2016 e-commerce Double Eleven tutorial | The most comprehensive prepaid deposit promotion strategy in history

Soon to come is China’s annual e-commerce shopping carnival season – Double Eleven . Now that it is only a few days away from Double Eleven, the warm-up activities of major mainstream platforms are in full swing. Looking at the event preheating and promotion methods of major platforms this year, we found that a very obvious change is that everyone is using the promotion methods of prepayment deposit and discount on a certain amount on a large scale. At the same time, promotion methods such as direct reduction, group buying, flash sales, and no-threshold vouchers have shrunk on a large scale. (Their absolute number is still considerable, but their proportion in the entire Double Eleven promotion system is gradually decreasing).

The method of reducing the amount based on a certain amount is relatively conventional and has become quite mature. However, the prepayment deposit model was not mainstream for a long time (it was mainly used for pre-sales of new products before), and it did not develop explosively until this Double Eleven. Today I would like to talk about some of my views on promotions based on the prepayment deposit model.

Let’s take a closer look at each company’s pre-launch promotional page:

The Type A prepaid deposit model is represented by e-commerce companies such as JD.com. The final transaction price will be affected by the number of people who make the prepaid payment, which is somewhat similar to a variation of the previous group purchase tiered price discount . No similar platform has been found in the Double Eleven warm-up.

Type B prepaid deposit model is represented by e-commerce companies such as Tmall . The amount of the advance payment will have the attribute of financial leverage when the final payment is settled later (Tmall calls the leverage effect "inflation" in the event rules this time), which means it will play the role of making a small investment for a big gain . To put it simply, for example, for a product with an original price of 100 yuan, the deposit is 10 yuan, but it can be used as 20 yuan, which means that the final payment is only 80 yuan. In this Double Eleven, other platforms that adopted similar promotional plans using the prepayment deposit model include JD.com, No.1 Store, Suning, and Gome.

What are the benefits of the prepayment deposit model?

According to my summary, the prepayment deposit model has 5 most direct benefits:

1. Vest for single product coupons

Relying on the prepayment expansion lever (mainly referring to the Type B prepayment deposit model) to play the role of coupon discount model, we can understand it as a variant of the discount coupon for designated products. After all, putting on a vest can give the promotion more vitality. If customers are faced with the same things year after year, who would still want to shop?

2. A protective umbrella to help website servers withstand pressure

In the past few years, we have been desperately refreshing the website in the few hours after midnight on Double Eleven just to grab the products we want, but it is often the case that some are happy while others are sad. Although major platforms achieve a sales surge in a short period of time every year, the high frequency of web page crashes and even entire site outages greatly reduces the customer experience. Regardless of whether the e-commerce companies intentionally create downtime (to create a false sense of prosperity) or have no choice, it is generally difficult for customers to understand it, and they are lucky enough not to be criticized to death by keyboard warriors.

An advance deposit allows customers to buy out in advance and lock in the qualification to purchase this (limited) item. The deposit, as a commitment contract between the buyer and the seller, also gives customers peace of mind. As long as you pay the balance during the final payment period, you don't have to worry about the item being sold out in seconds. Naturally, the distribution of everyone's order density will become more even, which will invisibly reduce system maintenance costs and improve customer experience.

It's like when I went to a bank more than ten years ago, because there was no number-taking machine, people lined up in a long queue in front of the counter, and even if there were seats available, they didn't dare to sit down for fear that their seats would be taken by others. Now, with the advent of number-taking machines, we can basically estimate how long we will be waiting. Not only can we rest at our seats for a while, but we can even go out for a meal without any problem. Greatly improve personal life efficiency.

3. Scopes that help improve the accuracy of sales forecasts and target completion rates

Previously, because most order payment processes occurred after 0:00 on November 11, the ability to predict sales trends before that time would have a large error, resulting in very limited remedial measures and effective time for achieving overall performance. Generally speaking, after the main Double Eleven event ends, each platform will hold return events for a considerable period of time afterwards. However, the promotion intensity and attention are not as strong as the main event. Therefore, if the actual sales situation differs greatly from the estimate during the main event, purchasing, sales and operations will be very busy or overwhelmed.

The advance deposit provides a good basis for sales estimation (with the game rule that the deposit is non-refundable and people's psychology of loss aversion as logical support). And because the event is scheduled in advance, even if the response is not enthusiastic, each platform can basically keep a backup plan after Double Eleven officially begins, thus preserving the strength to win from behind. Similarly, a new wave of discounted products will be launched, and the attention they receive during the main Double Eleven event will definitely be higher than during the return event.

4. As a bargaining chip to optimize product costs

Anyone who has done purchasing work knows that when you ask upstream suppliers for resources, they will definitely ask you in return, "I will give you this price, how much sales can you achieve?" It is not difficult to brag once, but the difficult part is that you keep bragging and people still believe you. If too much inventory is stockpiled, category operators and purchasers will either have to clear out the inventory with tears or rape suppliers. In the long run, it will inevitably lead to the deterioration of the cooperative relationship between the two parties. Instead of hurting each other, it is better to let the data speak. With the end customer's deposit as the standard for data estimation, the platform is persuasive enough and can estimate the inventory digestion capacity in advance. Therefore, you can be more adept at cost optimization negotiation strategies.

5. Avoid black hats such as price limits and price comparison crawler plugins

Many brands that have very strict control over channel prices will arrogantly require all downstream platforms to maintain a unified price even during major promotional seasons. Although there are countless procurement and sales operations that break the law, if the timing is not right, it is very likely to cause a breakdown in the cooperative relationship between the two parties. On one hand, there are the lofty sales targets given to them by the company and leaders, and on the other hand, there are the brands that they cannot afford to offend. I wonder how many people who are assigned to the procurement, sales and operations of this category/brand have had their hearts trampled by thousands of alpacas.

On the other hand, there is an increasing number of competitors and end consumers using price crawler plugins. Customers will know immediately if you do a slightly false promotion (not only the situation where the final transaction price remains unchanged or even increases, but also the situation where the extent of the price reduction is exaggerated). Or they may even give up the gross profit margin of the category in order to boost sales, but as soon as they change the price, they are faced with the helpless phenomenon of competitors following suit. Paying a down payment can help avoid this situation. Make your own price magic more playable.

How to deceive end customers with price crawler plugins? For example: During the preheating and official start phases of Double Eleven, the model is 400 yuan with a prepayment of 100 yuan. The deposit of 100 yuan can be expanded to 200 yuan, which means the final price is 300 yuan. The information read by the crawler is 400 yuan. When sales expectations are not as good as expected, there is still a chance to reduce the price directly to 300 yuan during the return event, and the price captured by the crawler will become 300 yuan. Customers who did not pay enough attention before might think, wow, it’s 100 yuan cheaper, even cheaper than Double Eleven, be quick! Little did people know that this price had actually been sold for a month. (Merchants on Taobao usually use the black hat method of "add to cart, turn into XX yuan" which is officially approved)

6. Serving as a sunshine source for the reservoir of deposited funds

As for the wonderful uses of deposited funds, you can search the historical articles in my official account - "Unveiling Huang Guangyu | The Devil's Secret to Building Gome's Business Empire", which contains detailed cases that can be used as reference by many companies. This method of accumulating deposited funds is different from the method of extending the payment period to suppliers, and it has a bit of a one-sided flavor.

What are the disadvantages of the prepayment deposit model?

Although the deposit has 5 obvious benefits, its negative effects must also be noted by us.

1. It is more difficult to sway undecided customers

Because part of the funds are tied up in advance, some hesitant customers may not take the bait.

2. Information asymmetry plays a role

After all, before the arrival of Double Eleven Day, there were still quite a number of people who held the mentality that "there will be even more exciting discounts later." The insecurity caused by information asymmetry really makes it difficult for people to act freely. What if I pay a deposit but the product turns out to be too expensive? That would be screwed.

3. Product scarcity is exaggerated

Experienced shopaholics will definitely know that some products can actually be easily bought at a special price in the afternoon of Double Eleven, so there is no need to rush to spend some money to buy a "ticket" to qualify for the flash sale. The scarcity of limited-edition specials is exaggerated, which will affect the company's reputation in the long run.

Why do everyone use this promotion model without any prior agreement?

To sum up, although the advance deposit promotion method has many advantages, it is not flawless. For those who have difficulty making decisions and savvy shoppers, the stimulus may not be that great. Therefore, the prepaid deposit model is a relatively stable gross profit promotion method, while the traditional instant discounts, limited-time flash sales, and purchase discounts are relatively aggressive in handling gross profits, and the level of profit margin consumption and sales volume increase may be comparable (low ROI).

This time, several traditional e-commerce companies that have long occupied the first- and second-tier positions in China have adopted this model at the same time. Perhaps to outsiders, this may seem like a conspiracy, as if everyone had agreed on it in a meeting in advance. I don’t quite agree with this view. Although there are some e-commerce platforms that copy others, most of them are not collusion, but are trapped in the prisoner’s dilemma and have to make Nash equilibrium choices.

(The above table assumes that the same product is promoted and the same sales volume is achieved)

It is not difficult to see from the table that both A and B adopt conservative promotion methods, which cannot maximize their respective gross profits. However, in the process of market game, this Nash equilibrium has to be accepted by both parties.

Tmall and JD.com are the two current domestic e-commerce giants. They have left their competitors far behind with their exaggerated market share, and due to capital constraints, it is difficult for them to carry out very aggressive promotions. Profit targets are increasingly valued in the daily operations of enterprises (returning to the essence of business), which is why this Nash equilibrium was formed.

However, why have some e-commerce companies in the second tier also joined in? It is not difficult to understand why Suning is in step with Alibaba in terms of strategy and tactics after the latter invested in it. No.1 Store is JD.com’s wingman and rivals Tmall (supermarket), so it will definitely follow suit in terms of gameplay. Gome was "led into the ditch" by Suning, which is quite funny.

Key points of the advance deposit model

The basic mathematical model of deposit promotion is as follows. For a product with an original price of A yuan and a deposit of B yuan, it can be used as a deduction of C yuan.

The balance = AC

The absolute amount of B cannot account for too small a proportion of A, in order to prevent some upstream companies from placing orders crazily on downstream platforms for improper benefits, thereby defrauding the platform's purchase orders. Of course, this method is actually quite naive, and the order risk control department can basically resolve it, but it is really better to have less trouble than more.

You can try to make the C/B value as large as possible to give people the illusion of having a small effort to achieve a great result. It can provide customers with the psychological feeling of "getting a bargain".

A You can raise the price in advance, but don’t be too exaggerated. These days, there are more and more experienced online shoppers. You can go and take a look at “What’s Worth Buying” and you will see that every day there are some so-called “special offers” being criticized by netizens.

Taking this picture of Tmall as an example, B/A is basically around 10%, while C/B is between 1.5 and 2. I can’t tell you whether this value can meet the sales expectations of the Tmall team, but the next time Tmall implements the prepayment deposit policy, you will know if there is any difference by observing. So is this numerical range similar for all stores in this promotion?

Let's take a look at Suning's value:

B/A ranges from 1/7 to 1/18, while C/B is between 2 and 3. It seems that they are quite different. I have two inferences about this:

It has been shown that the optimal numerical settings do differ between categories.

In fact, no one knows what the optimal value is, and we are still in the process of trial and error. Anyway, I prefer to believe that they are currently in the second stage of inference.

Breakthrough of small and medium-sized e-commerce companies

Since the inference model is based on Nash equilibrium, we can infer that more and more e-commerce companies will join the promotion team of prepayment deposit. However, the problem is that the more everyone takes a conservative approach, the more the e-commerce landscape tends to become solidified. So what is the way for small and medium-sized e-commerce companies to break through?

In fact, this problem is definitely not something that can be solved by optimizing promotion methods. In recent years, there has been no shortage of small but beautiful e-commerce unicorns. Whether it is their category layout, promotional strategies, or even the segmentation of user portraits, they are very different from traditional e-commerce.

Therefore, the road for small and medium-sized e-commerce companies to break through is still very long. But as far as promotional method preferences are concerned, my opinion is that radical methods must be used to attract users' attention (at least not more conservative than traditional e-commerce of the same period).

Since you have chosen this path, please prove it to everyone with your efforts instead of blending in with the crowd.

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

The author of this article @李彬 is compiled and published by (APP Top Promotion). Please indicate the author information and source when reprinting!