AARRR model of user growth!

User growth is essentially a precise, low-cost and efficient marketing method. —Sean Ellis

1. What is User Growth?

In recent years, the topic of user growth has emerged one after another. Affected by the decline of the Internet dividend, more and more companies find it difficult to acquire customers, so user growth is an eternal topic to ensure the healthy development of the product. However, we cannot simply view growth as “the accumulation of new users”, because this only means an increase in quantity but does not generate any benefits for the product, let alone profit for the company.

Therefore, "increase in users" can only be regarded as a link in the user growth system. If you want this system to run smoothly, you need to coordinate with other links to achieve overall results.

For large companies, growth will not be particularly difficult. After all, their brand reputation and market share are there. Just by organizing a large-scale event, such as Double Eleven, they can increase their users by hundreds of millions in minutes. The most important thing is that there is strong financial support behind the product. A welfare subsidy can easily amount to hundreds of millions of yuan, which was an unimaginable subsidy level in the past.

However, as the cost of acquiring customers increases year by year, large companies are beginning to struggle.

However, small companies do not have so many unique conditions. They are struggling to make ends meet every day and are always worried about user growth. Because products can only generate corresponding benefits when they are used by users, and the larger the number of users, the greater the chance of creating value for the company.

So for any business of any size, user growth is an urgent issue that needs to be addressed. However, user growth cannot be achieved just by wanting it. It is a complex system that involves the coordination of multiple aspects such as products, operations, marketing, and technology.

Therefore, in order to grow, companies must first form a professional growth team to be responsible for user growth: user growth is a huge project. Unlike other methodologies or research activities described in this official account, it cannot be completed by one or several people. It requires an entire company or a professional team responsible for user growth.

The positions involved range from person in charge to product manager to data analyst, and finally to interaction, design, technical development, marketing and market, etc. It can be said to be a "one-stop" strategic growth team.

From a time perspective, user growth is a long-term system: it is not like a project-based system, where a team is temporarily formed for a project and disbanded when the project is completed. It is a period of time spanning several years or even decades. In this respect, it is somewhat similar to "ethnography", but with different purposes:

• User growth focuses on the increase of users and benefits;
• Ethnography, on the other hand, focuses more on the study of populations, which is a long-term project.

With the popularization of the concept of user growth, more and more companies, teams and individuals have created a variety of growth methods and models, among which the "AARRR User Growth Model" is the most popular. So what exactly is the “AARRR User Growth Model”?

2. What is the AARRR user growth model?

The "AARRR User Growth Model" is composed of the acronyms of the five links of the model, namely Acquisition, Activation, Retention, Revenue and Referral.

1. The first A refers to acquiring users

The first step in marketing a product is to acquire new users. This is the most important factor to ensure the healthy development of the product and also the primary condition for user growth.

2. The second A is for activation

It is a link to convert users who passively enter the product into active users. According to valid data, when the calculation of new users’ activeness on the next day after they enter the product begins, a considerable number of new users (more than 80%) will not be activated again.

To put it bluntly, the users acquired in the first stage can only generate 20% of the energy per day, and the rest is wasted. Therefore, the purpose of activation is to increase energy and reduce waste.

3. The first R is to improve retention

The most intuitive data indicators to solve this problem are daily retention, weekly retention, etc. These indicators can monitor the user retention and churn of the product, and then take corresponding measures to encourage these retained and churned users to continue using the product.

4. The second R is to get benefits

This is the core part of the AARRR model and also the fundamental driving force for the sustainable development of the product. To put it simply, users generate benefits for the product. This benefit can be money or some kind of value, depending on how the company defines the meaning of benefit.

5. The third R is referral

From recommendations to acquiring new users again, product development and user growth form a perfect cycle, which is the "head-to-tail connection" link that ensures the sustainable development of the product. Judging from the actual data, completing the five rings in a one-way manner is like a funnel. The number of the next ring will always be lower than the previous ring, and the value of the rings at the bottom will be greater.

Some readers may ask: "The fifth ring does not produce any value, so how can it be considered the greatest value?" This will be explained in the following text.

3. Early Preparation

As the saying goes, “A little time before sharpening the knife makes the work of chopping wood easier.” Before starting user growth (MVG) work, you need to prepare the “four major systems” first.

MVG explanation: Referring to MVP, the author temporarily defines user growth as Minimum Viable Growth, abbreviated as MVG. As for why it is called "minimum viable growth", this will be explained in detail later.

Archimedes once said, "Give me a fulcrum, and I can move the whole earth." Below, I will use this sentence to explain the four major systems:

Four major systems diagram

1. The first system: good products are the fulcrum

It is necessary to ensure that the product can be accepted by users. Not only must it be accepted, but users must also be "amazed" by the product. The "amazing" here is somewhat similar to the "Aha Moment" described in "Growth Hacker". The purpose is to make users remember and use the product for a long time.

To put it simply, the product should not only solve problems for users, but also solve those problems with extremely high quality. For example, when you need something, you think that no one will sell it, and then you search on Taobao and realize, “Oh, I didn’t expect there is such a thing, and it’s not expensive!”

In this way, this Taobao product not only meets the users' purchasing needs, but also satisfies the users' idea of ​​"good products are not expensive" behind their purchase with high quality. This is a product that can "amaze" users.

In addition, based on good products, a visual data monitoring system should be established (this is a derivative product in addition to the main product). And everyone on the growth team should be able to see valuable data metrics on the monitoring platform (within their authority).

After all, the quality of MVG's results needs to be supported and verified by actual data. At the same time, this is also the fundamental data to ensure that MVG can take small steps and run fast and continuously iterate.

2. The second system: The clear indicator is leverage

To put it simply, just like the "HEART User Experience Model", it is necessary to establish a unique, clear, measurable and targeted goal. You can directly use the company's established North Star indicator as your goal, or you can redefine a related indicator based on the North Star indicator as a direction.

In short, growth indicators must be combined with strategic indicators to be effective.

For example, Facebook’s North Star Indicator is daily active users, while Line’s indicator is the number of messages sent by users. The more messages sent, the more dependent the user is on Line. Since both are social networking platforms, why does Line measure the number of messages instead of daily active users?

Because Line may have a high daily active users, but a large number of users only send one message when they go online. This phenomenon is unacceptable to the Line team. Therefore, for the Line product, the number of messages can better measure the degree of user dependence on the product than daily active users.

The data monitoring system established in the first system is actually to ensure that all data indicators of MVG can always grow around the target, so as to ensure consistency in direction. It is no exaggeration to say that MVG is a model based on collecting a large amount of data and then analyzing the data, so it is very necessary to have clear indicators and a visual data monitoring system.

3. The third system: a strong and professional team, i.e. people

In fact, before the concept of growth became popular, a large number of companies had already been doing this, but at that time they were all organized according to the project system: that is, they would temporarily call the heads of various core departments to hold a meeting, then discuss solutions and go back to implement them. When we finally see that the result is growth, we are overjoyed, and then the project is disbanded and the team members go their separate ways.

And when it comes to growth, it is not a short-term goal, but a long-term task. I have mentioned this point in the previous article. The rules and key points for team formation can be reviewed in the previous article, so I will not repeat them here.

4. The fourth system: small steps and fast iterations, this is the way to exert force

Although the name of MVG has changed, its connotation remains the same: the purpose is to ensure the effectiveness and practicality of user growth. During the growth process, the growth team must try more and constantly explore the most feasible and efficient growth model, rather than just going down a single path like designing a rocket.

Especially for small companies, it is even more necessary to constantly verify the various characteristics of their products to ensure that they are not eliminated by the market. After all, the speed of the Internet is too fast, and if you don’t achieve MVG, you will easily be left off the highway. As the saying goes, "everything is ready except the east wind", the following will break down in detail what the five links of AARRR are, and the author will also provide corresponding cases to deepen readers' understanding of the growth model.

4. AARRR

1. Acquisition

Simply put, user acquisition refers to data indicators such as "new users", which can be the number of registrations or the number of payments. The specific indicators depend on the product needs. Although it is simple to understand, it is not easy at all to implement the new implementation.

The essence of customer acquisition is the result of a process of disseminating information to the target audience. In the process of acquiring customers, we first need to define three issues:

1. Who is the audience, that is, what kind of people are the target users of the product? What characteristics do these target users have?
2. Through what channels will these audiences learn about product-related information, that is, what are the channels for information dissemination?
3. What kind of communication methods are needed to reach these audiences so that they will be interested in using or consuming the product?

In response to these three questions, the following will explain the specific process of "user acquisition" point by point.

1) Step 1: Define your audience

According to the relevant content of "user research", we can analyze the target users and expected users. The audience of the product can be mainly divided into three categories: primary users, secondary users and tertiary users.

If the company has the conditions and resources, it is recommended that they first draw a user portrait and cooperate with corresponding user research activities, such as user interviews, questionnaires, focus groups and other activities to help the team accurately define the audience of the product.

2) Step 2: Determine the channel

There are many channels for marketing and promotion. Here are a few more useful channels for promotion and marketing for reference only:

Enumeration of various channels

• Advertising: This is the most traditional and most commonly used promotion channel.

Placing advertisements on platforms with relatively large traffic pools, such as TikTok and Weibo, can attract a large number of users. Combined with the platform's own big data analysis, it can achieve both large-scale and precise delivery, which is convenient and efficient. That is, you have to consider the cost issue when placing the advertisement.

The left picture shows Country Garden’s advertisement on Weibo, and the right picture shows KFC’s advertisement on TikTok

In addition to placing advertisements online, you can also place advertisements in offline channels, such as subways, airports and other public places.

• Cross-border cooperation: For example, Land Rover and National Geographic, Uniqlo and KAWS, and especially the "Forbidden City Collaboration" which has been particularly popular in recent years, all of them acquire new users through cross-border cooperation in different industries.

Forbidden City co-branded lipstick

Logically speaking, it is a bit difficult for products from different fields to exchange users through cooperation, after all, they are in different fields.

But from the user's psychological perspective, although the fields are different, users are always human beings. We can get a glimpse of this through the "Maslow's Hierarchy of Needs Theory" introduced by the author on the Renren platform: users' needs have different levels, but they can exist at the same time, so cross-border cooperation in different fields may bring unexpected surprises.

Just like Marvel and Coca-Cola, one is in the film and television entertainment industry, and the other is in the beverage manufacturing (retail) industry. These two industries that have nothing to do with each other can build a powerful channel promotion channel by establishing some subtle connections.

Marvel and Coca-Cola crossover collaboration

• Ground promotion: It is the abbreviation of ground promotion personnel, such as handing out flyers on the roadside, swimming and fitness, these are all considered a form of ground promotion.

This approach relies on casting a wide net, attempting to reach potential customers by sowing widely and reaping little, so the rejection rate (difficulty in acquiring customers) will be quite high. After all, users may not necessarily be interested, unless they are very capable salespeople. If you want to achieve precise ground marketing, you have to learn from Ele.me and directly enter universities to conduct ground marketing in the early stage of entrepreneurship. This will not only achieve precise customer acquisition but also low cost.

In addition to promotion based on people, promotion can also be carried out in public places such as subways and elevators. This form is both a form of ground promotion and a form of advertising.

• Traffic diversion: It is to cooperate with some large platforms or large traffic owners (such as WeChat’s private domain traffic and Bilibili’s up masters) to guide each other’s traffic.

Alipay, Tmall and Fliggy are all products of Alibaba, so you can promote Tmall and Fliggy products in Alipay, drive traffic to both and promote consumption.

To put it simply, it is to use the Alipay platform to advertise the corresponding products, and the customers acquired are Alipay's existing customers. Of course, this traffic is definitely not one-way. Alipay can also acquire customers from Tmall or Fliggy in certain ways. For example, when making payments, Alipay is used. This is an invisible +1 in customer acquisition.

In addition to internal traffic generation within the company, online products can also be driven through offline activities.

For example, for an offline event, you can invite offline users to join the online club. Online membership is a way to connect offline and online traffic, that is, to "direct traffic from the public pool (all offline users) to the private pool (online products)".

The most popular medium for private domain traffic is the official account - the behavior of "asking for attention and subscription" is the behavior of directing the large traffic pool of WeChat (public domain traffic) to one's own official account (private domain traffic).

• Social Marketing: There is a case of “viral customer acquisition” – Pinduoduo’s price-bargaining.

In the early days, Pinduoduo took advantage of the social relationships between people. For example, Li Ming asked Wang Hao to help him cut a price by selling his trust. This will spread like a virus from person to person until it reaches its goal.

Why is it called viral?

1. It spreads quickly and can only be spread from person to person;
2. The virus was so annoying that people on WeChat were finally "terrified of Pinxixi."

After all, social fission affects the trust between people. I feel embarrassed if I don’t help you bargain, but it doesn’t do me much good to bargain for you (actually there is a benefit, but it’s not big, which will be discussed later).

Pinduoduo's various bargaining activities

This is also why WeChat banned such marketing and promotional content (Pinduoduo was banned in the early stage because it affected the original intention of WeChat social networking, but now it has been acquired by Tencent and is also a Tencent product, which is much better). But TikTok is not immune. It belongs to Toutiao. WeChat cannot just watch the users in its public traffic pool being taken away by Toutiao and become Toutiao's traffic, so it was "banned".

Of course, in addition to "viral" marketing like Pinduoduo, there are also some relatively mild but also very powerful social marketing methods. Sharing recommendations is a good way. More information about sharing recommendations will be explained in detail in the "Recommendation and Dissemination" section of this section, so I will not go into details here.

The above channels can be promoted through different combinations. In other words, if you want to achieve effective MVG, you can combine the characteristics of each channel to launch a combination of punches. What needs attention is the cost and cost-effectiveness of the channels used. As for how to conduct cost accounting, it is necessary to use data analysis, such as AB testing, which will be explained later.

3) Step 3: Marketing Content

Now that we know who the users are and have the channels, all that remains is the content. Different platforms have different characteristics, so when promoting, you must use appropriate content to do marketing. For example, you can use brand advertising on Weibo, and use storytelling and other methods to acquire customers on Douyin.

In general, by combining the content that channel-exclusive users care about and catering to their interests, you can achieve your customer acquisition goals more accurately.

Speaking of marketing, it is actually somewhat similar to experience design. Generally speaking, there are three characteristics and purposes of marketing: products (or brands, services, etc.) must be unique, highly recognizable, and at the same time meet user needs, that is, be fully functional.

Comparing the designs, don’t they correspond exactly to the three aspects of difference, memorable points and meeting needs?

Some commonalities between marketing and design

After the three major directions are clear, the next step is implementation. The execution process is slightly complicated, so I won’t explain it in detail due to limited space in this article. I will focus on the subsequent verification and supplementary content: We can verify the quality of the channel and the results through data, which is why we need to prepare a data monitoring system in advance.

Through this system, we can use these data to reasonably analyze the strengths and weaknesses of different channels. At the same time, we can also explore the commonalities between each channel and the product itself, whether the acquired users match the product, and other information.

For example, through AB testing, we can test on a small scale which channel has a higher cost-effectiveness, which can save a lot of costs in the future. After all, resources are limited, and while considering the cost of acquiring customers, we must also consider the cost-effectiveness of acquiring customers.

However, some values ​​are not immediate, such as the implicit value of brand, which is a subtle "brainwashing" and an implanted information. It may not generate benefits immediately, but later when users trigger this information due to certain scenarios, they will think of the brand, and corresponding value will be generated (for information about brand implantation, please review the historical article "Looking at User Experience Design through "Positioning"").

So, rather than viewing this as an immediate gain, think of it as capturing potential customers. For example, the products of cross-border cooperation are not the target user group we need, but this does not rule out the possibility that there are a large number of potential users suitable for our products among the existing users of the cooperative products.

Therefore, we cannot simply generalize based on data indicators, after all, this potential information is impossible to measure. Moreover, when calculating customer acquisition costs and cost-effectiveness, we must also look at the effectiveness of marketing communications comprehensively, and not just look at each aspect independently.

2. Activation

Activated (user) activity can be simply understood as the concept of the "active user" data indicator. Of course, the definition of activated users will vary depending on the product goals.

For example, most e-commerce products have newbie discounts, which allow you to purchase high-quality products at low prices, which is often referred to as "getting a bargain." The first purchase behavior of such users is not considered as an activated user, after all, it is not a voluntary purchase intention.

This behavior or phenomenon cannot be said to activate user activity, but can only be regarded as a marketing method in the "user acquisition" link - using the "bargain mentality" of low prices and discounts to acquire customers at low cost.

Like Meituan in the picture below, it uses a low-price method to guide users to open membership: only when the user activates and consumes, the user is truly activated (of course, in some scenarios, users can be judged as activated as long as they purchase a membership, which needs to be defined according to product needs).

There is also Taobao’s 88 members, who use the method of accumulating Taobao points to stimulate users’ desire to consume. After all, using a membership system can better enhance user stickiness and loyalty to the product.

The left picture shows the Meituan membership activation page, and the right picture shows the Taobao 88VIP pop-up window

In general, most products determine whether a user is activated by judging whether the user has secondary consumption behavior. The purchasing behavior of secondary consumption is completely spontaneous. People are attracted by the value of the product, rather than for the purpose of taking advantage of the platform. How should other products, such as tourism products and travel products, be defined?

The operation path of this type of product is generally very long, and it is difficult to offer large amounts of benefits, so as long as the user completes a core process completely and successfully. For example, booking an air ticket, booking a hotel, going on a trip, hailing a taxi successfully, etc. (generating consumption) can be defined as an activated user.

No further related examples are given. In short, different products have different definitions of active users, and the scope still needs to be defined based on the characteristics of the product itself. Now that we have clear boundaries, how do we activate users?

The author uses the above examples of "薅羊毛" and "去旅游" to introduce two different activation schemes in detail:

1) Solution 1

For users who want to get the best deals, what attracts them is definitely not the product itself, but the preferential policies of the platform, such as subsidies, new user discounts, coupons, etc. Most platforms use this method to acquire customers at low cost. This is for first-time consumers.

So for second-time consumers (i.e. repeat purchasers), why can they still initiate consumption on their own without any preferential policies?

Comparing the differences between the two, it is nothing more than whether the content of the product itself arouses the user's interest, such as usage value, display value, texture and so on. Therefore, the value of the product itself becomes one of the directions to activate users.

Let’s dig deeper into this example: If a user’s first purchase on the platform (at a discount) is eggs, how do we activate the user’s attitude and behavior toward repeat purchases? (Regarding attitudes triggering behaviors and behaviors influencing attitudes, you can review the article “The Relationship between Behavior and Attitude, Qualitative and Quantitative, from a Psychological Perspective” published by the author on the platform (click to jump))

At this time, you can try to optimize the supplier channels and introduce high-quality suppliers to provide users with high-quality products that can be guaranteed for consumption: if the eggs are fresh and delicious, and the price is lower than the same type of eggs on the market, then users will continue to have a "cheap" mentality, thinking that the eggs sold in this store have the best cost-effectiveness and are worth far more than the price, which will lead to repeat purchases.

As shown in the figure below, JD.com No. 1 Member Store invites users to become members, and then regularly sends eggs produced through safe channels (quality guaranteed) for free (for cheapness) throughout the year, using the value of the product to acquire high-quality, valuable users.

Of course, in addition to controlling the supply channels, you can also try to approach the user experience and design features that will surprise users. For example, optimizing the display content of reviews, allowing more high-quality reviews to be exposed, etc. These can all be counted as points where users discover the core value of the product.

These points can make users deeply remember the sense of surprise, that is, the memory point and the sense of surprise.

High-quality graphic reviews (buyer shows) can enhance users’ trust in products, thereby stimulating their consumption.

2) Option 2

When it comes to tourism, users will use and consume products only when they have demand, so the question of "how to activate users" must be optimized during the "usage process".

(Perhaps some readers will ask at this point: "Why should users use your product to make reservations and not other products?" This goes back to the "user acquisition" stage: whether it is brand placement or marketing strategy, these must be solved in the acquisition stage.)

How to optimize the usage process? That must be to optimize the path used by users. Assuming that the product already has a large user base, how can the newly acquired users be effectively activated?

This requires the use of refined design, that is, the "divide and conquer" approach:

• Step 1: Attract first

First, use big data to group users. It is recommended to use "labeled user portraits" to segment users' product usage: are they new white-collar workers or urban seniors? Re-use these tags to push different content to users. The more accurate the label is, the more likely it is to arouse the user's interest, leading to subsequent viewing of details and consumption behavior.

• Step 2: Reactivation

Predict user behavior and use user operation expectations to define corresponding operation steps. For example, simplifying the path and reducing leakage: by observing the funnel or other data, you can discover the numerical changes of the user during the operation process and optimize the path in a targeted manner. This can reduce the resistance of users to using the product, effectively improve user satisfaction, and increase the success rate of users completing tasks on the core path.

To put it bluntly, the "activation and activity" link mainly depends on the quality of the product itself. The higher the quality, the lower the difficulty of activation, and vice versa. Moreover, the process of stimulating activity is neither long nor short, and requires relevant personnel to constantly change and optimize the content.

This brings us back to the premise of "small steps, fast iteration" and "focusing on data indicators" mentioned at the beginning of this article. Only by discovering data changes in a timely manner during the process can we give the most reasonable solution at the most appropriate time.

3. Retention

The concepts of "improving retention" and "retention rate indicators" are similar. It means "users who repeatedly use the product and generate corresponding value within a certain period of time are retained users."

Please note that we are talking about value here! Value can be in any form, not just consumption value. If a user opens the software and only looks up information, he or she can only be considered an active user and cannot be counted as retained.

For example, Li Ming browsed on Tmall but did not place an order or pay (generate any consumption behavior) for a month. At this time, he can only be considered an active user. At this time, the product should consider using appropriate forms to stimulate Li Ming and make him want to consume, so that the retention rate can be +1.

However, value cannot be simply measured by money. For example, for news products, the amount of user activity is a reflection of the value of the product. The number of messages on WeChat is also a reflection of the value. Therefore, retention value should be viewed and defined dialectically in combination with product characteristics.

There are many ways to improve retention, and each product has different characteristics and problems, so the solutions adopted are endless. The author briefly introduces several practical methods here to help improve product retention, for reference only:

1) Sunk costs

Every year on Double Eleven, major platforms will organize a pre-holiday warm-up operation event in advance. For example, the building event (game) in 2020 used the "energy investment" of users (players) before the event started as time cost, and finally converted it into consumption money to increase sales on the day of the big promotion.

Since players have already invested so much time and energy in participating in the event, they can only continue to pay the corresponding money to let the time "sink" in order to realize the value of the time spent (consumption money is similar to points, and these points can only be consumed in some way, such as deducting them when purchasing products, so that the fourth link of "increasing income" can be successfully promoted).

Isn’t this a good way to encourage users to create value? Although it’s a bit tricky, it’s also a good way to improve user retention.

2) Loss Aversion

Let’s take the Double Eleven example again. Every year, we launch discount activities, such as 40 yuan off for purchases over 300 yuan. Sometimes we may meet this amount just to complete the order.

For example, if we buy something worth 880 yuan, and we are 20 yuan short of another 40 yuan off, we will finally look for useful things but perhaps not needed now to complete the order, and we may accidentally end up with 50 yuan. Although we meet the "900-120" policy, if you think about it carefully, haven't we invisibly paid 10 yuan more?

Then why are there still so many users who just want to get together? Are you willing to pay even if it means paying a little more? This is because the purchased items are valuable to the users themselves, and this value has surpassed the extra 10 yuan (the discount is actually in the form of coupons, which is an indirect means of stimulating "increasing income").

Marketing methods similar to loss aversion, as well as hunger marketing and limited-time flash sales, are all aimed at creating an atmosphere of missed opportunities, thereby leading users to have the illusion of "seizing the time."

3) Herd mentality

For example, when a new product is first launched on the market, it will cause a sensation in the market, and then users will flock to it.

If a product has value, users will continue to stay with the product. Otherwise, if the product has no value, they will leave (for specific values, please review "One Article to Understand Maslow's Hierarchy of Needs Theory - Insight into Human Nature in Humanistic Psychology" (click to jump). The more basic the hierarchy of needs, the stronger the persistence).

In the long run, this is only a temporary solution, but it can stimulate user retention in the short term. There are many methods, such as refined design, emotional design, membership system, holiday activities, etc., which are all good ways to improve retention.

Speaking of retention in essence, no matter how you play marketing or improve user experience, in the final analysis, users will reuse the product and contribute value repeatedly. This is nothing more than the product being able to generate or even create additional value for users, and users will be willing to use it.

Therefore, the question of improving retention comes back to square one:

• What should the product provide to users?
• What user needs need to be met?
• How to realize expected and attractive needs on the basis of meeting basic needs?

Only when a product satisfies users’ needs and creates value for them first, can users give back to the product and create corresponding value for it.

I wonder if you readers have ever thought about this question: Why do people who have eaten at Haidilao go back again? Isn’t it enough to eat the same brand of hotpot once?

Through some similar cases in the past, we can get a glimpse of this: people used to like going to coffee shops because coffee shops can provide an environment, and this environment can create a corresponding atmosphere for users, just like playing games at home doesn’t feel good, but going to an Internet cafe will instantly feel good.

Haidilao is a company that can provide an atmosphere for eating hotpot: there is no such atmosphere when eating hotpot at home, but you can have it at Haidilao (environmental value), and you don’t need to choose the dishes yourself, the waiters will help you do it all (service value). In addition to the above values, there are various other values, such as various cleaning products coming out of the bathroom, small snacks provided while waiting, etc. These are constantly creating value for users.

When users experience this kind of value baptism many times, they will feel satisfied and begin to develop a sense of loyalty. They will slowly bring more friends to Haidilao for dinner, and provide more value to Haidilao as a company (this is actually the "communication recommendation" to be discussed in the fifth link).

Imagine if an old customer brings 5 ​​friends to dine together, and then these 5 friends, after sensing the value, will also bring 25 new friends to dine together, the compound interest effect will gradually take effect.

According to a study conducted by Harvard Business School:

For every 5% increase in retention rate (that is, more old users stay), the profit margin can increase by 25~95%!

Therefore, compared with the aspects of "acquiring new users" and "stimulating activity", retention is a link with greater maintenance value than the first two links, and it is also the most cost-effective link. Just like the membership system, the value that one paying member (old user) can contribute is far greater than the total value that 10 new users can contribute.

Of course, the success of Haidilao cannot be explained clearly by the author with just one case. This article is just to cooperate with the "improving retention" link, and only provides an in-depth description of certain single points. Readers are welcome to read on their own for more detailed content.

In addition to finding ways to improve retention, we might try a different perspective: reducing churn by reducing churn. Doesn’t this indirectly improve retention?

Due to limited space, I suggest that you optimize yourself based on your actual work experience as to the specific methods to reduce the attrition rate. I will not describe them in detail here.

4. Revenue

Monetization is about obtaining revenue, which is a manifestation of the value that a company or product obtains from valuable users. The most direct monetization indicator is profit. After all, when a company spends so much resources to develop and operate a product and provide services, the ultimate goal is almost always to make money, either from the users themselves.

For example, e-commerce, live streaming, paid services, etc.; or making profits through advertising revenue, which is similar to the main source of income for Douyin in the early stage, except that it needs huge traffic to attract advertisers to invest money; there is also a more special form, which is traffic monetization. For example, public welfare platforms use traffic to monetize, but what is monetized may not be money, but some value.

The left picture shows QQ Music Deluxe Green Diamond (membership system), and the right picture shows Weibo advertisement

The "profit-generating" link cannot exist independently. It must rely strongly on the "activity" and "retention" links. Therefore, all the cases mentioned in these two links can be used as references for this link.

For example, the consumption money for building a building is actually a point system, which is used to encourage users to use it, thereby promoting consumption conversion and obtaining profits; the full-discount system is similar to a coupon, which stimulates users to make additional purchases and obtain profits through discounts; there is also user segmentation of Toutiao, which uses big data to manage users, accurately deliver content that users are interested in, and stimulate users to watch the same type of advertisements to increase the exposure of the advertiser's brand.

Looking at the cases mentioned above systematically, we can conclude that if we want to increase our income, it is either a "win-win model" or a "win-lose model": the "win-win model" is actually a value exchange.

E-commerce platforms, for example, build a bridge of communication and trust between merchants and users, and then all three parties can gain corresponding benefits from it - users get products, merchants get money, and the platform collects relevant fees; while the "win-lose model" is a way to increase revenue by sacrificing certain user values. For example, advertising is a way to reduce user experience, but it can increase the platform's advertising revenue and advertiser's product exposure.

When encountering this kind of pattern of one gaining while the other loses, user experience designers are needed to step in to balance the critical point of winning and losing. After all, different advertisements have different effects on user experience. For example, embedding advertisements on TikTok through storytelling is a good way to strike a balance. Of course, there are more sophisticated methods, such as TopView, which is a good way.

There are many methods for "How to monetize? How to increase income?" It is directly linked to business and market. Interested readers can read relevant materials on their own.

5. Referral

Before we start describing the “recommendation and dissemination” link, let us try to recall: from the moment we have the idea of ​​traveling to the moment we decide to travel, what factors guide us in making the decision to “go out and travel”?

I believe it is most likely a social recommendation. At this point, some readers will start to refute: "I looked it up on the Internet myself, how can it be considered a social recommendation? There are related guides on Mafengwo and Ctrip. I found the guide I was interested in and made a decision! This has nothing to do with social networking."

So, who wrote these guides? Isn’t this guide also written by a stranger? When strangers share their travel summaries on the platform, does that count as information exchange? Isn’t this socializing? Is socializing with strangers not socializing anymore?

The left picture is Mafengwo's "Fengshou Travel Notes", the middle picture is Ctrip recruiting future travelers, and the right picture is Ctrip's hot topics

Looking through the phenomenon to the essence, we will find that travel can be a big or small matter, but what can guide us to make a decision is most likely the decisive role played by "social recommendations".

Maybe it was recommended by a stranger on the Internet, or by friends or colleagues around you, but you would never make a decision after searching the encyclopedia of the attraction on your own (unless it is for some purpose, such as a business trip, which is mandatory).

After all, we always rely on sharing other people's experiences to avoid losses, especially in the shady industry of tourism, where there are too many tricks and you can get cheated if you are not careful.

From the perspective of Maslow's hierarchy of needs, social needs are the longest-lasting and most instinctive needs of human beings. After all, humans are social animals (the article "Understanding Maslow's Hierarchy of Needs Theory of Insight into Human Nature in Humanistic Psychology" spends a lot of space to describe the importance of social interaction, which readers can read repeatedly).

It is precisely because of the need for social interaction that we are tempted to make up our minds. With the previous social preparation, let’s now return to the “recommendation and dissemination” link itself.

Looking back at the content of the positioning section, we know that for a product, brand promotion in marketing is actually a way to implant a concept into the user's mind, which is what is called the "nail" in brand positioning.

In order to pry this nail open, we need the power of recommendation and sharing: social media is the most powerful and direct force. As we usually say, Amway is a kind of recommendation. We often try something based on the content of Amway. Because we believe that with the help of friends' experience, we can avoid many detours and get more reliable, accurate and cost-effective feedback.

Let’s dig a little deeper and find out what specific forms social recommendations take. The author summarizes three types:

• The first type is the easiest to understand, which is like Pinduoduo, where products are spread among users like a virus through social fission: Li Ming recommends a link and needs Wang Hao to help him bargain. In the end, Li Ming can buy the bargained product at a low price, and Wang Hao can get the corresponding coupons;
• The second type: If the first type is passive, then the second form is active. For example, Li Ming asks you: "May Day is coming soon, do you have any recommendations for fun places?" Then you will start to recommend various places, which is a proactive social recommendation;
• The third type is more special. Although it is an active behavior, there is a certain exchange of interests. For example, if the stock makes money today, Li Ming will take a screenshot and post it on WeChat Moments to get some likes and envious looks, and then his friends will also enter the market.

So what is the essence of these three forms and what is the logic behind them? How are these social recommendations generated?

The essence of the first one: This is actually a kind of external stimulation. Merchants will use various subsidies, concessions and discounts to attract new users, which is similar to the "user acquisition" and "stimulating activity" links mentioned in this section. To put it bluntly, it is a new round of customer acquisition, activation and retention.

The nature of the second type: As for the second type, it is the user's sincere recommendation. It is not utilitarian like Pinduoduo, nor is it purposeful like the third type. Instead, it simply hopes to gain respect and recognition from friends by sharing experiences and trying to establish emotional connections with others.

Psychologically, this is a sense of satisfaction of being needed. Of course, this recommendation is based on the premise that the value of the product itself can be recognized by all.

If the early marketing is done well and the brand concept is successfully nailed into Li Ming's mind in advance, then once his friends recommend the brand to him, Li Ming will immediately pry out the nail that has already been nailed in, and will most likely create value for the brand.

The nature of the third type: At first glance, it seems to be a social need, but in fact, it has risen to the level of respect needs. According to Maslow's hierarchy of needs, this means "acting to meet respect needs under the guise of social needs."

In summary, if you want to increase the number of product users and maintain fresh blood, the "communication and recommendation" link is essential. Because it is a product that can be recognized by old users and then recommended to new users through a powerful channel, that is, "person-to-person", it can be understood as the mainstay of product marketing (this is also the important reason why "good products" are ranked first among the four major systems in the preparatory work in the previous article).

At the same time, "propagation and recommendation" is also a key link in making the user growth model form a cycle, which can form a (closed) loop with the first link of "acquiring users".

The data that "if 5% more old users stay, the profit margin can be increased by 25~95%" can simply and roughly explain why the "communication and recommendation" link in the funnel is the most valuable: although it is not a vested interest, the hidden value is unlimited. It can not only create high profit returns for the product, but also bring more new users to the acquisition ring, which can be said to kill two birds with one stone.

So far, the five links have been introduced. Finally, it is important to emphasize that the final result of MVG must be verified through data to see whether the plan is feasible. After all, data is the most intuitive and effective way to monitor growth.

Especially when formulating corresponding plans for each link, it is necessary to do like the "HEART User Experience Analysis Model": define a clear and measurable data indicator for each link, and in this process, constantly "take small steps and run fast, iterate quickly", try to optimize the plan, and finally find the most suitable and effective plan to better promote the product and serve users, so that the AARRR user growth model can form a virtuous, spiraling closed loop and cycle.

5. Final Thoughts

The growth model completely transforms invisible user growth into a data problem, which indirectly connects user growth to growth data. As long as all the data are up, user growth will naturally not be a problem. However, the biggest difficulty lies in how the data grows, which requires a variety of complex and targeted methods to divide and conquer.

With the development of the times, user growth models like AARRR, which use "brute force customer acquisition", have begun to show signs of being powerless and unadaptable: it cannot achieve accurate customer acquisition, and now more and more users are difficult to acquire. According to valid data, the average customer acquisition cost of a large platform is 400 yuan per registered user, and this cost continues to rise over time.

The cost of acquiring customers online continues to rise (unit: yuan/person), and the cost of acquiring customers has increased 13 times in 9 years. Just think about it, 1,000 new users would cost 400,000 yuan, which is too much money for anyone to bear.

Therefore, in order to survive in the current environment where traffic dividends are receding, we have to think of more novel ways to acquire customers.

The "precise customer acquisition" proposed by the 6R user growth model Recruitment, Reproduction, Retargeting, Retention, Revenue and Reservation is a good choice: as long as the user's interest can be aroused, the cost will be greatly reduced.

• There is also social fission like Pinduoduo, which uses social power and interpersonal relationships to reduce costs;
• Toutiao uses big data to achieve precise promotion;
• Alibaba has connected the data middle platform and launched label user portraits, etc.

These are all based on the re-innovation and re-creation of the traditional growth model, while also saving a lot of resources for the company.

6R User Growth Model

Finally, it is important to note that user growth is a team effort, not a solo effort. It’s best for each individual on the user growth team to understand some of the core work of other positions.

The more clearly a person defines his or her position, the easier it is to retreat into the comfort zone of that field. The result is that there is less and less cross-functional and cross-field communication, which will breed a "self-preservation" mentality, leading to suspicion and accusation of problems and mistakes in other functional departments. This is a mentality that is not conducive to the development of oneself and the team.

And as the pace of the Internet era accelerates, team-based collaborative work models are becoming more and more urgent, which means that the "self-protection" approach will no longer apply to the team as an organization, not to mention the user growth team with extremely high responsibilities.

Therefore, no matter what position you are in, you must always understand one thing: only when your ability is greater than your position can you gain greater room for growth and advancement.

The above is just my personal opinion. If there is anything wrong, please feel free to point it out and communicate with me.

Author: Dasheng

Source: Daodao's Design Footprints