For an Internet finance platform, is a 30% increase in the number of users each month considered "growth"?

What is growth? Any growth that is not aimed at increasing effective users is rogue!

Note: This article is based on my presentation at the GrowingIO Data Driven Growth Conference in Beijing.

1. What is growth?

For Internet financial platforms, what does "growth" mean? Is a 30% increase in the number of users every month considered "growth"?

1. Let’s start with two questions

Question 1: There are three Internet financial platforms A/B/C. In the same period of time, the number of registered users of the three platforms increased from 10,000 to 1,000,000, 500,000 and 100,000 respectively (as shown below). Among the three platforms A/B/C, which one has the largest investment amount?

Question 2: There are three Internet financial platforms A/B/C, each with 10,000, 100,000, and 1,000,000 investment users respectively (as shown below). Among the three platforms A/B/C, which one has the largest investment amount?

In fact, people’s opinions on these two questions are not consistent, and there is no standard answer. Why? Because growth does not mean more quantity!

2. Growth of Internet financial platforms

This morning, I listened to many guests’ sharing. In fact, there is still a big gap between the Internet finance industry and tool products. Those of you who work in Internet finance should know that it is very difficult to get users to pay money, so we attach great importance to a series of subsequent conversions . Different from the commercial monetization model of tool-type products that relies on advertising, Internet financial platforms cannot be simply guided by indicators such as user registration volume and user transaction volume. Even if your platform has 1 million investment users, the total investment amount may not be as much as that of 10,000 users.

So, what is growth?

For transaction products, such as Internet finance, e-commerce , etc., I have set two directions. One is the growth of effective users, and the other is user growth.

What is effective user growth? Suppose there are two platforms. Platform 1 has 1 million registered users, of which 10,000 are investment users. Platform 2 has only 50,000 registered users, but it also has 10,000 investment users. It seems that Platform 1 has tens of thousands of invalid users. These tens of thousands of registered users mean that Platform 1 needs more channel budget and more traffic , which means higher costs. Therefore, the growth of Internet financial platforms must focus on conversion rate and the growth of effective users.

Let’s talk more about what user growth is? Taking the two platforms as an example, Platform 1 had 10,000 registered users at the beginning, and 8,000 were still retained after one month; Platform 2 had 100,000 registered users at the beginning, and only 1,000 were retained after one month, and the rest were lost. Therefore, when an Internet financial platform talks about user growth, it does not mean the growth of the user base, but the growth of users based on effective users.

2. Growth Formula of Internet Finance

For Internet financial platforms, a very important concept is the liquidity of funds. As we all know, capital inflow - capital outflow = capital retention, and this formula applies to any industry. If an Internet financial platform wants to grow, it should start from both the inflow and outflow of funds. Today we will mainly introduce the growth formula for capital inflow, namely: investment amount = UV * registration conversion rate * investment conversion rate * average order value.

Why do some platforms with 10,000 registered users bring in more investment than others with 100,000 registered users? This has to do with the issue of investment conversion rate. For example, let’s say the AR PU of one user platform is 50,000 and that of another is 100,000. This is the difference in average order value, which is also a question of user growth. This formula is particularly important for growth in Internet finance.

3. Four Growth Models of Internet Finance

When we talk about the growth system, what does it include? Let me introduce them to you one by one.

1. User Growth Funnel Model

The first step is to build the platform's overall user growth funnel, from UV to registration, to first investment, to reinvestment, and even five investments.

Many times when we talk about growth, we are more talking about customer acquisition without considering how to improve the conversion rate of existing users. This model includes the growth definition and growth formula we mentioned above. We need to consider how to turn investing users into loyal users. Only loyal users will not leave and can bring more investment.

Suppose the boss assigns a task to double the investment based on existing users, but the budget does not increase. At this time, improving the conversion of users at each step is a very important method. Even if the conversion and retention cannot be improved, increasing the investment amount of each investing user is also a very good choice.

2. Channel Growth Funnel Model

With the overall conversion funnel of the platform, we need to segment each channel. The following figure shows the conversion rate of each channel of a certain mutual finance platform:

How do you read this picture? It actually turns the vertical funnel horizontally and compares multiple channels together; the horizontal axis represents the nodes in the user conversion process, and the vertical axis represents the proportion of a certain channel in the entire platform. Taking UV as an example, the blue channel at the bottom has the largest number of users, but has not achieved effective user growth. There are problems in its registration conversion or investment conversion. For the second channel from bottom to top, the investment amount is very effective, but the number of channel users is very small, and there is a need to expand growth space. Let’s look at the third green channel. The average order value is high enough and there are enough effective users.
After looking at the conversion rate issues of various channels, what should we do next?

First of all, we need to find efficient growth opportunities. We want to achieve large-scale user growth rather than minor adjustments. For example, the first channel has a particularly large UV. If its conversion rate increases by 1%, the investment amount may increase by 10% or even 100%. So for channel 1, the focus is on optimizing conversion rate. For the third green channel, our focus is to expand the number of users.

Someone said this morning that each of your funnels should be broken down infinitely, and I totally agree with this. It is impossible for us to conquer the world with one platform's overall conversion funnel. We need to find out the problems of registration conversion, investment conversion, and investment amount through different channels. Only by identifying specific problems can we improve conversion rates and achieve user growth.

3. User Growth Lifecycle Model

When we talk about user growth, it actually represents the cumulative investment amount of users. From traffic to registered users, from novice to mature users, loyal users, and finally to a lost user: this is the entire life cycle of user growth.

If you turn an already invested user into a loyal user and encourage him to reinvest multiple times, the money you spend is far less than the cost of acquiring a new user. Operations are not about how great your theories are, but about whether you have achieved a big growth. The user life cycle theory is not a very sophisticated model. You can analyze the entire user structure, the proportion of users who invest once, twice, and five times, and then carry out refined operations.

4. User Growth Core Path Model

Growth Hacking emphasizes exploring user behavior and finding core growth. For example, if users like to use function A, then adding an entrance to function A, etc. Internet finance is a transactional product that is different from other tool products. Our ultimate goal is to allow users to invest. However, the Growth Hacking methodology can be mapped to financial business, only the specific business indicators have changed.

I wonder if you often check the data of your own platform? In the past, people believed that users’ investments would be normally distributed, with more in the middle and less on both sides. But after reading it, you will find that this is not the case. Most users only invest a small amount once, and it is a very obvious long tail. In fact, it’s not just Internet finance, group buying, O2O , and e-commerce are all like this. For users with very small investment amounts, we need to promote their growth through operational means. But if a user invests 50,000 yuan right at the start, what does that mean? This shows that he has a very strong desire to invest, and this user can be treated differently. Going back to the RMF model, considering factors such as the user's most recent consumption (Recency), consumption amount (Monetary), consumption frequency (Frequency) and other factors can effectively promote user growth.

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