suits you.

Author: Grayscale Cognitive Society

Source: Grayscale Cognitive Society