Using the AARRR model to analyze Pinduoduo's user growth

The AARRR model describes the five processes in the user life cycle, namely user acquisition (Acquisition), user activation (Activation), user retention (Retention), revenue (Revenue), and referral (Refral). By gradually breaking down these five links, we can also discover the secret of user growth for a product.

When it comes to user growth, what may impress everyone most is Pinduoduo's rocket-like rise: it went online in April 2015, and in February of the following year, its monthly transaction volume exceeded 10 million, and the number of paying users exceeded 20 million; on its anniversary celebration in October, its single-day transaction volume exceeded 100 million yuan. It was successfully listed just three years later, and its market value even exceeded that of JD.com in 2019! According to the fourth quarter and full-year financial report for 2020 released recently by Pinduoduo, as of the end of 2020, Pinduoduo's number of active buyers reached 788.4 million, surpassing Alibaba to become China's largest e-commerce platform in terms of user scale!

What exactly is behind its rapid growth? In order to have a deeper understanding of the model, this article will use the AARRR model to analyze Pinduoduo's user growth method.

1. Acquisition

User acquisition methods can be roughly divided into two aspects: advertising acquisition and fission sharing of old customers. Let’s analyze them one by one.

1. Advertisement acquisition

1) Advertising format

Generally speaking, there are many forms of advertising that can be placed for a product, which can be roughly divided into online advertising, media advertising and outdoor advertising. Please see the figure below for details.

For Pinduoduo, the most impressive thing is its intensive sponsorship of various variety shows around 2018. From the third season of "Go Fighting" to "If You Are the One", "Running Man" Season 2, "Youth Reunion", "Fantasy City", "Chinese Restaurant Season 2", "My Boy", "Happy Camp" and so on, it sponsored a total of 18 variety shows in almost the same period! By using various methods such as sponsorship, celebrity announcements, and hard advertising placement to help promote its brand, Pinduoduo's reputation spread across the country in a short period of time.

This "seamless" and intensive sponsorship has brought Pinduoduo direct high exposure and also given it a vivid brand image in the minds of the audience. After continuing to invest in variety show sponsorships, Pinduoduo's average monthly active users in the second quarter of 2018 was 195 million, an increase of 495% compared to 32.8 million in the same period last year.

2) Advertising copy

The copy and materials displayed when placing an advertisement are very important. This is the first battlefield to attract users to click and pay attention to the brand. Therefore, the display of advertising materials should be simple and direct, reflect the brand characteristics, and conform to the attributes of the delivery channel.

For Pinduoduo, it has made good use of a brainwashing song to deepen its impression in users' minds - "Pinduoduo, Pinduoduo, the more you work, the more you save." This magically simple song is catchy and easy to remember. It combines the brand name with its greatest feature. Add in the performance of celebrities and it can easily go viral.

2. Sharing of old customers

The fission sharing activities where old customers bring in new customers are also a method that many products currently use to attract new customers.

Pinduoduo's product was initially targeted at users in third- and fourth-tier cities, where users are mostly familiar with each other and word-of-mouth recommendations from friends and relatives can easily lead to dissemination and purchases. Moreover, most of these users are price-sensitive and like to get bargains. As long as the price is attractive enough, they will be more willing to try it. So Pinduoduo took advantage of WeChat’s social attributes and user characteristics and launched a series of actions to attract new users. Pinduoduo's fission activities are endless and diverse, but they can be mainly divided into the following types:

1) Invite friends to bargain and get products for free

The user selects a product that he wants to get for free - invites friends to help bargain - bargain down to 0 yuan and get the product for free

2) Invite friends to help withdraw red envelopes

The user receives a red envelope, but is still X% short of being able to withdraw the money. He invites friends to help withdraw the red envelope.

Generally speaking, there are two models: commodities and red envelopes. The specific forms may be different, but the essence remains the same. These tasks are not as easy to complete as they seem, but due to the influence of sunk costs, users will continue to share them in their WeChat groups and invite friends, thus forming a viral spread. Although old users can also participate in the support, since new users can increase the speed of support (for example, downloading the APP can help more/new users can cut more), these activities have become an important way for Pinduoduo to acquire new users.

2. User Activation

The so-called user activation has different definitions for different products, but generally speaking, user activation mainly refers to the user's use of the core functions of the product. For example, for Weibo, it means users browse/post Weibo; for video editing software, it means users edited a video; for Meitu XiuXiu, it means users performed photo editing operations, and so on. In the actual application process, each product needs to carefully define the standards for user activation in order to better exert its efforts on the operational side.

For Pinduoduo, the core function of the product is obviously to place an order to purchase goods. For shopping products, the way to stimulate users to make their first purchase is generally some new customers’ first order discount activities. In Pinduoduo, there are mainly the following types:

1. New members can purchase for 1 yuan

For users who use Pinduoduo for the first time, the system will pop up a new user welfare poster before entering the Pinduoduo mall, highlighting the special price of 1 yuan and taking advantage of users' desire for bargains to guide clicks. After clicking in step by step, users will find that there are more daily necessities for 1 yuan. Since it is only 1 yuan anyway, the cost of making a decision is very low. Moreover, since there is a 15-minute time limit, most users will place an order without hesitation, guiding conversion.

2. Full refund for first order of new customers

Newcomers can receive rewards after purchasing the required number of orders on the event page within 24 hours and confirming receipt. The rewards are divided into no-threshold coupon packages or WeChat cash back, with a maximum of 40 yuan.

3. Exclusive for new members

The new user exclusive offer is a promotional activity launched by the platform for new users who have not paid. When eligible users open the Pinduoduo APP, there will be a new user exclusive module on the homepage. By clicking on it, they can purchase the low-priced products exclusively for new users.

In general, it is to take advantage of the user's desire to get a bargain, and use limited-time low-priced goods, 0 yuan purchases (cash back) and other methods to reduce the user's decision-making cost for making their first purchase.

Of course, sometimes people may question the quality when buying goods that are too cheap. Pinduoduo has added words such as "7-day no-reason return" and "Return shipping included" on the product details page to reduce users' concerns in this regard.

3. User Retention

For any product, the cost of attracting new customers is very high. Therefore, it is very important to increase user retention, extend customer life cycle and reduce user churn.

1. Make users feel that it is easy to use

In order to keep users using the product, they must feel that the product is "easy to use". The concept of "easy to use" is very rich, for example, this product can meet a certain need or pain point of the user, this product's usage path is simple and clear, the user interface is pleasing to the eye, etc.

Pinduoduo has well satisfied the preference of the lower-end population for low-priced goods. When searching for the same product on Taobao, JD.com and Pinduoduo, the price is often lower on Pinduoduo.

Moreover, Pinpinduo tries to keep its product settings as simple as possible, shortening the purchase process and reducing the decision-making costs for users:

• There is no shopping cart. If you like something, you can place an order directly without hesitation.
• Free shipping for the entire store, no need to worry about the postage
• The general promotion method is to reduce prices to the lowest level, without any complicated methods such as cross-store order combination and subsidies, so that users can see real discounts. In addition, some product discounts will be marked as limited time and limited quantity, which will encourage users to make decisions early.
• Use price points to set group buying prices and regular prices, and the group buying prices are much lower than the regular prices, so that users can choose group buying without hesitation.

2. Give users a reason to come every day

The book "Games Change the World" summarizes the four major characteristics of games: goals, feedback, rules, and voluntary participation. If we can make good use of these features and combine them with the gameplay of the game to create a product, it can, to a certain extent, have the same charm as the game.

Pinduoduo can be said to be the shopping software that has mastered the concept of "gamification" to perfection. Sometimes I even suspect that it is a game software. It uses various games to increase user retention and activity, thereby increasing user value.

As far as I can see, Pinduoduo currently has the following games:

1) Duoduo Orchard

This is a cultivation game where you make fruit trees grow by watering and fertilizing them. When the fruit trees grow up, you can get corresponding medals. Then come to the orchard every year to plant fruit trees, and you can get the corresponding fruits for free when they are ripe.

The main ways to get fertilizers are signing in, browsing popular products, and group buying, while the main ways to get water drops are smashing golden eggs, browsing products, group buying, signing in, experiencing small circles, browsing free benefits, watching videos/live broadcasts, buying train tickets, completing tasks, inviting friends to help, etc., which are mainly combined with the functions of the product.

The goal is very clear, which is to make the fruit trees grow, and we can get timely feedback through the shape and progress bar of the fruit trees to understand what stage the fruit trees have reached. The corresponding rules are also very clear, which is to make fruit trees grow through watering and fertilizing, and there are also guidelines on the specific ways to obtain water droplets and fertilizers. Users participate completely voluntarily and can quit at any time, but most people are affected by sunk costs, and once they start planting trees, it is difficult for them to stop. Therefore, Pinduoduo can increase user retention through this game, and at the same time guide users to use other features it wants to promote through various ways of obtaining water droplets and fertilizers.

2) Duoduo Ranch

It is very similar to Duoduo Orchard, and is also a cultivation game, but it is changed to raising cows to earn milk (including other snacks). I won’t go into details.

3) Duoduoai Elimination

In fact, it is a replica of the previously popular CandyCrush, where users can accumulate bonuses by completing levels. But on this interface we can also see the entrances to many other games, such as "Duoduo Rich Man" (a game similar to Monopoly), "Grow Flowers to Get Goods" (also a cultivation game, but you first select a product and then get it by growing flowers)

4) My steps

Users can accumulate steps every day by walking or completing tasks. Steps can be exchanged for health dollars, which can be exchanged for cash. In other words, users can "exchange money" while walking, which not only encourages users to exercise, but also increases users' continued visits to Pinduoduo.

In addition to these games with obvious entrances, Pinduoduo has also placed various types of games on many second- and third-level pages, making it difficult to guard against. There are even games like Landlord and Gold Mining!

4. Revenue

For a product, there are many ways to generate revenue, such as selling value-added services, selling advertising space, selling products, etc. For Pinduoduo, the most direct way to make profits is to let users place orders and buy not just once, but to form continuous repeat purchases.

1. Accurate and personalized product recommendations

First of all, the product information flow on Pinduoduo’s homepage, personal center, etc. are all recommended based on the user’s browsing history. By continuously appearing in front of consumers, the user’s purchasing mindset is gradually strengthened, and ultimately an order is guided.

The second is the “Promotion Notification” in the “Chat” section, which also pushes customized promotion information based on the user’s browsing and preferences. Moreover, these push copywritings are all promotional interest-oriented, which are very tempting to users who have just searched for this product, such as "Are you sure you don't want it? XX is only 8.8 yuan today!", "The merchant has agreed: free gift", "XXX: Pay ¥1.00 to take the product away"...

2. Display other users’ successful purchase information

One of the biggest differences between online shopping and offline shopping is that users cannot see the actual product when purchasing. In this case, the reviews of other users who have already purchased the product are the most important source of information for users when placing an order.

The most direct way is the product evaluation section, which uses the user's text, pictures and videos to further obtain product information and reduce trial and error costs. Of course, there is a lot of room for manipulation. Many merchants will put notes in the package promising cash back for good reviews, and distort product reviews by guiding them to give good reviews. Therefore, users should pay more attention to the negative reviews in the product reviews.

Since the authenticity of online buyer reviews is questionable, the "small circle" created using circles of acquaintances is relatively more trustworthy. Through Pinduoduo's Pinxiaoquan, users can see what their friends have purchased on Pinduoduo. If they want to buy the same product, they can directly ask this friend, and the authenticity can be relatively guaranteed. However, Pinxiaoquan also involves a privacy issue, which leads to many people not being willing to turn on this function, which makes the effect of this function relatively limited.

Pinduoduo will also put information such as "XX just successfully placed an order" and "XX gave a five-star review a few hours ago" on the product details page. This is actually a kind of purchasing incentive, which stimulates people's herd mentality and makes users think: if so many people have bought it and given it good reviews, the products here should not be too bad.

3. Cashback for group purchases

You will receive a certain amount of cash back when you place group orders on Pinduoduo. Once you accumulate a certain amount of cash back, you can redeem it for cash voucher rewards with no threshold. Moreover, the progress bar will provide timely feedback on your group order progress, and some "gamification" methods are used to encourage users to continue placing orders for cash coupon rewards. And similarly, users are influenced by sunk costs and loss aversion and are reluctant to stop once they start.

4. Save money with monthly pass

The cost of opening a Pinduoduo money-saving monthly card is extremely low. Generally, you only need to buy it two or three times to save the card fee, so users are generally willing to buy this card. But once you buy it, you will think about how to buy more to earn back the card fee as soon as possible. Moreover, there are now two versions of the money-saving monthly card, one is the trial monthly card, and the other is the normal version of the money-saving monthly card. The purchase cost of the trial monthly card is lower, but the coupon amount is low. Although there are 4 5-yuan no-threshold coupons, you need to participate in the "treasure hunt" game to get them.

5. 10 billion yuan subsidy

By making real concessions, users can buy authentic and high-quality products with confidence. In particular, some digital products included in the 10 billion yuan subsidy, such as Apple mobile phones and iPads, have great discounts compared to the market price, and because of the platform's authenticity guarantee, many users exclaim "it's so good" after purchasing them, and word-of-mouth can also stimulate another wave of purchases.

5. Referral

In terms of recommendation and dissemination, Pinduoduo has actually perfectly combined attracting new customers with it. Since its most important means of attracting new customers is to use various 0 yuan products and red envelopes to share them in WeChat groups, the process of recommendation and dissemination has also been carried out during this period.

In addition, because Pinduoduo has strengthened its control over counterfeit goods in the past two years, coupled with the advantages of the platform, many users have been able to select many high-quality and low-priced products on Pinduoduo. This has also become a kind of social currency among users, making users willing to make word-of-mouth recommendations in their social circles. Therefore, high-quality products and services that satisfy users are the most important motivations for users to spread the word spontaneously.

Although various problems, big and small, have emerged during Pinduoduo's rapid growth, its approach to user growth is indeed worth learning from. What is mentioned in this article is just the tip of the iceberg. I hope that when you use Pinduoduo in your daily life, you can think more about the underlying logic behind its gameplay and apply it to your work and life. Perhaps this is the most valuable part of Pinduoduo to us.

Author: yiyigreen

Source: yiyigreen