Boss, let’s talk about the most effective channel for attracting new customers!

Background knowledge:

CAC = cost to acquire a single user, LTV = lifetime value of a single user (profit contributed from registration to churn)

With more and more friends, many fans sent me private messages asking, "Brother Long, traffic is too expensive. The money earned from users is not as much as the money spent on attracting new users. Can you give me the most effective channel for attracting new users?"

There is also a legend circulating in the circle of friends :

《From 0 to 100,000 users without spending a penny》

《Inventory of new customer acquisition channels, the last one is the most effective》

"One trick to increase followers on WeChat public accounts "

…

Everyone hopes to find a channel that can provide large quantity, good quality and low price to solve the problem of attracting new customers in one fell swoop.

Does such a channel exist?

If you click on the articles above, you will find that most of them are outdated experiences, or playing methods closely related to their own resources, or even accidental opportunities.

These won't solve your confusion.

Therefore, in this article, I will use a basic model to deduce the three laws of channels, and finally help you build a systematic framework to help you better attract new customers.

Other questions about the channel will also be answered at once, such as:

• What are the rules for rapidly changing channels?
  
• Why do some channels work well when tested but fail when officially launched?
  
• When you are faced with a new channel, how do you decide whether to launch it?
• Invest in expensive channels or in cheap ones?
  
• As an operations director , what strategies should you use to attract new customers?
• Is burning money a stupid act?

1. Regressive thinking - demand model

There is a way of thinking called backward thinking , which retreats from general to specific, from complex to simple. This time we will adopt a backward thinking approach and consider the situation of a single channel first.

Suppose there is a channel that few people know about, so the demand is very small and the price is very low. In order to increase sales, the channel also offers a lot of benefits.

Xiao A happened to invest and found that the effect was surprisingly good. It completely meets the definition of “the most effective channel for attracting new customers”.

What will Xiao A do next? Will I write an article to tell the industry that I have found a good channel? Of course not !

That would attract a large number of competing products to follow suit, causing demand to rise rapidly and channel prices to soar.

But will it be useful if Little A keeps it secret and doesn’t say anything?

Don’t forget that the channel itself is also a party to the game . When the channel verified the value of its traffic through Xiao A's delivery, the first thing he did was to make a PPT and try his best to sell traffic !

Therefore, no matter what Xiao A does, the channel price will increase rapidly due to the increase in demand . The channels that have been deployed will further accelerate this process.

Gradually, the channel price became closer and closer to the market average price, and the growth rate of demand slowed down. Until one day, the channel price is equal to or even greater than the market price, and the bonus period ends .

I call this model the demand model . The demand model explains a very simple truth:

The more people demand it, the higher the price.

Please repeat this silently three times. This is the cornerstone of all the following inferences.

In this dynamic game, the channel's bonus period can be as long as 1-2 years or as short as a few months or even weeks.

Back to the original question of the article, is there a most effective channel for attracting new customers?

If you enter in time during this short bonus period and the channel is accurate enough, this is the most effective channel for you to attract new customers.

When you see articles like "One trick to increase followers of WeChat official account " and "One trick to get 100,000 users" in your circle of friends, they are either soft articles published by the channel itself, or the channel's bonus period has passed and the operator hopes to increase influence through sharing.

2. Three laws of channels

From the demand model, we can derive three rules, which I call the three laws of channels.

• Law of Magnitude: For the same channel, the greater the magnitude you want to achieve, the higher the CAC
• Law of Time: For the same channel, the earlier you enter, the lower your CAC
• The Law of Precision: Different channels, the more precise, the lower the CAC

Let us explain them one by one below.

1. Law of Magnitude: For the same channel, the greater the magnitude you want to achieve, the higher the CAC

Here we introduce the concept of user density :

User density = number of target users /total number of user groups.

You will find that users of almost all products are stratified , from the core user group to the general user group, and the user density gradually decreases.

Taking the hand-earning product as an example, users can earn 1-3 yuan in rewards by downloading the designated App. I earn about 20 yuan a month. What are the characteristics of users of this type of product?

• Too much fragmented time
• Low income and lack of money

The core users are mothers . My time is severely fragmented and I cannot do a part-time job. The child is a human money-shredding machine and is extremely short of money. This type of user has the highest LTV and the best stickiness.

The second group is young people from small towns , whose lives are idle and boring, and they are happy to spend a few minutes to earn 2 yuan.

Finally, there are the recent graduates .

If I choose Sina Fans Channel and target mothers , I may be able to get 500 registrations every day, with a cost of 10 yuan per person . If I want to expand the scale, I can only increase the dimension of delivery and include young people from small towns . If I get 2,000 registrations per day, the cost will become 15 yuan per person . If I want to increase the scale further, I will have to advertise to newly graduated students , and the final cost may increase to 20 yuan per piece .

Why is this happening?

From core users to general users, the population size is getting bigger and bigger, and naturally there are more and more competitors. And the demand model tells us that the more competitors there are, the higher the price.

This theorem has two consequences.

• First, the actual price of the channel will be higher than the test price . Because the magnitude of the test is generally small. As the scale expands, the price will inevitably rise.
• Second, creative ideas or delivery methods that quickly gain volume are more costly . A rapid increase in volume means attracting a larger number of users.

(Creativity refers to the form and content of the advertisement. For example, the Guangdiantong advertisement below.)

2. Time Law: For the same channel, the earlier you enter, the lower your CAC

In the demand model, channel price is the result of the dynamic game between supply and demand. Therefore, the earlier you enter, the lower the CAC will be and the longer the bonus period will be .

Weibo in 2010-2011, Zhihu in 2010-2012, and WeChat public accounts in 2013-2014 were all bonus periods.

At the same time, in order to quickly recover funds or expand scale, channels often make substantial concessions and subsidies in the beginning.

For example, when Weibo first started its crowdfunding business, it packaged some resources and provided them as service plans to high-quality merchants participating in the crowdfunding. If these resources were purchased separately, they might cost hundreds of thousands.

3. The Law of Precision: The more precise the channel, the lower the CAC

The more precise the traffic, the more expensive it tends to be, and the more general the traffic, the cheaper it is. Therefore, many bosses tend to buy cheap traffic, thinking: with such a large amount, the washed users may be cheaper than other users!

Unfortunately, things often go against one's wishes in the end.

I have talked about this in my previous article: traffic ≠ users , so traffic price ≠ user price .

The more traffic there is, the more competitors there are, and the higher the price to the end user will inevitably be.

Therefore, the smart way is to find precise channels . At the same time, it should be noted that precision is relative . Due to differences in product models and user characteristics, other people’s general channels may be your precise channels.

For example. Ubox is now starting to get involved in the WeChat fan-adding business. When buying water and snacks, it will guide you to follow a public account and then receive a 0.5 yuan coupon.

For other public accounts, this channel has very broad traffic, and the cost is bound to be high. But for competitors, it is a very precise channel for making money from products, and they are all people who are relatively fond of taking advantage of small bargains.

So, fellow operations directors and channel managers, the primary criterion for judging a channel is its accuracy, not its price.

3. Finally, we have a methodology

Now, let’s review the three laws of channels:

• Law of Magnitude: For the same channel, the greater the magnitude you want to achieve, the higher the CAC
• Law of Time: For the same channel, the earlier you enter, the lower your CAC
• The Law of Precision: Different channels, the more precise, the lower the CAC

You will find that the operating framework of the channel has emerged.

1. Occupy precise channels first, then consider general traffic

Don't use traffic prices to evaluate user costs. Don't blindly try low-priced channels.

First quickly occupy the precise channels, and when the requirements for volume are higher, consider the general traffic channels.

2. Increase the scale and ensure the balance between profit and growth rate.

I have proposed a multi-dimensional coordinate model in my previous article. Here, channels are arranged by cost and magnitude:

For different channels, channels in quadrants B and C can be amplified and pulled towards quadrant A through creativity and delivery strategies. Cut off the D quadrant channels.

For the same channel, expand the scale as much as possible. Expansion in scale will inevitably lead to rising costs, so you have to strike a balance between profit margin and expansion speed.

3. Spend money when it’s necessary, don’t be afraid of losses

Should I spend money?

If you catch the bonus period of the channel, please spend as much as you can. The bonus period is really short.

The stupidest thing is not spending money to attract users during the bonus period. After the bonus period, you can only purchase traffic at a high price to keep the product alive.

Is loss scary?

If LTV>CAC , the losses caused by rapidly expanding the scale are not terrible. Control the rhythm of financing , and the capital market will pay for your losses. Because you only lose temporarily.

If LTV<CAC , users leave in large numbers, or there is no conversion , and you are still desperately burning money to expand the scale, this kind of loss is terrible.

4. Maintain a keen sense of smell and curiosity, and follow up on new channels in a timely manner

Establish connections with the business and operations departments of each channel and build good relationships. When they launch a new channel, they make quick decisions and conduct rapid trial and error with small-scale launches. Once proven feasible, quickly expand the scale. After all, the bonus period is only a few months.

If possible, you can consider signing a long-term framework agreement in the early stage of the channel to reap the dividends; or simply invest a little money and become a channel shareholder .

For example. In 2015, WeChat public accounts have demonstrated strong traffic diversion capabilities, especially for Internet financial products. At that time, some far-sighted financial apps invested in some personal financial management public accounts and self-media incubation institutions.

In 2016 and 2017, everyone started investing in self-media, and advertising prices quickly soared. The headlines of an account with 10,000 readers could be sold for over 100,000 yuan.

At this time, those companies that have made early arrangements can not only continue to acquire users from the public accounts they invested in at lower prices, but can even successfully cash out during the second round of financing of some public accounts and make a fortune.

IV. Conclusion

I have always felt that channel operations are the most complicated, but there is no systematic methodology.

When an operations director or channel manager faces hundreds of different channels, and each channel desperately tells him, "My product is effective, and your competitor XX has invested in it!", he will feel helpless.

He can only make judgments based on past experience, recommendations from friends, even phrases heard at the dinner table, and articles in his circle of friends. But experience quickly becomes obsolete, friends are not necessarily reliable, set words are often lies, and the channels in the circle of friends have long passed their bonus period.

Therefore, I wrote this article, hoping that it can be of some reference to fellow operators.

We simplified the complex channel market into a demand model, and derived the three laws of channels:

• Law of Magnitude: For the same channel, the greater the magnitude you want to achieve, the higher the CAC
• Law of Time: For the same channel, the earlier you enter, the lower your CAC
• The Law of Precision: Different channels, the more precise, the lower the CAC

As a result, we rebuilt a complete set of channel delivery logic:

• First occupy the precise channels, then consider general traffic
• Increase the scale and ensure the balance between profit and growth rate
• Spend money when you need to, don't be afraid of losses
• Keep a keen sense of smell and curiosity, and follow up on new channels in a timely manner

For most companies, traffic is their lifeblood, and channel building is the top priority of operations. Excellent channel, maintaining low CAC. Excellent channels can seize opportunities and seize dividends, increasing traffic and user scale as much as possible while maintaining acceptable profit margins.

It should be noted that an excellent channel requires an equally excellent boss.

I occasionally go to some companies to give lectures. When chatting with the bosses, I found that many of them like to set a framework, detailing what price the CPA channel can accept, what price the CPS channel will accept, and what level of users they want to achieve by the end of the year.

In this situation, students in charge of channels are often restricted, have no decision-making power, and miss countless opportunities. Therefore, the growth rate of such enterprises tends to be slow.

The demand model tells us that prices are never determined by any boss, but are the result of bargaining among all parties in the market.

Therefore, the best way is to find a reliable person, fully trust him, and link the bonus to the final result.

above.