[In-depth Revelation] Analysis of Internet Financial Product Operation Strategies!

The main product model of Internet finance is relatively simple, which is to sell assets. The main asset types include: current accounts, fixed deposits, bills, insurance, funds, equity crowdfunding, debt transfer, etc. Here, this article combines the business model of a certain P2P website to analyze their product strategy and what other product strategies the author believes there are on this basis, as well as the corresponding operating strategies.

1. Current products: Change plan

The main feature is the ability to deposit and withdraw funds at any time, and it targets users with relatively high requirements for liquidity. This type of product is a traffic-type product, and in the category structure it is responsible for user acquisition and first-time conversion. Its characteristics are: low investment threshold, higher returns than bank current accounts, higher than baby products, and lower than fixed deposits. Due to the popularity of the platform, the platform must have a greater price advantage than baby products in order to stimulate users who prefer profitability over absolute financial security to shift their investments.

Many users are more tentative in their initial investment mentality. If users are asked to invest in a regular product right away, the threshold for user conversion will be very high. Therefore, this product is positioned more towards retail investors and some tentative investors, whose core demands are capital preservation, tentative investment, sensitivity to yield, and high requirements for liquidity.

Operational strategies for this type of product:

1. Strengthen the privileges for novices to stimulate users' first investment; increase the benefits of privileged tokens, with no limit on purchase time or purchase frequency, only the purchase privilege amount;
2. Maintain the interest rate advantage among similar websites, and dig out the sensitive coefficients that stimulate user fund transfers to conduct reasonable asset pricing;
3. Strengthen website security and strengthen brand endorsement.

2. Regular products: lazy plan

The main ones are fixed-income financial products, which target users who have a certain amount of idle funds, have no requirements for short- or medium-term liquidity, and at the same time have demands for capital appreciation.

Before talking about the fixed-term series products, we need to popularize the pricing logic behind Internet financial products.

As shown in the above figure, the above four factors are the basic elements for pricing of Internet financial products.

Profitability, security and time are closely related. When users buy financial products, they are essentially transferring the use value of funds in a certain period of time in exchange for a return on funds based on a certain risk pricing. Therefore, the higher the risk, the higher the rate of return; the longer the time period, the higher the rate of return. The following will discuss each factor separately:

1. Risks:

(1) The overall risk of the platform can be roughly divided into several categories:

• One type is financial products from large Internet companies. Users will view them as a platform with a different risk level, including Ant Financial, 360 Wealth, JD.com, Lufax, etc. Users will switch between these companies and invest in whichever one has a higher return. Because these companies have strong parent endorsements, users believe that their money is absolutely safe on these platforms;
• I will treat another type of P2P companies together. In the minds of users, the risk level of the platform is greatly discounted compared to the products of large Internet companies. Their main motivation to attract user investment is the asset yield rate, and they use the yield leverage to leverage users to transfer funds. Therefore, we can see that many P2P websites focus on high returns, and the smaller the platform, the higher the yield rate. Because there is no differentiation and the brand is not good, they can only use the interest rate leverage to leverage users.

The stronger the platform’s brand endorsement ability, the stronger its bargaining power with users and the lower its customer acquisition cost. Yirendai insisted on listing on Nasdaq in order to find a strong brand endorsement for the platform, improve its customer acquisition capabilities, and reduce user acquisition costs. After Yirendai's successful listing, we saw a decline in Yirendai's yield, and the issuance of asset securitization reduced the cost of obtaining funds.

The pricing strategy and user operation strategy revolve around: what type of platform it is, what the market and competitive environment are like, identifying similar platforms for benchmarking asset pricing, and transferring users and funds through price leverage and differentiated services; pricing that is too high is a waste of cost, and pricing that is too low will make it difficult to acquire users.

(2) Risk of different asset types

Within the same platform, different risk pricing is required based on different asset types. From the perspective of assets, the risk level of each asset is different.

Generally speaking, P2P and fund products are definitely not at the same risk level. Auto loan assets, real estate direct financing assets, supply chain finance, personal consumer loans, bill assets, etc., these products should be based on the platform's own risk pricing and then formulate a yield price coefficient according to the risk level of the assets, so as to generate a final investment yield.

2. Timeliness:

In terms of asset pricing, for assets of the same risk type, the longer the time period, the higher the yield of the asset; we talked about the category structure before, and when it comes to each asset that can be purchased, we can combine multiple products based on the time period to form a rich asset product matrix, thereby meeting the needs of various types of users.

Treat each asset as a SKU. In theory, the more complete the platform's product categories, the richer the SKUs, the wider the user needs covered, and the easier it is to bring about investment conversion.

Therefore, in terms of product strategy, the platform should design a product portfolio based on factors such as time period, rate of return, risk level, asset type, etc., and plan a product matrix that gradually guides users from shallow to deep investment paths.

3. Liquidity:

This is the strategy of another product we are going to analyze below.

III. Transfer of claims: cash-out plan

Investing in fixed-term financial products is equivalent to giving up the right to use funds for a certain period of time, and the liquidity of funds is restricted. When you deposit fixed-term financial products in a bank and need to use the money urgently, you need to withdraw the money in advance. The money will be calculated based on the interest rate of the current account, which is very uneconomical. Internet finance has made a great product innovation in this regard, opening up a secondary market for "debt transfer", fully releasing the liquidity of funds and ensuring the profitability of investments.

1. User needs for purchasing regular financial products:

(1) When investing, users cannot be sure when they will need to use the funds, but everyone has emergencies. If they are in a hurry to cash out, they can accept a certain degree of interest loss, or even a loss of principal (depending on the urgency of the use of the money, the speed of platform transfers and the market interest rate environment) and quickly cash out;

(2) High-quality assets are scarce. Currently, the entire Internet financial market is in an environment where asset supply exceeds demand, and market interest rates are on a downward trend. If users lock in assets with a certain interest rate in advance and then transfer them at a lower interest rate, there is room for arbitrage.

Therefore, the core of debt transfer is to solve the problem of capital liquidity, and the core factor affecting capital liquidity is transfer pricing.

Transfer pricing is mainly affected by the following factors:

• The time period of the original asset;
• the urgency of the transfer;
• Monetization costs (platform fees;
• The interest rate in the primary market at the current time.

The platform product operation strategy should effectively guide users on how to reasonably and independently transfer prices in various scenarios to achieve rapid cash realization at the lowest cost; and guide secondary interest rate pricing based on primary market interest rates.

2. The relationship between the primary market and the secondary (transfer) market:

The transfer fully releases the liquidity of funds, enables the transferor and the transferee to get what they need, increases the platform's profitable income, and reversely promotes more people to buy in the primary market, ultimately achieving a win-win-win situation!

The prosperity and full sales of the primary market will expand the market supply pool and drive the activity of the secondary market; conversely, full transactions in the secondary market will greatly stimulate investment activity in the primary market.

Because of the secondary market, the liquidity of funds in the primary market has been greatly released. Many users who originally would not purchase regular fixed-income financial products due to concerns about liquidity issues are now willing to purchase long-term financial products because they can cash out at any time . This allows them to invest in products with higher yields without having to worry about not being able to cash out when they need to use funds. In some cases, users can even earn lucrative interest rate spreads by investing long-term financial products in the secondary market, based on the current market interest rate environment.

To summarize the main features of debt transfer products: turning fixed deposits into current deposits, fully releasing liquidity, marketizing interest rates, and making market transactions more active.

3. Benefits of transfer to the platform, users and asset side:

(1) For the platform side:

Before the transfer of debt, funds can only flow in two directions on the platform, from investors to borrowers and from borrowers to repay investors; the income of each asset is certain, but the transfer has changed this.

The same amount of funds can be circulated through the platform twice or more times, resulting in multiple changes in creditors. As long as funds circulate, costs will be incurred. In addition to the original capital transaction income, the transfer brings the platform a handling fee for each transfer.

(2) For the user side:

There are two main reasons why users choose to buy transfer marks:

• The primary market is in short supply, and there is money that cannot be invested, so one has to look for suitable investment targets in the secondary market. One may encounter a target that is urgently transferred, and the interest rate may be higher than the original interest rate of the asset;
• An asset originally has an 8% interest rate for one year. If a user transfers it at the original yield of 8% six months after purchasing it, other investors can then enjoy the one-year asset interest rate for six months. This asset yield is much higher than that of the primary market.

(3) On the asset side:

This is also a good thing for the asset side. There is no need to worry about early withdrawals by users. The secondary market has already met the needs of these users and borrowers only need to repay the principal and interest on time.

In terms of operational strategy, through the transfer success rankings and the disclosure of transfer operation data, we can very intuitively tell users what interest rate will result in a higher transfer success rate; we constantly use means to stimulate users to initiate transfer transactions, allowing users to fully realize the value and benefits of transfer products, further stimulating the activity of the primary and secondary markets, thereby increasing overall trading volume.

4. Floating income (betting) products: Bullfighting plan

The main positioning of this product is to enhance user participation, make full use of social hot spots, and stimulate user investment through gamification .

Finance itself is cold. Apart from investment returns, users have little sense of participation. They log in to the website every day to see if the platform has run away and how much money has been earned today. Users have strong stickiness, but it is impossible for them to participate in investment every day. The Bullfighting Plan product combines investment and financial management with many hot spots, adds a lot of scenarios, and increases the fun of investment.

• The returns of gambling products are floating. If you bet wrong, you will only get the original basic returns without any loss.
• If you bet right, the returns may be higher. High interest rates will stimulate many people to take a gamble, which will attract many non-rigid investment users and greatly increase the sense of participation in the product.

Specifically, you can study the " one dollar treasure hunt " type of products to find out why many users spend a lot of money on them, or even lose all their money, but still want to play on them. The logic of the product strategy is similar.

Wherever there is a hot spot, there is traffic. This product can greatly improve the website's operational capabilities to keep up with hot spots and improve the website's customer acquisition capabilities. As long as a hot spot appears, it can be quickly launched with certain assets and bonuses, which also greatly improves operational efficiency. You know, every company attaches great importance to hot spot operations , but apart from Durex, who else can you think of when it comes to companies that have a complete set of mechanisms to cooperate? That is because without the supporting marketing tools , no matter how fast the response is, it still needs the support of products and R&D, so it is doomed to be slow. In many companies, when a hot spot emerges, the operation team will be thrown into chaos.

This has been refined in my operational thinking, called " gamification drives user growth". I will explain this separately in a future article.

5. Enjoyment Plan:

A new financial product that integrates consumption and financial management. Another term I defined to effectively drive the growth of Internet financial users is " e-commerce driven user growth."

As mentioned earlier, finance itself is cold. If we only tap into those users who seek investment returns, the means of acquiring customers will be relatively simple, the cost will be very high, and it will be easy to fall into homogeneous competition, which will ultimately result in a price war.

Why are JD.com and Ant Financial developing so rapidly in the financial sector? It is because they are built on the basis of e-commerce, there are naturally many scenarios. Finance itself is a link in the consumption chain, and finance is also an extension of consumption. In the user structure of Internet financial platforms, the overlap between users who consume e-commerce is the highest, so it is reasonable to convert users to e-commerce scenarios.

In the user structure of financial product investments, in addition to large high-net-worth users who pursue investment returns, there are also many mid- and long-tail users whose overall personal investment amount is not very high. However, these users can be transformed into investment and financial management users in e-commerce scenarios, and cumulatively they also form a large user group. The Internet itself is a long tail market. Users who originally had no need to invest will be tempted to invest because they can get attractive products for free (in fact, the profits are given to users in advance. For users who already have some spare money and investing it is unlikely to generate much profit, and it would be a waste to just leave it there, they will feel psychologically that it is like getting it for free) and can be continuously cultivated and converted.

Banks are trying to do various scenarios (including installment payments, life services, payment, points redemption, etc.) in order to better acquire customers and increase usage scenarios. This logic still applies to Internet financial platforms.

Analysis of Internet Finance User Demand

6. Star Project:

The Star Project is similar to equity crowdfunding: high investment threshold, high profitability, and high risk.

This is where we need to talk about the category structure and user structure together. Supply drives demand. We talked about the category structure earlier and mentioned that each type of asset has its own positioning and a customer base that fits its positioning. This type of asset is positioned for high-net-worth user groups.

Finance, whether traditional or Internet, cannot avoid the "80/20 rule", where 20% of high-net-worth users contribute 80% of the investment, or even more.

Internet finance is a typical supply-driven business. The type of assets it has will attract the type of investors it attracts. By providing different types of assets to segment users, high-value users can be screened out.

The Star Project actually provides a type of asset with high threshold, high unit price and potential high return. Its main target group is high net worth users. It attracts large amounts of capital, high return on investment and strong profit-seeking funds.

Many people have a misunderstanding when doing user operations. They think that in order to do user stratification, they must have points and levels. Only with these can they screen users and then let users enjoy different rights and interests. This is correct, but it will seriously affect the progress of the project, because the points and level system is a relatively complex system. The development speed of many companies makes it difficult to wait until a project is launched before doing user operations. This is a typical practice of large companies.

The most effective way to truly and quickly segment users and implement differentiated operations is to segment by asset type and threshold. There is a common and difficult to find misunderstanding: "Points and levels only reflect the user's historical investment ability. The user has invested 100 yuan now, which does not mean that the user has the ability to invest only 100 yuan. Another possibility is that there is no asset type that meets the user's requirements. When you provide such an asset type, the user's investment ability may be 100,000 or 1 million."

This is a typical preconceived notion. Don’t set an upper limit for users. Verify user demand through supply. Users may burst out with amazing purchasing power, which will definitely exceed your imagination!

Let me give you an example:

In 2012, when I was managing the "360 Special Supply of Hairy Crabs" project, I brought about a huge increase in trading volume through a user differentiation change.

In the early stage of this project, we did a series of planning and preparation. We will not discuss the large amount of content about e-commerce today. According to normal logic, we should find ways to increase the traffic of the activity page, improve the conversion rate of the activity page, and optimize the product portfolio of the activity page. We have done all these and the data feedback is pretty good. If you just look at the users who have already purchased, it is difficult to see any problems. However, after obtaining some user feedback, we discovered a relatively large demand, which almost never results in purchase conversion on the page, and that is corporate procurement.

The purchasing needs of enterprises are all lost in the overall traffic and cannot be reflected through data feedback, because many factors affecting their decision-making cannot be obtained through the page and must be converted through direct communication. For example, whether an invoice can be issued, how much discount to give based on the quantity, or even some kickbacks that are not acceptable.

After analyzing this demand, I decisively added a large banner directly on the page, and simply wrote "Group Procurement: 400XXX". The effect was immediate. By inbound phone calls and using manual negotiations to convert purchases, the page traffic conversion rate was greatly improved. The average order value of each order is dozens or even hundreds of times that of ordinary purchasing users.

This is a typical case of opening up different purchasing channels for different types of users to release demand.

Therefore, when we are doing operations, we must not set a preset upper limit for users, especially user operations in the financial industry.

Sometimes the user's investment limit will leave you dumbfounded. Never prejudge the user's investment capacity based on your own investment capacity and the investment capacity within your own knowledge range. This will be a serious mistake.