Thoughts on e-commerce user growth

The quantitative target of user growth products is DAU. With the goal of increasing DAU, any form, module or function can be used as a tool for user growth.

It can be divided into three aspects: acquiring traffic, reducing loss, and increasing transaction conversion

• For most businesses, the importance of reducing churn > acquiring traffic, and improving conversion is something that should always be done;
• For a business that has just completed a cold start, the prerequisite is that the conversion reaches the passing line, and then the importance is: obtaining traffic > reducing loss.

1. Get traffic

1. User growth products need to constantly find low-cost, sustainable ways to acquire traffic

Acquiring traffic has a cost. Using a certain channel or form to acquire traffic usually has a certain "lifespan". The routine will become less and less effective as it is used. PM needs to monitor cost and effectiveness data regularly, and constantly discover more channels and new forms, and iterate away old and ineffective methods.

2. Now more and more businesses are being used directly as customer acquisition businesses to attract traffic

This type of business meets the above-mentioned requirements for obtaining traffic, and can acquire customers at low cost, in large quantities, and sustainably. Usually (non-essential) the business has a high frequency, a low average order value, and the business model itself does not have strong profitability. Eg. Mini game of watering trees and Meituan-bicycle business.

3. The overall trend now is that quantity is more important than quality when acquiring traffic

Since the Internet industry has huge scale effects and almost zero marginal costs, being big is the way to win the competition, and quantity is more important than quality to a certain extent. The quality of traffic refers to the proportion of users with purchasing intentions in the traffic. The higher the proportion, the better the quality.

Everyone is thinking more about how to attract users, meet all aspects of their needs as much as possible, increase ARPU, and occupy more of the users' time. Every user has limited time. From this perspective, all apps, regardless of industry, are competitors. The Internet and traditional offline apps are also competitors. Everyone is trying to grab as many users as possible, and as much time as possible from each user.

2. Reduce churn

1. The importance of reducing churn

We have entered the second half of the Internet. The cost of acquiring customers is very high and competition in the industry is fierce. Once a user is lost to a competitor, it is almost impossible to recall him.

If the loss is not reduced to a reasonable range, any work done to introduce traffic is tantamount to throwing money away and harming more users. For the users you bring in, you should try to establish connections with them, and don’t let go easily just because they don’t have clear purchasing intentions at the moment.

2. To reduce churn, you need to first find the points that cause churn.

For a specific business in the e-commerce industry, users usually have some key statuses, such as first visit, repeat visit, first purchase, repeat purchase, etc. Generally, by analyzing the conversion data of key statuses, we can find out which links have more losses, and we can find and solve problems in a targeted manner.

3. Pay attention to traffic distribution

1) Pay attention to the significance of traffic distribution

The traffic distribution of each page directly affects the conversion of the next page, and ultimately affects the overall conversion efficiency of the traffic. Pay attention to traffic distribution, especially pages with high traffic such as the homepage.

These pages are usually far away from the final transaction link and carry complex content, so the loss can easily be regarded as normal loss. This type of page has a large traffic base, and optimizing it and improving traffic distribution efficiency can often achieve surprising results.

2) Key points of traffic distribution

The key point of optimization is to first sort out the target users corresponding to each functional module in the page, and then arrange them in order from high to low according to the value of the target users and the degree of user demand for the functions.

For example, the functions that are highly needed by users with high purchase intention are arranged at the top, and the functions that are needed by users with no purchase intention are arranged at the bottom. Generally follow the above rules and make adjustments based on specific circumstances. For example, when a large number of new users come in, in order to retain these users, you can prioritize the content they care about, even if they are not the most likely to purchase.

4. Appropriate recall to create demand and value

Certain businesses have their own characteristics, with naturally low access and transaction frequencies and a high overall industry churn rate. Therefore, it is necessary to recall users appropriately, strengthen user awareness of the product, and prevent churn caused by long access intervals. It will cost a lot to bring users back after churn.

Recall methods include:

• Cross-industry cooperation, focusing on integrating with upstream businesses or high-frequency businesses, and showing more faces in front of users;
• Lay a good hook in advance: prompt repeat purchase discounts when making the first visit or first purchase, and offer free membership to lock in repeat purchase discounts;
• Push, SMS, and phone calls to recall interest points;
• Create demand, sort out users' interests, and attract their attention: annual inventory of each company, psychological tests and other small games, and push notifications of discounted products;
• Design tools and content modules around the business to provide users with value beyond transactions and give them reasons to come back.

5. Observe and learn from offline traditional industries

Traditional retail formats have a history of thousands of years. They have fully explored various methods of acquiring customers, improving retention, and recalling users, and have a lot of experience that can be learned from. Previously, traditional retail scenarios were mostly offline, and it was necessary to move the predecessors’ methods online and make appropriate adaptations and optimizations.

3. Improve transaction conversion

This section focuses on users who currently have purchasing intentions and how to attract them to buy. It is necessary to design appropriate hooks for different groups of people to attract users to trade.

1. How to divide the crowd

What are the characteristics of the main users of the business? Compared with the industry as a whole, which ones are better and which ones are worse? For those who are doing well, we can strengthen our penetration, and for those who are doing poorly, we can fill the gap. Specific business analysis is required, there is no universal solution.

2. More general: How to improve conversion rates for new and old customers

In general, if new customers have purchasing intention but do not place an order, we need to analyze the reasons and find the right remedy. Old customers mainly need incentives to repurchase, and after reaching the magic point, the incentives can be reduced appropriately.

The magic point refers to the number of transactions a user needs to complete to become a stable and settled user. This number varies according to different industries, and some industries may not have a magic point.

Sharing with old customers and attracting new ones is an excellent tool that can improve the conversion of both new and old customers, and the cost is usually lower than directly attracting new customers. It is an advertisement for new customers, and can enhance trust and promote conversion. It can also attract new customers when combined with discount hooks. It is a secondary discovery of the value of old customers, and combined with marketing that shares their information with repeat customers, the repurchase rate of old customers can also be higher.

[Supplementary explanation 1] Why is a certain user growth method effective for business A but not for business B?

Different businesses and different time points have different ways and angles to increase user growth, mainly depending on the following two points:

1) Whether the business has completed cold start

Before a business can achieve large-scale user growth, it must first complete a cold start and perform iterative optimization under small-scale traffic to reduce churn to a reasonable and acceptable range. Before these preparations are completed, it should not rashly introduce too much traffic.

2) Blue ocean businesses with large potential user bases should be prioritized for growth; red ocean businesses with small potential user bases should be prioritized for retention

As time goes by, the business will always reach a point where, if the number of users is to continue to grow, it will need to bring back lost users. The later this point comes, the better. Once this point arrives, the user growth cost of the business will reach a new level.

For blue ocean businesses with a large number of potential users, this node will naturally come later, giving this business a longer window for low-cost growth. It can focus on growth first, otherwise it must focus on retention first. Otherwise, business growth will be forced to stop due to excessively high net costs (using incremental cost minus profit).

The estimation of the potential number of users requires comprehensive consideration of the user scale of the entire industry and the possible market share of one's own products in the industry. High-frequency, low-order-unit industries generally have a large number of users. In the early stages of industry competition, market share fluctuates greatly, and companies generally prioritize growth.

[Supplementary Note 2] Summarize the common user growth tools and methods used in e-commerce business

Author: Hu Pang

Source: Hu Pang Run