The traffic is gone, can we rely on it to save the situation in 2017?

The opening rate and reading volume of WeChat public accounts have declined, and the traffic of video websites, news media, and various mobile application apps has decreased. Behind Alibaba's Double Eleven total transaction volume of 120.7 billion, countless e-commerce merchants are on the verge of bankruptcy due to the lack of traffic. Where did the traffic go?

"A strange phenomenon has appeared on the Internet. The traffic of various new media seems to have disappeared. The opening rate and reading volume of WeChat public accounts have declined. The traffic of video websites, news media, and various mobile application apps has decreased. Behind Alibaba's total transaction volume of 120.7 billion on Double Eleven, countless e-commerce merchants are on the verge of bankruptcy due to the lack of traffic. Where did the traffic go? The total traffic of mobile Internet is still growing. It's really strange!

Today, let’s use a general formula to explain why the traffic ran away. The growth rate of traffic acquisition capability = the growth rate of Internet traffic/the growth rate of the number of competing individuals.

First of all, we need to define the nature of traffic. Traffic is actually user time, which is equal to the product of the number of users and the user usage time. According to traditional thinking, the more Internet users you get, the longer they are willing to stay on your platform, the more total traffic you will get, and you can achieve more commercial monetization through more total traffic.

Especially when the number of Internet users is growing and the time users spend on the Internet per day is increasing, your life will be easy because the cost of obtaining traffic for each application is very low. But the situation is different now. This traditional traffic thinking will harm many traditional enterprises.

Why do we say that traffic thinking has gone bankrupt?

1. The growth rate of Internet traffic is declining year by year

Since being allowed to join the Internet in 1994, China's Internet users have been in a stage of rapid growth. After 2010, the growth of traditional Internet began to slow down, and the era of mobile Internet arrived. However, in recent years, the growth rate of China's mobile Internet users has gradually slowed down, the total number of Internet users has tended to stabilize, and the user usage time has basically been exhausted (each user has only 24 hours a day). This means that it will become increasingly difficult to increase individual traffic. Using the example of dividing a cake, the total cake is only so big, so the piece of cake you get won't get any bigger.

2. The number of competing individuals is increasing rapidly

The competition for traffic is itself a competition among competitors for user time. Competition in the traditional sense refers to competitors whose products are similar to yours. For example, if you operate a WeChat public account for audio equipment, your competitor is another public account for audio equipment.

But the current concept of competitors has taken an absolute leap forward. Competitors have risen to the dimension of time: whoever competes with you for user time is your competitor.

If you are operating a WeChat public account, live streaming has now become your competitor. In 2015, the number of registered WeChat public accounts exceeded 10 million. In 2016, countless self-media outlets doing live broadcasts suddenly emerged. Live streaming is a huge time-waster: a beautiful woman plays with her hair, reveals her breasts, and flirts in front of the screen, and the onlookers spend several hours on her without realizing it, and part of these hours should have been spent on your platform.

From the Chinese social media landscape map released by Kantar Media CIC on August 10, we can see that countless emerging media are emerging, especially the increase in vertical media. As time killers of users, they compete with you for user traffic and always disintegrate your user camp to varying degrees. When users spend half an hour on your platform and then go to other platforms, you will continue to lose traffic, the cost of acquiring traffic will continue to rise, and commercial monetization opportunities will shrink. You are facing a cruel reality.

Using the cake example mentioned above, the total size of the cake is limited. The more people share it with, the smaller the piece of cake you will get, or you may even get no cake and starve to death.

"The key to breaking through is to firmly grasp 'customer lifetime value' as your business philosophy."

What should we do if we can’t get a share of the cake? Have you ever thought that as long as you understand the psychology of the person who divides the cake and capture his or her heart, you can always get the cake. And the people who share the cake are actually our users. The piece of cake you get doesn’t have to be big; the key is to have it be heavy enough.

Customer lifetime value refers to the total benefits that each buyer may bring to the company in the future. In order to briefly explain the concept of "customer lifetime value", let's cite an example of Hair Salon A:

We can do some calculations regarding Hair Salon A. Take female customers as an example: Generally speaking, how often does a female customer get a haircut? Generally, people get their hair cut once every two months. If the price for a hair wash, cut, or blow-dry at hair salon A is 40 yuan, that means this female customer will spend 40 yuan six times a year, which means she may spend 240 yuan on hair cuts.

Generally speaking, a girl will consume perming and dyeing services at least 2 to 3 times a year. The average cost of perming and dyeing is 400 yuan per time. If it is 3 times a year, the total consumption is 1,200 yuan. If she comes to Hair Salon A to wash her hair three times a month, that would be 36 times a year. Assuming each time costs 20 yuan, the total cost for hair washing alone would be 720 yuan.

If the customer is very satisfied with the technology and services of Hair Salon A, it means that she will also purchase some other supporting products. In a year, shampoo, hair mask, styling products, etc. will cost her about 500 yuan.

240 yuan for a hair cut, 1,200 yuan for perm and dyeing, 720 yuan for shampooing, and 500 yuan for takeout, the total cost is 2,660 yuan. In other words, the lifetime value of this customer to us is 2,660 yuan per year.

The “customer lifetime value” thinking was born to solve the problem of traffic loss. Quoting a business case that happened in the United States:

In the past, competition in the US hosting industry was very fierce, and major domain host providers mainly promoted their products through affiliate marketing. But strangely, the commissions given by these hosts exceeded the product sales price. IX webhosting is a major American provider. Their best-selling host comes with unlimited space and unlimited traffic. It also comes with 15 independent IPs, 3 international domain names, which can host multiple websites, and more than $100 in adwords advertising coupons. The price is very low, only $7.95 per month, which is only $95.4 per year, but what is surprising is that the commission they pay to affiliate marketers is as high as $95.

If calculated according to conventional thinking, they will definitely lose money, because for a product worth $95, all the commissions are given to affiliate promotions, and they also have to provide so many independent IPs and international domain names. But the fact is that IX webhostin is among the top in the industry, so they must be making money.

How exactly do they make money?

They focus on the lifetime value of customers. From the first year's perspective, they did lose money, but most of the customers who purchased their virtual hosts would use them for a long time. If a customer uses their hosting for 5 years, then during these five years the customer pays them 5 times $95, so they still make money in the end. Because they value the lifetime value of their customers, they set the commission very high and give almost all of the first year's sales to the alliance members who help them promote the business. Because the commission is very high, many websites around the world will help promote it, so it is able to develop very rapidly in the fierce competition and grow bigger and bigger.

Many companies only see the value of the first time, but completely fail to see the lifetime value of the customer, so they often take short-sighted actions, which restrict their sales growth. If you can calm down, focus on certain customers, and encourage them to contribute more user value on your platform, even if you don't have more traffic, you can still make considerable profits in the field you operate. Once a customer has developed trust in you, you can continue to sell him more products and services. It should be clear that traffic does not equal revenue. Customer value equals profit.

When you understand the "customer lifetime value", you will not buy traffic just for the sake of buying traffic. Abandon the traffic mentality and maximize the existing and potential value of customers.

How can we grasp the power of customer lifetime value?

Different industries have completely different practices and routines. But the key is to grasp two points: on the one hand, extend the time between customers and merchants by building brands; on the other hand, increase the value of customers to merchants by creating multi-level demands.

1. Build a brand and extend customer value horizontally

With the upgrading of consumption, consumers buy a product not only because of its use value, but more importantly, because of the spiritual or psychological satisfaction it brings, which is reflected by the brand. Only a solid brand can capture the hearts of customers and extend the time they consume branded products. Once consumers identify with your brand, they will not consume other brands in the same category in a short period of time, because the brand effect makes the consumer decision-making cost very low, and consumers are lazy by nature.

2. Capture multi-layered needs and extend customer value vertically

For the same consumer, try to extract as much value as possible. For example, there was once a company called Y that was very successful in selling apples using the social economy, and it benefited greatly by digging deep into consumer needs. They collected information on consumers who consumed Apple and found that they were a group of petty-bourgeois urban residents between the ages of 30 and 45. Living in busy cities, they long for the green and healthy agricultural products from the countryside. Therefore, the company expanded its product line to create Oscar, a healthy and green agricultural product, including vegetables, poultry, farm delicacies, etc.

Conclusion

In the mature Internet era where traffic is scarce, traffic thinking is no longer applicable. Operating a business based on the concept of "customer lifetime value" is an important turning point for companies to survive in 2017. Grasp two keys:

1. Build a brand and extend customer value horizontally;

2. Capture multi-level demands and extend customer value vertically.

Mobile application product promotion service: APP promotion service Qinggua Media advertising

The author of this article is @007 of the marketing world. It is compiled and published by (Qinggua Media). Please indicate the author information and source when reprinting!