Everyone is talking about user growth, have you avoided these 3 pitfalls?

In my book "Exploding User Growth ", I not only discussed the strategic elements and tactical means for enterprises to implement user growth, but also very clearly pointed out several major misunderstandings about user growth. As shown in the figure below, they are:

• Pursuing vanity metric growth
• Blindly pursue the growth of the number of users
• The product has not been tested by the market yet, and the user base is growing too fast and too early.

3 myths about growth

Below we will explain each misunderstanding in detail, and everyone should try to avoid falling into these misunderstandings when implementing user growth.

1. Pursuing Vanity Metric Growth

"Vanity indicators" refer to those indicators that cannot reflect the core competitiveness of the product or the true value of the product. They are superficial indicators. Such as PV, UV, clicks , APP downloads, number of registered users, etc.

The real core indicators are how many active paying users you have, how much content you have that brings actual value to your business, how many active sellers you have, etc. These will vary depending on different business models .

Vanity metrics look nice and make you feel good, but they don’t provide any guidance for your next actions other than inflating your ego.

【Case】Inspiration from SocialCam’s failure:

In 2012, SocialCam, an American short video social application, suddenly became popular across the United States. This APP is positioned as "sharing videos with friends instantly" and once became the number one free application in the App Store and was considered the "video version of Instagram."

SocialCam was launched in 2011 and had only 40,000 users at the beginning of 2012; by May, the number of users suddenly exceeded 10 million, and by June it was close to 20 million.

In order to grow rapidly, SocialCam took the "number of registered users" as the company's core indicator and launched a series of crazy viral marketing campaigns around attracting new users .

First of all, SocialCam updated a large number of clickbait , borderline video content, and video content that satisfied people's curiosity on its website, attracting a large number of visiting users.

Secondly, the videos that users watch on the SocialCam website will be automatically shared to their Facebook friends .

Thanks to this double virality , SocialCam has skyrocketed.

However, the good times did not last long. Facebook continued to receive complaints from users about SocialCam violating their privacy and sharing the videos they watched on Facebook without their consent. Finally, Facebook decided to close the traffic entrance of SocialCam.

After losing traffic from Facebook, SocialCam's number of visitors plummeted. Coupled with the fact that the product was imperfect and the user retention rate was extremely low, in less than a year, the tens of millions of visits were basically zero.

How to avoid this misunderstanding?

The approach I give is: set the right core indicators at the right time.

There are three main principles for selecting core data indicators:

1. The choice of indicators must be consistent with the core goals of your business model, and the indicators you focus on at different times are different.

Take the P2P online lending platform as an example.

The business model of P2P online lending is to obtain user funds at low cost, lend at high interest rates, and earn the interest rate spread in the middle. The platform profit is the income minus the bad debt cost. To increase profits, it means that the scale of funds absorbed and loaned must be large enough while controlling the bad debt rate. This is the same as the banking model.

The differences are:

Banks have strong risk endorsement and are naturally able to obtain funds at low cost. The business model of the Internet is to make losses first and then make money. The more trust users have in the platform, the more money they will invest.

P2P platforms must first establish brand trust among users, subsidize users through losses in the early stages, and use high-interest returns to stimulate users to transfer funds from banks to P2P investment platforms, and form investment stickiness with the platform, thereby achieving economies of scale.

While ensuring risk control, the lending side acquires more loan users through online lending, issues loans of different terms to different users, and obtains interest income.

There are two business models for online lending: one is to use pure interest rate differential income as the core profit point, mainly making money through the size of the user's loan amount and the length of time; the other is to charge a handling fee for each loan made by the user, and then charge the interest differential on this basis.

Therefore, the core indicators of the former should be the amount of user investment and loan amount attracted as well as the bad debt rate.

For the platform, the amount of funds remaining on the platform is the key, while the user transaction amount is a vanity metric (the transaction amount means that the user has made multiple investments or loans, but the total investment or loan amount has not changed).

But for the latter business model, the transaction amount plays a very important role.

Because every time a user takes out a loan, the platform can charge a fee. Even if the user's total loan amount has not changed, an increase in transaction amount means an increase in the number of loans, and the platform's revenue from the same user will also increase accordingly.

This is the significance of selecting corresponding core indicators for different business models.

2. Regardless of the period, the indicators we focus on cannot harm the core value of users

LinkedIn has a core principle: if a product affects the experience of non-paying users, then this feature is a bad feature, no matter how much money it makes for the company.

For example, some Internet companies use commercial revenue as their core indicator. In order to achieve the commercial revenue KPI, the product team will add more and more commercial content, even resulting in more advertising content than what users normally need, which greatly damages the user experience . In the long run, it will lead to user loss and ultimately affect commercial revenue.

3. Data must be aggregated and quantifiable

Every indicator we set must be quantifiable before it can be evaluated.

For example, when we talk about user experience, this is not a quantifiable indicator. We can replace it with user retention rate and user rating, which is a quantifiable indicator, to measure whether what we are doing is effective.

2. User growth is all about quantity

Many companies blindly pursue user growth without caring about user quality and retention , resulting in rapid growth in user numbers, but the actual company's performance and revenue do not grow at the same rate.

This mainly depends on the following two aspects:

1. Quality of new users and whether they are target users
2. Whether the new users have retained and continued to purchase, that is, whether the new users are growing

If the above two problems are not solved, it will be ineffective growth.

In order to increase the number of stock trading account openings, a stock trading software planned an activity of "invite friends to open accounts and get cash back". As a result, the number of account openings increased significantly within a few days. After the event ended, it was found that the trading volume of funds for stock trading did not increase significantly. After checking the data, it was found that the increase in the number of account opening users during the event had almost no trading volume.

After further investigation, it was found that a large number of users who came in during the event were " freeloaders " who came purely for the invitation benefits and left after getting the freeloaders. These users are not real stock traders, so such user growth is invalid growth.

Baidu Nuomi , with Baidu's massive investment, has achieved tremendous growth driven by activities, channels , brands and other factors. At one point, its daily peak turnover was comparable to that of Meituan . Why did it fail in the end?

The essence of the problem is that the merchant supply is insufficient and the gap with competitors is too large, which leads to the inability to continuously meet user needs, and naturally the platform transfer will occur. Although a large amount of user growth has been achieved, without user retention and growth, it is still ineffective growth.

In the past two years, the subsidy war in the Internet industry has become increasingly fierce. Excessive subsidies will attract a large number of non-target users. These users come purely for the benefits and will not generate any retention.

The higher the actual payment amount of the user, the higher the retention rate , which means the higher the user's actual demand and the closer they are to the real target users.

Therefore, user quality, user retention, and user growth are key factors in user growth.

How to avoid falling into this misunderstanding?

The user growth strategy must acquire accurate target users and must ensure high-quality user growth; it must improve user retention rates from all aspects and promote user growth.

• User growth = effective user growth

• User growth = user growth × user retention rate (user growth) × user monetization rate

• Balance the relationship between user growth from user subsidies and the number of non-target users, and maximize the actual payment amount of users. The higher the actual payment amount of the user, the closer it is to the real target user, and the higher the repurchase rate

3. Rapid and premature user growth accelerates the product’s death

Rapid growth is not always a good thing.

When the product has not yet been verified by the market, the user retention rate is low, and the product is not perfect, too rapid user growth will only lead to negative reputation and a large number of user losses, ultimately accelerating the death of the product.

[Case Study] The tragedy behind the halo of a hotel’s special offer: a painful lesson from premature rapid growth:

The "Hotel Specials" app was launched on September 21, 2011. At that time, they expected explosive growth as soon as it went online, but the actual situation was that the first six months were a huge tragedy. The APP reached the second place in the Apple APP Store ranking list on the second day after it was launched, surpassing QQ and Fruit Ninja, and gained great fame in the market.

Almost everyone on Weibo and in the TMT circle is discussing this app. Of course, there are also many people wondering why an app that is so ugly and stupid can get so much discussion.

Next, it was reported by more than 200 media outlets including CCTV, and was very successful in public opinion, instantly gaining millions of users.

However, the performance at that time was 23 orders sold in one day, and a total profit of only 300 yuan. Sometimes, there are hundreds of thousands of users pouring in every day, but there are only 10 orders, which is very bleak.

Its founder summarized the reasons for the failure:

1. At that time, mobile payment was not mature, but we insisted on only mobile prepayment. Users were unwilling or unable to pay, resulting in a very low payment success rate. Only 10 out of 200 orders were successfully paid.
2. Users feel that there are too few hotels, the coverage is insufficient, and there are no hotels to stay in nearby
3. We were not sure what users wanted (user needs), whether users would buy our solutions (solutions), or whether we were able to offer the promised prices (our capabilities). We were just guessing.

From this case we can see that start-ups should keep a low profile, put users and products first, and should not advertise too early.

Their user base grew too quickly and prematurely, and they had 1 million users very early on. However, when people mentioned this product, they didn't think it was a good app.

On the contrary, their impression was that there were too few hotel options, the payment process was inconvenient, the program design was ugly, and all they got was negative word of mouth. Although several optimized versions were released soon afterwards, users had already been offended.

How to avoid falling into this misunderstanding?

Do the right thing at the right time, using the right method and investing the right resources.

Sean Ellis, the "father of growth hacking ", believes that a successful startup must go through three stages: Product /Market Fit, Transition to Growth, and Growth.

The author believes that enterprise user growth generally goes through four important stages, as shown in the following figure:

Phase 1: Discover customer pain points and explore solutions.

Generally speaking, companies can test whether they can effectively solve user pain points by providing MVP (minimum solution).

Phase 2: Find the fit between your product and market.

You can measure whether your product satisfies users by two simple indicators: first, whether users have sufficient stickiness; second, if users stop using your product, will they feel "uncomfortable"? If users feel your product is dispensable after they stop using it, it may mean that there is no product-market fit.

The third stage: understand whether the product and channel match.

As we mentioned in the previous content related to channel-driven growth and data-driven growth, it is necessary to find the matching relationship between products and channels through data analysis . With a very limited marketing budget, find the most efficient channel and increase investment.

The fourth stage: the period of rapid user growth.

After completing the above three steps, the last step is to invest more resources and expand rapidly. During this period, enterprises need a huge capital investment. At this stage, companies can do a lot of brand promotion and marketing to increase channel conversion rates and drive growth through brand reverse flow.

These four steps need to be carried out in rhythm.

The core reason why many startups and projects fail is that they fail to follow this step, invest a lot of resources too early at the wrong time, and invest resources in the wrong channels.

User growth is a long-term and continuous exploration process. It cannot be achieved overnight, and we should try our best to avoid misunderstandings.

We should not only summarize successful experiences, but also reflect on the lessons learned from failures and avoid detours to make enterprise user growth more efficient.

This article was compiled and published by @花大冲(Qinggua Media) by the author @花大虫. Please indicate the author information and source when reprinting!

Product promotion services: APP promotion services, advertising platform, Longyou Games