Yuanfudao Product Analysis

How did Yuanfudao, which has only been established for 8 years, quickly rise to become the largest unicorn in the global education industry? What is the current development status of the entire online education industry?

This article will analyze Yuanfudao’s perspective and give you an in-depth understanding of the operating logic of this company and the K12 online education industry.

This article will analyze from the following aspects:

1. Industry Analysis
2. Competitive product analysis
3. User Value Analysis
4. Business value analysis
5. Product Iteration Analysis
6. Product structure analysis
7. Operational Analysis
8. Summarize

1. Industry Analysis

The K12 online education industry is an online model produced by the education industry with the development of the Internet. It is a training industry with students from the first grade of elementary school to the third grade of high school as target users. Compared with the traditional offline education industry, it breaks the limitations of time and space and provides more high-quality educational resources for areas with a shortage of educational resources.

So in just a few years, what has made the K12 online education industry become a dark horse in the Internet industry?

Since the education industry is an industry deeply affected by macro factors, we will use the PEST model to explore the reasons behind it.

1. Politics

• 2016.2 Internet education was included in the new version of the "National Key High-tech Fields" list. Internet education companies have the opportunity to be recognized as high-tech enterprises and enjoy tax incentives.
• 2017.1 The 13th Five-Year Plan for the Development of National Education encourages social forces and private capital to enter the Internet field in various ways, promoting the development of the new "Internet + Education" business model
• In July 2019, the Ministry of Education, together with the Cyberspace Administration of China, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration of Radio, Film and Television, and the National Office against Pornography and Illegal Publications, jointly issued the "Implementation Opinions on Standardizing Off-campus Online Training", which is the first online training standard document issued at the national level.

The release of various policies and regulations are encouraging and promoting the development of Internet online education and the standardized operation of the subsequent industry.

2. Economy

According to the National Bureau of Statistics, my country's GDP in 2019 was 99,086.5 billion yuan, a year-on-year increase of 6.1%. China's per capita gross national income exceeded US$10,000 for the first time, and the national per capita disposable income was 30,733 yuan for the whole year, an increase of 8.9% over the previous year. The per capita consumption expenditure of the national residents was 21,559 yuan in the whole year, an increase of 8.6% over the previous year.

In addition, with the upgrading of my country's consumption structure and the improvement of people's living standards, the proportion of per capita cultural, educational and entertainment expenditure in total consumption has continued to grow. According to data analysis by the National Bureau of Statistics: In 2019, the per capita education, culture and entertainment expenditure of urban residents continued to increase, accounting for 11.7% of consumer expenditure. This shows that parents pay more and more attention to their children's education and are willing to invest money in their children's education and learning.

At the same time, the scale of China's K12 online education market has been showing stable and sustained growth. According to iMedia Research, the scale of China's online education users was 104 million in 2016. By 2019, the number of users had risen to 259 million, an increase of 149%. Judging from the scale and forecast data of online education users in China from 2016 to 2021, it is estimated that the scale of online education users will reach 446 million in 2021.

3. Society and culture

From the perspective of the entire society, the imbalance of educational resources is a problem faced by the entire society, which is in sharp conflict with the rigid demand for Chinese-style exam-oriented education.

For most families, education is still the only shortcut to their children's development. However, good educational resources are, on the one hand, distributed extremely unevenly, especially in terms of teachers. There is a huge gap between first- and second-tier cities and other underdeveloped cities. On the other hand, good schools have high admission thresholds, and many families cannot enter. Therefore, pursuing better education through technological means becomes their only option.

4. Technology

The continuous development and advancement of technology has brought many improvements and changes to the online K12 education industry.

• The gradual popularization of mobile Internet since 2012 opened a new chapter for online education. Education live broadcast platforms began to emerge in 2014, breaking the limitations of time and space and expanding the use scenarios of online learning.
• The improvement in hardware performance of mobile phones, tablets, etc. has greatly improved the user experience of online learning: higher-performance devices provide a better experience.
• With the popularization of 4G, the research and development and application of 5G, and the support of big databases, teaching students in accordance with their aptitude is no longer empty talk. Accurate user portrait analysis allows users to truly choose the courses and education that suit them.

All of the above factors have together driven the rapid development of the online education industry in recent years. So what will be the development trend of this industry in the next few years? Is there enough market space?

According to statistics and calculations by iResearch Consulting, the market size of China's online education industry in 2020 was 257.3 billion yuan, with a CAGR of 34.5% over the past four years. Among them, the accelerated online process of K12 subject training is the main contributing factor to the rapid growth of the online education market.

Therefore, we can see that there is still a lot of room for this market, and it will continue to grow rapidly in the next few years.

2. Competitive Product Analysis

Faced with the promising online education industry, a large number of players have emerged to participate. Traditional offline educational institutions have started online education in order to maintain their competitiveness, upgrade and expand their businesses, and open up the industrial chain.

In May 2018, New Oriental launched Oriental Quark, which was renamed New Oriental Primary and Secondary School Online School in 2019. It focuses on online courses for primary and secondary schools, and will later develop to cover adult education.

Internet giants such as BAT and Toutiao are optimistic about the online education industry and have taken advantage of their traffic to enter the market.

In 2019, ByteDance acquired the Internet mathematics education platform Tsinghua University and Peking University Online School, and launched the incubation project Dali Classroom. 100% of the teachers are from Tsinghua University and Peking University. The teaching method is "dual teacher model", and the courses cover all subjects in primary and secondary schools.

On March 7, 2020, ByteDance’s AI English enlightenment course “GuaGuaLong English” was launched, dedicated to providing multi-disciplinary online systematic AI enlightenment education for children aged 2-8, which mainly includes three major course systems: English, Chinese, and thinking.

At the same time, pure online education companies are constantly emerging and flourishing in various segments.

In July 2016, Zuoyebang, which focuses on taking photos to search for questions, officially launched the live class function, providing online teachers and course services, covering all subjects in primary and secondary schools.

In 2016, the Zhangmen One-to-One APP was officially launched, focusing on providing one-to-one customized online tutoring for primary and secondary school students across the country. Its unique "4in1" teaching guidance system shines.

In 2019, Zhangmen One-to-One received US$350 million in Series E financing, setting a new record for the highest financing in the K12 online education one-to-one full-subject tutoring track.

Gaotu Classroom was officially launched in November 2016. Backed by SXU, it focuses on K12 online education and also adopts the online live broadcast dual-teacher model of "famous teachers teaching + dual-teacher tutoring".

The online education business conducted by Internet companies has a strong traffic entrance, but lacks basic education industry experience; traditional offline education institutions have rich experience in the education industry and long-term face-to-face teaching experience with users, but have insufficient traffic entrances, their scale is restricted by geographical location, and their market costs are relatively high.

According to the "Online Education Market White Paper 2020 and Outlook Report 2021" released by the Virtual Economy and Data Science Research Center of the Chinese Academy of Sciences in 2020, Yuanfudao leads the way with more than 4 million paying users for full-price courses and corporate revenue exceeding 28 billion, ranking in the first echelon of the industry; Zuoyebang has more than 1.3 million paying users for full-price courses and a large number of APP downloads. It has an important position in the industry and belongs to the second echelon; other companies with relatively low market share belong to the third echelon.

Yuanfudao and Zuoyebang are both leading comprehensive K12 education companies with similar user groups and similar scale, and are direct competitors. So, we will take the growth paths and business models of the two companies as the entry point to gain a deeper understanding of the differences between them.

1. Yuanfudao

• Yuanfudao Online Education was founded in 2012 and received RMB 10 million in Series A funding from IDG in August of that year.
• In August 2013, it received $7 million in Series B funding from Matrix Partners China and IDG, and launched the Yuantiku APP in October of that year.
• In July 2014, it received $15 million in Series C funding from Matrix Partners China and IDG, and in October of that year, it launched the Xiaoyuan Question Search APP.
• In March 2015, it received $60 million in Series D funding from China Media Capital, New Horizon Capital, IDG Capital, and Matrix Partners China, and in May of that year, it launched the Yuanfudao online course APP.
• In May 2016, Yuanfudao received USD 40 million in Series D+ funding from Tencent, which was a major strategic investment by Tencent in the field of K-12 online education.
• In May 2017, Yuanfudao received a round E financing of US$120 million from PE Warburg Pincus and Tencent. In December of the same year, the Xiaoyuan Oral Arithmetic APP was launched.
• In December 2018, Yuanfudao received a $300 million Series F financing led by Tencent, with participation from Warburg Pincus, Matrix Partners China and IDG’s original shareholders. After the financing, Yuanfudao’s market value was estimated to exceed $3 billion.
• On March 31, 2020, Yuanfudao completed its latest round of financing of US$1 billion. This round of financing was led by Hillhouse Capital, followed by Tencent, Boyu Capital and IDG Capital. After the financing was completed, Yuanfudao's valuation reached US$7.8 billion.
• On October 22, 2020, Yuanfudao announced that it had completed a total of US$2.2 billion in financing in rounds G1 and G2. After the financing was completed, the valuation of Yuanfudao Online Education Company reached US$15.5 billion, exceeding the Indian education technology company BYJU'S and ranking first among the global education technology unicorn companies.

Core business model: dual-teacher teaching - large class lectures, small class tutoring and question-answering mode.

Teaching Staff: Most of the teaching staff graduated from prestigious universities at home and abroad such as 985 and 211 or have many years of front-line teaching experience. The admission of teaching staff is extremely strict every year, with an admission rate of only about 1%. New teachers must undergo 12 weeks of training and 200 hours of trial teaching before they can officially teach.

Tutor: Each class is equipped with a tutor who provides individual WeChat Q&A, reading companionship, exercise explanation, class summary and other services to consolidate classroom knowledge.

Course selection mode: Yuanfudao will provide one-on-one online consultation for every registered student, clearly understand their learning situation, the points they hope to improve, accurately profile their users, and then recommend suitable courses for them.

Teaching mode: In order to improve the quality of classes, we adopt a dual-teacher mode of large-class teaching and small-class Q&A. The main teacher is responsible for explaining the course content, and the tutoring class teacher fully assists in classroom learning, answering questions after class, and correcting and explaining homework, etc.

Traffic acquisition: In the early stage, Yuanfudao relied on the large number of users accumulated by its two free tool software, Yuantiku APP and Xiaoyuansouti, to attract traffic at a low customer acquisition cost. In the mid-term, with the support of capital, technology, and traffic, it invested heavily in advertising to increase exposure and popularity to obtain traffic. In the later stage, it reached strategic cooperation with the authoritative technology competition program "The Brain" and the national education program "Study Strong Country" to further build brand awareness, consolidate brand positioning, and acquire more users.

Track layout: In 2019, Yuanfudao announced the closure of its one-to-one tutoring business and will focus on class business.

2. Homework Helper

• On January 15, 2014, Zuoyebang Android was officially released and had been downloaded by 300,000 users that month.
• In September 2015, Zuoyebang received a $25 million Series A funding round from Sequoia Capital and Legend Capital. In the same year, it announced that it would separate from Baidu and operate independently.
• In September 2016, Zuoyebang received a $60 million Series B financing led by GGV and Xianghe, followed by Sequoia and Legend Capital.
• In August 2017, Zuoyebang received a $150 million Series C financing led by H Capital, followed by Tiger Fund, Sequoia Capital, Legend Capital, GGV, and Xianghe Capital.
• In July 2018, Zuoyebang received USD 350 million in Series D funding, led by Coatue, with participation from Goldman Sachs, Primavera Capital, Sequoia Capital, GGV, Xianghe, Tiantu, NEA, Taihe and other new and old investors.
• In November 2018, Zuoyebang received $500 million in D+ funding from SoftBank

Unlike Yuanfudao, Zuoyebang, which also started out as a search tool, has not given up on the search tool business. Instead, it has continued to enrich this business while opening up the online live teaching business.

Core business model: large-class teaching, exercise practice, search tools

Teaching staff: More than 40% of the teachers are from first- and second-tier cities, and 60% of the teachers have an average teaching experience of more than 3 years. 985/211 universities account for more than 50%

Tutors: They also maintain classroom order, adjust the learning atmosphere, and answer questions after class.

Course selection mode: It also provides accurate positioning services and recommends courses that are more suitable for users based on their score stage.

Teaching method: A dual-teacher service model is adopted with large classes teaching and small classes answering questions.

Business expansion: On July 7, 2016, the live class function of Zuoyebang was launched, providing online teachers and course services, and allowing interaction and tutoring on mobile phones. This means that Zuoyebang, which has always been based on photo search as its core business, has officially entered an era with live teaching as its core business.

Summarize:

Development time:

• Zuoyebang APP: launched in 2014, Zuoyebang online courses launched in 2016
• Yuanfudao APP: launched in 2015

Traffic acquisition: Yuanfudao mainly relied on the large number of users accumulated by Xiaoyuan Search Questions and Xiaoyuan Kousuan in the early stage and the traffic entrances of the two platforms to complete the acquisition of the first batch of users. In the middle and late stages of development, on the one hand, Yuanfudao invested heavily in advertising with the support of traffic, technology, and capital. On the other hand, Yuanfudao further increased its popularity by reaching strategic cooperation with science and technology education programs such as The Brain and Study Strong China. In the early stage, Zuoyebang also relied on the large number of users accumulated in the tool search vertical field to acquire the first batch of users. In the middle and late stages, it also reached strategic cooperation through advertising and with major educational programs and platforms.

Financing situation: It can be seen that Zuoyebang has been smooth sailing on the road to financing, and major well-known investment companies are competing for financing. Yuanfudao is making great strides, not only attracting investments from major well-known investment companies, but also from technology and internet companies such as Tencent. It is favored by various industries and has become the biggest dark horse in online education.

Core business: Yuanfudao APP focuses on online courses, providing a full range of course services for primary, junior high and high schools, achieving precision and specialization. Zuoyebang has three core businesses: live classes, exercise practice, and search tools: including photo search, word lookup, Chinese composition, English composition, and ancient Chinese text assistant.

From the above analysis, it can be seen that Zuoyebang has richer platform business, and is backed by Baidu's strong technology and resource support, and has strong technical competitiveness, but is slightly insufficient in teaching staff; while from the development of Yuanfudao, it is favored by multiple markets, has a lot of financial advantages, and focuses on its own brand promotion. In terms of teachers, Yuanfudao has stricter recruitment conditions and its teaching staff is stronger than Zuoyebang, which is what parents are most concerned about. This is one of the reasons why Yuanfudao is more popular among parents. The core businesses of both companies include K12 online education courses, and both rely on their own large number of accumulated users in the early stage. They have the same teaching model, both adopt large-class teaching and small-class question-and-answer model, and have developed well, but it remains to be seen which one will outperform in the future.

3. User Value Analysis

In the K12 online education market, there are four main participants: parents, students, teachers, and platforms. The business logic diagram of Yuanfudao is as follows:

If a platform wants to achieve rapid growth, it must meet the needs of all three parties.

Next, let’s explore the needs of these three parties and how Yuanfudao can better meet their needs.

1. Parents

As payers of K12 education products, parents of children from elementary to high school are gradually getting younger, mainly those born in the 1980s and 1990s. They are more receptive to new things and their values ​​towards education are becoming increasingly diverse. Parents have different expectations for children at different stages of education.

Primary school stage: The primary school stage is a critical period for cultivating children's good interests and thinking habits. However, children at this stage generally have poor autonomy, love to play, and have weak learning awareness. At the same time, since children at this stage face little pressure to enter higher education, parents are more focused on stimulating children's curiosity on the basis of laying a solid foundation in cultural courses, and expanding their extracurricular interests and hobbies, such as spoken English, programming, mathematical thinking, ancient poetry, humanities, etc.

Junior high school stage: The number of subjects in junior and senior high school increases, the knowledge scope is broad, the knowledge system is complex, and the knowledge structure of liberal arts and science is quite different. Many children show difficulty in this learning stage, find it difficult to keep up with the learning progress, and find it difficult to understand and master the learning content. At the same time, many parents consider the transition from junior high school to high school to be the first watershed for their children, which means whether they can enter a good high school, enjoy a better educational environment, and receive better educational resources. At this time, parents' demand for online education is clearer and more utilitarian.

High school stage: High school is generally considered by parents to be the most critical stage of education. Whether a child can enter a good university will greatly affect the child's future. In the environment of exam-oriented education, parents are more eager for the utilitarian demand for education. Parents take exams and further studies as the goal - to consolidate the foundation, strengthen and make up for the weak, balance the subjects, and improve the academic performance. Due to the high cost of trial and error, parents are particularly cautious in choosing educational tutoring.

To sum up, parents' demands for tutoring education are roughly as follows: for the primary school stage, focus on the cultivation of interests, thinking, and cultural foundation, especially in English. The main focus in middle school is to expand knowledge and improve academic performance. In high school, the need for exams is stronger, and the main goal is to improve academic performance.

After a strong demand is generated, the learning methods adopted by parents are mainly the following:

1) Rely on existing school resources

China's compulsory education is a 9-year system. In an environment where exam-oriented education and indicators are king, education is not only valued by parents, but has also been quantified as a key indicator that can represent the quality of a school. Schools and teachers also pay great attention to the quality of education and invest huge amounts in education. Especially in recent years, children's courses are becoming more and more numerous and richer. Many parents believe that school education can meet their needs, but there are still opportunities for children's interests and hobbies that have not been developed too much. In underdeveloped cities, school education resources are insufficient, teaching is not professional enough, and there is even a phenomenon of one teacher holding multiple positions, which makes parents very worried.

2) Self-tutoring

Parents who choose to tutor their children themselves are mostly parents of children in primary school. The reason they choose this method is that, first, parents believe that the subjects their children learn at this stage are relatively simple, and they are capable of tutoring their children while saving money at the same time; second, parents believe that this method is more flexible and free, which is reflected in the fact that parents and children can flexibly and freely arrange time and space for tutoring; parents understand their children's learning situation better, and can provide flexible tutoring based on the situation, which is more targeted, and the effect is more obvious and faster.

However, there are also prominent problems with this approach. First of all, the vast majority of parents have no teaching experience and are worried that their knowledge reserves are insufficient to provide systematic teaching assistance to their children, which may even affect their children's thinking habits. Most of the parents' time and attention are occupied by work. After all, they are not professional teachers and cannot devote all their time and energy to tutoring their children. Intermittent, spare time, and fragmented tutoring has minimal effect on their children's education. Secondly, parents do not have the methods and abilities to cultivate their children's interests and hobbies. Interest is the best teacher for children. Only interest is the greatest driving force for children to learn and explore in depth.

3) Home tutoring

From the survey on part-time jobs for college students in major universities, we learned that home teaching is also one of the favorite methods for parents. They believe that, firstly, it can save time and space costs. Compared with traditional institutions, children do not have to spend time and energy on traveling and adapting to a new learning environment. Second, one-on-one tutoring at home is highly targeted. Teachers can develop targeted tutoring plans based on the child’s academic performance and focus on tutoring in weak subjects to achieve the goal of strengthening and making up for weaknesses.

However, in the tutoring market, college students and part-time teachers are prevalent. There are problems such as lack of professional teaching skills and characteristics, overly traditional teaching methods, lack of in-depth teaching, and difficulty in cultivating children's ability to solve difficult problems from a systematic thinking perspective.

4) Training institutions

This is also the most popular method among parents. The main reason is that parents believe that training institutions are more professional, authoritative and easier to cultivate children's thinking ability.

At present, when parents choose training institutions for their children, most of them still choose offline tutoring classes, and relatively few choose to teach only online, which shows that there is still huge room for the development of online training.

Although offline tutoring classes have many advantages, their disadvantages are also obvious. The market is not standardized. For example, there are unreasonable fees, uneven teacher levels, too many students attending classes at the same time, low teaching efficiency, time and space constraints, and it is inconvenient for parents to pick up their children, or even have no time to pick up their children. These problems have led to a significant increase in parents' costs in terms of money and time.

It can be seen that these four methods have their own advantages and disadvantages, but none of them can meet the current needs of parents well.

2. Children

The users of K12 education are all those born in the 2000s. Compared with the instrumental attitude of those born in the 1980s and 1990s towards the Internet, those born in the 2000s, as the "natives" of the Internet, often regard it as a "necessity of life."

The high penetration rate of the Internet in their lives has led to mutual influence and interaction between the Internet and their lifestyles: on the one hand, long-term immersion in the online world has made them more accustomed to images and videos than text, and has also developed a fragmented lifestyle, especially for primary school children. Children of this school age group have poor purposefulness, and unintentional attention still plays a big role. When disturbed by new and strange stimuli, their attention is easily distracted; therefore, in order to gain their attention, the content must be lively and vivid in form, otherwise there is no way to "please" them.

For children in junior high school, they are in adolescence and are under pressure to enter junior high school. Overly traditional and rigid tutoring can easily make them dislike studying and become resistant. Students need to have their own study habits and correct study methods. At the same time, communication between teachers and children and psychological counseling are also particularly important.

High school stage: At this stage, students are divided into arts and science. Because the subject knowledge is more complicated, the gap between students is more obvious. Students not only need the correct learning methods and a lot of test training, but also need to enhance their self-confidence. Specialized tutoring, efficient specialized and personalized tutoring is what they really need.

We can see that children of different school ages have different problems, but they are relatively similar in junior high and high school, and it is not easy to solve these problems.

3. Teacher

The core of any education and training institution must be the teachers, and the quality of teachers is also one of the core concerns of users in brand selection, which is also one of the core competitiveness of all education and training institutions.

In 2015, the Ministry of Education issued the regulation “Strictly prohibiting primary and secondary schools and in-service primary and secondary school teachers from giving paid tutoring”, which made it even more difficult for most teachers who already had meager salaries. Especially in an era of rapidly rising housing and commodity prices, many teachers have to look for other part-time jobs to increase their income in order to make a living and have a better life.

It can be seen that faced with meager salaries and increasing life pressures, teachers have an increasingly urgent need to make money. In the context of the government banning paid extracurricular tutoring while encouraging the development of Internet + education, teachers seem to have seen new options.

According to a survey conducted by iResearch, Chinese parents currently pay more attention to the richness of teaching models, quality of teaching materials, fun of courses, and quality of teacher teaching when choosing the brand of a tutoring institution. Relatively speaking, affordable price is what parents care least about.

From the above analysis, we can find that in the matter of educational counseling, the problems with parents' existing solutions are mainly:

• The traditional school teaching method is too rigid and cannot cultivate children's interests and hobbies;
• Concerns that the quality of teachers varies greatly and it is difficult to improve the skills and knowledge of one’s children;
• The question of whether the teaching method is systematic or not, and the worry that it cannot exercise children's thinking ability;
• The question of whether personalized teaching is possible, especially for junior high and high school students, the trial and error cost for parents is extremely high;
• Whether it is necessary to spend extra time to pick up and drop off the children, etc.

Children’s main demand is fun. They need fresh and interesting teaching methods to make learning more interesting and more attention-grabbing. In addition, efficient, personalized and goal-oriented tutoring is also what they need.

Similarly, teachers also have a strong desire to increase their income, status, and realize their self-worth. How does Yuanfudao, as a platform, better meet their needs and attract them to this platform?

4. Platform

1) Control of teacher quality

As we mentioned above, Yuanfudao has a very strong faculty and extremely strict requirements for recruiting main teachers. Most of the team members graduated from prestigious universities at home and abroad such as 985 and 211, or have many years of front-line teaching experience. The annual admission rate is only about 1%, and new teachers must undergo 12 weeks of training and 200 hours of trial teaching before they can officially teach.

Such a strict recruitment and admission system can guarantee the quality of teachers to the greatest extent, thus avoiding parents' concerns about the uneven level of teachers in offline training institutions; at the same time, each teacher has a corresponding detailed introduction, including a summary of teacher qualifications, teaching experience, and teaching characteristics, which eliminates parents' doubts and concerns about the teacher's level.

2) Optimize the teaching system

Yuanfudao has never stopped exploring the teaching system. After closing the "1 to 1" business model, Yuanfudao focused on exploring large-class dual-teacher courses. The large-class dual-teacher model reduces the demand for the number of main teachers, and the one-to-many teaching is closer to the school classroom scenario. At the same time, each class is equipped with a head teacher who is responsible for answering questions after class, accompanying and assisting students, and providing feedback on learning conditions.

3) Personalized course recommendations

In view of the fact that the subject knowledge scope has expanded and the knowledge system has become more complex and huge in junior and senior high school, students are more likely to have the problem of subject level gap. Yuanfudao has launched courses tailored for students with different goals and ages, which has effectively solved the needs of students for personalized tutoring.

4) Make the course more interesting

Learning itself is a boring thing, especially for primary school children. They cannot establish a learning consciousness, have no interest in learning, and their attention is easily distracted, which are common problems for them. For primary school courses, Yuanfudao has created an immersive classroom to increase the fun of the courses.

The interactive questions and scenarios, with the help of animations that recreate the scenarios, make children’s understanding of knowledge more vivid and easier to concentrate.

The original teaching animation closely follows the course content and runs through the course in the form of animation, making children more interested, more willing to learn, and able to solve difficult problems easily.

Gold coin reward mechanism: students can get gold coins every time they answer a question, and the gold coins can be exchanged for corresponding items. The gold coin reward mechanism is used to enhance classroom interactivity, allowing children to gain a sense of accomplishment from learning, stimulating their learning potential and increasing their enthusiasm for learning.

5) Competitive salary system

When analyzing the needs of teachers, we mentioned that their normal income is relatively low. Faced with the increase in living and survival costs and the pursuit of quality of life, teachers hope to earn more money; Yuanfudao provides a powerful salary system. From Yuanfudao's recruitment, we can see that the salary of the main teachers is around 250,000 to 500,000 yuan per year. For the low-income teacher group, the temptation is huge. Judging from the strict 1% admission rate, Yuanfudao also attracts a large number of teachers to stop every year.

Through the above analysis, we can find that compared with other educational training and tutoring methods, Yuanfudao continuously adjusts and optimizes according to the needs of each user, which explains why Yuanfudao was able to break through the siege in a short period of time and was welcomed by a large number of parents and children.

4. Commercial Value Analysis

We know that the ultimate goal of any product is to create commercial value. A product that cannot create commercial value cannot develop for a long time. Revenue is an important indicator for judging the commercial value of a product. Yuanfudao's revenue mainly comes from K12 live large-class courses. Here, we use the commonly used data indicator GMV (that is, number of users * conversion rate * average order value) of e-commerce to analyze whether Yuanfudao's core business is healthy.

1. Increase the number of platform users

To achieve revenue, the first step is to have platform users, which is the foundation for achieving revenue. So how does Yuanfudao increase the number of users on its platform?

We can roughly divide it into two ways: paid channels and free channels

1) Large-scale advertising investment

• Place television commercials on CCTV.
• Sponsored the popular variety show, "Ace vs. Ace".
• Strategic cooperation, and the sponsorship and cooperation with CCTV for many science and education programs, such as "Let's Talk" sponsored by CCTV in June 2016, and the exclusive online education partner of "The Brain" for the third consecutive year from 2017 to 2020. In August 2019, Yuanfudao cooperated with Xuexi Qiangguo for the first time, and Yuanfudao's exclusive original course "Dore-Mi Classical Music Enlightenment Course" was selected for "Xuexi Qiangguo" and received a key recommendation.
• Free live classes. In January 2020, we invited top scholars to give free master humanities classes, bringing together scholars such as Zhou Guoping, Yu Qiuyu, Meng Man, Yi Zhongtian, Kang Zhen, Ji Lianhai, and Liu Yong to teach Chinese culture live.
• Academic cooperation: In August 2019, Lin Yuanfudao invited Academician Lin Qun to attend a special sharing session, bringing the deep thinking of a mathematician to the Yuanfudao mathematics teaching and research team, as well as his insights and experiences accumulated in many years of mathematical research and education and teaching.
• Live streaming is the most popular way of selling goods at present. Yuanfudao invited Luo Yonghao to sell courses for Yuanfudao online on Douyin, which combines selling courses with brand promotion and achieved very good results.
• To support public welfare, in 2020, the year of the epidemic, Yuanfudao responded to the government's call to suspend classes but not learning, and launched free live classes as soon as possible, and launched online mock exams for the CCP college entrance examination candidates.

In 2021, we participated in the award ceremony for CCTV's large-scale charity event "Looking for You in the Crowd - 2020 "Looking for the Most Beautiful Filial Teenager"" and provided scholarships for the teenagers.

We can see that Yuanfudao has invested a lot of money and energy in advertising. It is not just a simple advertising and marketing investment, but also has its own courses, which have greatly enhanced its brand awareness.

2) Excellent product reputation

According to statistics, more than 60% of parents obtain information about training classes through introductions from relatives, friends and colleagues, accounting for 61.25%; it can be seen that the fission dissemination through interpersonal relationships is a major way for K12 online education platforms to attract new users.

So how can we get friends to recommend each other? Word of mouth plays a very critical role, because educational products are a type of product that requires users to invest a lot of time and money, so the decision-making cost is very high. In order to improve the reputation of its products, Yuanfudao also spares no effort in activities and user service experience.

1. Satisfy parents' desire to share and vanity. By forming classroom reports, test reports, etc., it is convenient for parents to share their children's progress and learning performance on WeChat Moments, thus creating word-of-mouth fission among WeChat Moments.
2. Promote new customers by providing mutual benefits. For example: invite friends to attend classes together and win gifts, and get the same training equipment as the strongest brain for free; invite new users to attend classes and get monkey coins, and get continuous gifts. These activities motivate and stimulate users, increase user participation, and are beneficial to brand image promotion and promotion of related courses.

3) Inflow from other platforms

As Yuanfudao continues to grow and develop, its products have formed a closed loop of preparation, teaching, practice, testing and evaluation. The products within the matrix are divided into two categories: tools and training. A good relationship between customer acquisition and traffic is formed between the two categories of products.

As of now, Yuantiku has provided 800 million practice services, Xiaoyuan Search Questions has been used by 200 million students and provided 36 billion homework tutoring sessions, and the number of Xiaoyuan Oral Arithmetic questions corrected every day exceeds 250 million; all of these provide a steady stream of traffic for Yuanfudao, its core product.

2. Improve conversion rate

After acquiring new users, how can Yuanfudao motivate users to consume and convert registered users into paying users, thereby generating commercial value? Below, we analyze in detail.

1) New member gift package event

For newly registered users, as soon as they log in and enter the APP homepage, they will be given a special gift for new users (10 yuan for a limited time course purchase), and there will also be special courses for new users, free course qualifications and other activities to encourage consumers to make their first purchase.

2) Provide high-quality and low-cost courses

Yuanfudao offers 3 yuan for 5 subjects and 10 hours of difficult and key special courses. The course quality has not been lowered due to the low price. Instead, it has given users a sense of trust through high-quality and low-priced courses on difficult and key topics. In addition, after the first payment, it will be easier to pay for the full-priced courses for the second time.

Next, let’s take a look at the page layout design of Yuanfudao.

List page:

From the list page, we can first see the goal of this course (target A, S, S+ classes) and detailed notes on the levels: difficulty and what kind of score rate is suitable for the group), class time, and judge whether it is suitable. Secondly, we can see the clear selling price and whether it meets the consumer's psychological price.

Subject List Course Page:

Create a sense of urgency: Use the registration countdown and the number of remaining places to hint to consumers that if they don’t buy now, they may not be able to buy at all. This creates a sense of urgency in consumers’ minds and encourages them to buy.

Course details page:

Create a popular atmosphere: There are course reviews under the course details page. By displaying the number of reviews and the rate of positive reviews, on the one hand, it builds user trust, and on the other hand, it creates a strong consumer popularity atmosphere.

Establish consumer protection: There is a [Service] description under the course details page, which describes in detail the services provided before, during, and after the course, so that users can understand more clearly and establish a sense of trust and security.

Free trial classes for high-quality paid courses: When users are willing to purchase courses on the platform but may have doubts about the choice of teachers, Yuanfudao provides free trial classes of the teacher's full-priced courses on the course details page, allowing users to directly experience the course effect and dispel their doubts.

Product guarantee:

At the bottom of the APP homepage, there is a public announcement of the course content commitment to establish user trust and a sense of security, allowing users to purchase with confidence and solve after-sales problems without any worries!

3) Increase the average order value

The average order value is affected by two factors: the single purchase amount and the purchase frequency. Online education platforms and e-commerce platforms are similar in that they are both e-commerce transaction platforms, but the transaction contents are different. So how does Yuanfudao increase its average order value?

For online education platforms, the core indicator is the renewal rate. In order to increase the renewal rate and thus increase the average customer price, Yuanfudao has adopted a variety of methods:

① Improve course quality

Strict recruitment requirements, from the annual acceptance rate of 1% and the small number of lecturers at Yuanfudao, we can see that Yuanfudao has very high quality requirements for teachers. Most of the lecturers are graduates from prestigious universities or have rich teaching experience and rich teaching background.

Targeted curriculum system. Help students match courses according to different grades, subjects, and students' different achievement levels. Tailor-made courses for students of different ages and with different goals, which is a good way to solve the needs of students who need personalized tutoring.

Systematic large-class courses covering all subjects. Yuanfudao has achieved full coverage of all subjects in its course system, allowing every student to find a systematic class that suits them, minimizing the loss of users due to lack of course selection.

② Improve the class experience

The class is taught by two teachers, with the main teacher responsible for explaining the course and the head teacher responsible for answering questions and explaining exercises after class. With precise division of tasks, the main teacher can devote all his energy to teaching and curriculum development.

The immersive classroom, aimed at primary school courses, makes the courses more interesting and enriched through animations and online scenarios. At the same time, it strengthens the interaction between teachers and students, so as to achieve the goal of making children fall in love with classroom learning.

Visualization of learning effects. Parents, as the decision makers on whether to purchase online education products, play a vital role for the platform. So how can parents and platforms interact and connect with each other?

• Yuanfudao launches classroom reports: parents can receive classroom reports after their children finish live classes to check their classroom performance;
• Exercise report: After completing the homework, you can receive the exercise report to check your performance.
• Exam Report: Receive an exam report after the exam to review your exam performance.

In this way, parents can understand their children’s learning situation in real time and feel their children’s progress at the first time. At the same time, they can also feel the professionalism of the platform, thereby enhancing parents’ trust and increasing the renewal rate.

Conversion of users who purchased special price courses:

Yuanfudao can attract a large number of people to make purchases by offering special price courses to new users. So how does it convert these users into consumers of full-price courses?

Service experience of special price courses: Although it is a special price course, Yuanfudao still takes the course quality and after-class services seriously. The head teacher will add all users to the WeChat group and provide class reminders and question-answering services. At the same time, the teacher will share class notes in the group.

Punch-in reward: In order to reduce the user churn rate during the special price course, Yuanfudao has set up a punch-in reward mechanism, providing free learning materials to users who punch in for classes for several consecutive days.

Distribute coupons and valuable learning materials: Users who purchase discounted courses can receive a fixed amount of coupons to offset the cost of purchasing regular-priced courses again. At the same time, they will also receive regular-priced course grade-improvement materials worth several hundred yuan.

Summary: From the above analysis, it can be seen that Yuanfudao has done a lot of work to optimize its revenue model in order to achieve the goal of attracting new customers, improving conversion rates, and increasing average order value.

In 2020, Yuanfudao had 400 million users nationwide. Its core business indicator "renewal rate" increased from the initial 30%-40% to 70%-80% in 2019. The customer acquisition cost was reduced to a few hundred yuan, and the promotion conversion rate was around 42%, ranking top in the industry. This is also the reason why Yuanfudao has won the favor of the investment community.

5. Product Iteration Analysis

In order to deeply analyze the version iteration rhythm of Yuanfudao and explore the product iteration logic, the author summarizes all the core version iterations of Yuanfudao from V1.0.1 to V7.17.0 as follows:

According to the curve distribution of the cumulative download volume of Kuchuan Yuanfudao, it can be seen that before the V2.10.0 stage, that is, before January 15, 2016, the Yuanfudao user growth curve was extremely low and almost unchanged. Between the V2.10.0 version and the V5.16.0 version, the Yuanfudao user growth curvature continued to increase at a low speed. In the V7.17.0 version, the Yuanfudao user growth curve rose with a very large curvature, which belongs to the "J-type" curve. Therefore, the author tries to divide Yuanfudao into two stages and three sections for analysis:

Before March 2017, versions V1.0-V2.10.0 were the cold start-up phase of Yuanfudao's mobile products. During this phase, Yuanfudao did not start marketing, and its users mainly came from the large number of users accumulated by Yuantiku and Xiaoyuankousuan in the early stage. During this phase, Yuanfudao's goal was also relatively clear: to explore and verify user needs.

1. Phase 1: Exploring and verifying user needs

The main operations are reflected in the following aspects:

1) Improve basic functions: such as adding pre-class photo-taking and question-answering exercises, adding the function of checking my classes in the semester, checking the delivery address and logistics information, adding the function of adding my order, adding the function of course playback, etc., are all improving basic functions.

2) Strengthen the connection and interaction between students and teachers: screening teacher reviews, contacting teachers by phone after purchasing courses, writing reviews for teachers for the first class to receive coupons, improving review information, updating teacher personal homepages, and viewing teacher reviews by course, etc., are all ways to strengthen the interaction between students and teachers. Students can have a clearer understanding of the teacher's background and it is easier for them to choose an ideal teacher. At the same time, teachers and platforms can also receive more feedback from users.

At the same time, Yuanfudao has expanded its course business: newly launched one-on-one tutoring in high school mathematics, physics and chemistry, special courses and semester classes, enriching the course variety. This is actually moving the offline training and tutoring classes directly online. In the early days of Yuanfudao, it was not sure which course model was suitable, so this is also the most effective and directly verifiable method.

The launch of special courses meets the personalized needs of students from the perspective of knowledge points, because many students have different levels of mastery of knowledge points, and special courses can enable them to achieve learning results more efficiently; at the same time, the launch of the semester class function can, on the one hand, alleviate the shortage of teacher resources caused by one-to-one tutoring for the platform, and at the same time, reduce prices, acquire more users, and reduce its own customer acquisition costs.

At the same time, a series of new sharing functions also mean that Yuanfudao has begun to build operational tools and prepare to attract users. For example, the newly added sharing function on the course introduction page and the personal teacher page means that more people will know about Yuanfudao, which means there is the possibility of more new users, indicating that Yuanfudao is already preparing for the next stage of user fission.

2. The second stage: build in-site operation tools and optimize user experience

From January 2016 to date, the curvature of Yuanfudao's user growth curve has begun to increase from version V2.10.0 to V5.5.0. At this stage, Yuanfudao mainly focuses on:

1) Further improve user experience

The course adjustment function allows users to purchase a course from a certain teacher, but:

• For some reason, the class time conflicts with other users after purchasing the course;
• Users may find a course taught by a teacher they like more or want to find out that their friends have also signed up for the course, and want to take classes in the same class as their friends and keep each other company.

The course adjustment function launched by Yuanfudao perfectly solves the needs of users in these scenarios and improves the user experience.

Users want to review the course after finishing it? However, watching the entire course would be boring and a waste of time. Yuanfudao launched a downloadable simplified version of the course replay, which cuts out non-important segments and leaves only the key knowledge points to allow users to review the knowledge points directly and efficiently.

2) Attract new users

We have seen that Yuanfudao has already launched the sharing function in the cold start phase, providing tools for attracting new users in this phase. Users can receive red envelopes by sharing their purchased courses. The company hopes to reduce operating costs and achieve user growth by actively attracting new users, which is also a common method in the e-commerce field. At the same time, as the number of users increases, Yuanfudao has launched an online customer service function in order to efficiently solve various problems and feedback from users.

3) Enhance user stickiness

The ranking list of the fastest answers to classroom quizzes can enhance users’ sense of accomplishment and participation, stimulate their interest in learning, and thus increase user stickiness.

In the process of gradual exploration, Yuanfudao gradually weakened its one-to-one tutoring business.

3. The third stage: explore and increase learning scenarios to seize market share

From V5.50 to V7017.0, we can see from the user growth curve that the growth rate of Yuanfudao user curve continues to rise. Expanding the number of users and retaining old users have become the key phased goals of product iteration.

In terms of retaining old users, Yuanfudao continues to optimize basic functions at the product level, including optimizing course reports, allowing users to evaluate teachers with tags, optimizing exercise answers, optimizing class homepages, etc., to further enhance the user experience and conversion rate of the App.

At the same time, playbacks of junior high school and primary school courses can also participate in the test, allowing users to interact even when watching playback courses. New primary school Chinese language support for reading aloud, English role-playing and foreign teacher animations have been added to enhance the fun of the class and create an immersive classroom, all of which are constantly improving and enriching the learning scene.

In August 2018, Yuanfudao closed its one-on-one tutoring business and said it would focus on class business in the future. At this time, facing a large number of online education players pouring into the market, in order to seize market share, at this stage, Yuanfudao has significantly accelerated its operating rhythm and reached strategic cooperation with major CCTV programs to enhance its brand awareness, including: In 2019, Yuanfudao's online course APP became the exclusive player registration and selection channel for "The Brain". In August 2019, Yuanfudao and Xuexi Qiangguo cooperated for the first time. Yuanfudao's exclusive original course "Do Re Mi Classical Music Enlightenment Course" was selected for "Xuexi Qiangguo" and was recommended. In January 2020, Yuanfudao announced a cooperative relationship with CCTV's "Chinese Poetry Conference" (Season 5). In July 2020, Yuanfudao announced that it had become the exclusive title sponsor partner of CCTV's "Let's Talk".

Judging from the user growth curve of Yuanfudao, the number of Yuanfudao users has shown explosive growth during this period, and there is no sign of slowing down, which shows that Yuanfudao's series of actions at the product and operational levels have achieved very good results during this period.

Overall, Yuanfudao has a particularly good sense of rhythm; it focuses on polishing products and perfecting business functions in the early stages, and is not in a hurry to promote it, because even if it attracts many new users through large-scale promotion at this time, these users will gradually disappear because the user experience is still unstable and the balance between platform resources and user needs has not been achieved.

When the user experience becomes stable and resources, costs and user needs are balanced, Yuanfudao enters its mature stage and conducts large-scale operations and promotions to continuously acquire new users. At the same time, it continuously optimizes basic functions, meets users' personalized needs, and improves user experience to retain old users. This is the overall iterative process of Yuanfudao.

6. Product structure analysis

In the iterative analysis, we analyzed the iterative steps of Yuanfudao’s product functions. Next, let’s take a look at what user needs these functions meet and how they are distributed throughout the app.

This is mainly analyzed through product structure. The following figure is the product structure mind map of Yuanfudao V7.17.0:

For the convenience of analysis, the author re-sorted the product structure of Yuanfudao according to users, scenarios, needs and functions and obtained the following table:

Although the consumer decision makers and users of Yuanfudao APP are quite different, in the primary school stage it is more about meeting the needs of parents, while in the junior high and high school stages it is more about meeting the needs of children. However, the needs of parents and children are highly overlapping, so the two are analyzed as the same user.

When users use the APP, there are three usage scenarios:

• Before purchasing a course, I want to have an understanding of the product’s brand, popularity, overall teaching staff, etc.
• During the course purchasing process, you will understand the detailed content of the course, the details of the course teacher, the payment price, etc.
• Operations on the course on the platform after purchasing the course.

1. Scenario 1: What needs do users have before purchasing and what functions does Yuanfudao use to meet these needs?

Before buying courses, parents may not be particularly familiar with the brand’s products, so they first want to have a systematic understanding of the product. Users can go to the “Home Page” after registration and login and click “Learn about Yuanfudao in One Minute” to learn about Yuanfudao’s product brand and teaching staff through videos, and learn how to choose suitable courses, class formats and after-school services through pictures and texts.

After gaining a preliminary understanding, you can start selecting courses according to the teaching, but you may still have questions about the class type, curriculum system, and qualifications of the course teachers. At this time, users can see the class type on the "Course" page after selecting the subject and grade: system class, difficult and key special courses, etc. You can find the information you want through the three-level pages of the "Course" page, the course outline, evaluation, and teacher details of the "Course Introduction Page".

After learning about the teachers and courses, users may feel that it is too one-sided and cannot truly feel the actual effect. They want to have a more intuitive understanding of the teachers' teaching style and level, as well as understand what services are available after purchasing the courses. Through the service introduction on the "Course Introduction" page and the free trial function, Yuanfudao allows users to clearly know what the course service they purchase includes and immediately experience the quality of the course service and the teacher's teaching style before paying, so as to decide whether to purchase the course.

2. Scenario 2: What are the needs of users when purchasing and what functions does Yuanfudao use to meet these needs?

When deciding to purchase the course and need to pay, users may still feel insecure and distrustful. Yuanfudao sets up a "Registration Commitment Notice" on the payment page, which requires users to read, understand and check before payment can be made. This gives users a greater sense of security and credibility.

At the same time, when purchasing products, consumers want to know more about whether there are any promotional activities, discount coupons and other information. Yuanfudao has set up a "coupon" module on the payment page, through which users can directly receive and use available coupons, effectively shortening the user's payment process and improving the payment rate to a certain extent.

In terms of payment methods, Yuanfudao fully considers the age and identity of the payer. Mainstream payment methods such as WeChat and Alipay are convenient for parents, but if used by students, "parent payment" and "QQ wallet payment" can better meet the children's payment needs; at the same time, the product price and product name are clearly displayed on the payment page, allowing users to consume with greater confidence and transparency.

3. Scenario three: What needs do users have after purchasing and what functions does Yuanfudao use to meet these needs?

After successfully purchasing a course, users need to understand the course schedule so that they can prepare well. On the first-level page "My Courses", users can view all purchased courses and filter by subject, type, and course status. Users can view the class schedule on this page and set the course calendar function at the top to display the class time of each class more clearly and in detail. At the same time, in order to prevent users from forgetting to attend classes, Yuanfudao has a "class notification" function in the settings to remind users to attend classes.

For children who are not very self-motivated in learning, especially those in elementary school, parents want to know about their children's class situation, performance in class, learning results, etc. Yuanfudao meets this demand by binding to WeChat official accounts and pushing learning reports. First, by binding to official accounts, user stickiness can be enhanced to a certain extent. After all, WeChat is used very frequently in parents' daily life and work. Second, by pushing learning reports through WeChat official accounts, parents can be more eager to share "friends circle" and it is more convenient for parents to share. This also achieves Yuanfudao's goal of using parents to achieve user fission.

After purchasing a course, users may need to change classes due to time arrangements, finding a teacher they like more, or wanting to take the same teacher's class as classmates or friends for the convenience of attending classes together, communicating, and supervising each other's learning, etc. Users can change classes through the class change function in the "Me" section of the first-level page or the customer service center.

Summary: From the above analysis, we can find that Yuanfudao’s functional design can well meet the needs of users in three scenarios: before, during and after purchasing courses. At the same time, the high-frequency functions required by different users are highlighted and reasonably distributed in the product structure. It can be regarded as a product with relatively excellent design.

7. Product Operation Analysis

A successful product, in addition to being able to meet user needs, is inseparable from product operations.

The saying "Products are responsible for giving birth, and operations are responsible for raising them" also indirectly reflects the close relationship between products and operations. So how did Yuanfudao achieve rapid growth in a short period of time through operational means?

According to the AARRR model, the author has sorted out the main operating activities of Yuanfudao since its establishment as follows:

1. Attract new customers

Method 1: Sponsor popular variety shows

• In July 2020, Yuanfudao announced that it had become the exclusive title sponsor partner of CCTV's "Let's Talk".
• 2016.6 "Let's Talk" sponsored by CCTV.

Method 2: Strategic and academic cooperation

• 2017-2020 Tutoring Online Education has been the exclusive online education partner of "The Brain" for the third consecutive year.
• In August 2019, Yuanfudao and Xuexi Qiangguo cooperated for the first time. Yuanfudao's exclusive original course "Dore-Mi Classical Music Introductory Course" was selected for "Xuexi Qiangguo" and received a key recommendation.
• We invite top scholars to give free master humanities lectures, bringing together scholars such as Zhou Guoping, Yu Qiuyu, Meng Man, Yi Zhongtian, Kang Zhen, Ji Lianhai, and Liu Yong to give live lectures on Chinese culture.
• In August 2019, Lin Yuanfudao invited Academician Lin Qun to attend a special sharing session, bringing the deep thinking of a mathematician to the Yuanfudao mathematics teaching and research team, as well as his insights and experiences accumulated in many years of mathematical research and education and teaching.

Method 3: Supporting public welfare

• In 2020, the year of the epidemic, Yuanfudao responded to the government's call to suspend classes but not learning, and immediately launched free live classes and online mock exams for the Chinese Communist Party's college entrance examination candidates.
• On January 25, 2020, it was announced that Yuanfudao had donated RMB 10 million to Wuhan to fight the novel coronavirus epidemic. The donations are mainly used to purchase medical protective supplies and testing equipment that are urgently needed by frontline medical institutions.
• In 2021, it participated in the award ceremony for CCTV's large-scale charity event "Looking for You in the Crowd-2020 "Looking for the Most Beautiful Filial Teenager" and provided student aid funds for the teenagers.

Method 4: Establish a live broadcast platform and invite anchors to promote products

In April 2020, Yuanfudao invited Luo Yonghao to sell courses for Yuanfudao through online live broadcast on Douyin, which achieved both course sales and brand promotion and achieved very good results.

2. Stimulate user activity

For users who download and register the APP, they need to be activated to open and use the APP, thereby increasing the daily and monthly activity of users. Yuanfudao increases user activity through the following methods: push messages and teacher phone reminders.

3. User retention

Gold coin task system: You can earn gold coins by signing in before class, completing after-class exercises, answering test questions correctly, and attending live classes, and redeem them for gifts (similar to a points system).

4. Increase revenue

This content is described in detail in the business value analysis section and will not be repeated here.

5. Share and spread

In order to acquire more users at a low cost, Yuanfudao has done the following in terms of user self-propagation:

• During the epidemic, in response to the government's call for "suspending school but not classes", free live courses were opened for primary and secondary school students across the country to study at home.
• At the same time, in order to alleviate the employment pressure of 2020 college graduates, Yuanfudao issued employment notices to more than 3,000 graduates from Wuhan.
• Set up sharing functions on the course introduction and teacher details pages, and launch an activity where students can receive red envelopes by sharing their course purchases.

8. Conclusion

Above, the author systematically analyzed the reasons behind the rise of Yuanfudao from seven aspects, including industry, competitors, user value, commercial value, product iteration, product structure, and operations. It can be seen that the success factors behind a product are very complex.

1) Under the influence of favorable factors such as policies, economy, technology, and social culture, the K12 online education industry has developed rapidly in recent years and will maintain stable and rapid growth in the next few years.

2) In the field of K12 online education, various industries are rushing to enter the market, including non-education giants such as Baidu and ByteDance. It can be seen that the online education industry is highly competitive in the market, but driven by the epidemic, the Matthew effect is significant, which has accelerated the reshuffle of the K12 online education industry and gradually clarified the industry structure. But at the same time, due to the complexity of demand in the education industry and the large number of sub-sectors, it is impossible for a monopoly enterprise to emerge, and the market opportunities remain huge. There are direct competitors between each track. Zuoyebang and Yuanfudao have similar user groups, similar scales, and the same core businesses. They are direct competitors. It remains to be seen who will be better in the later competition or form an acquisition monopoly.

3) In Yuanfudao, there are three main participants: students, parents and the platform. If the platform wants to achieve long-term and stable development, it needs to meet the needs of children and parents well. For educational needs, only by improving product quality and user experience can we gain user support and thus create user value.

4) From the previous analysis, we can see that Yuanfudao has also taken a series of actions to improve its GMV, but at this stage Yuanfudao has not yet achieved profitability and still relies on capital transfusions to compete in the market. This is also a common situation in the industry. For subsequent development, how Yuanfudao can achieve profitable development is also a top priority.

5) Yuanfudao's product iteration can be roughly divided into three stages: the cold start stage, to improve basic functions, explore and verify user needs; the stage of building operation tools and improving user experience. Based on the sharing function, it launched a red envelope sharing activity, and at the same time launched class adjustment and online customer service functions to better meet the various needs of users after purchasing courses and during the entire course purchasing process; the stage of increasing learning scenarios and seizing market share. Yuanfudao continuously launched learning scenarios such as text reading, role-playing, playback testing, foreign teacher animation, etc., to further meet user needs. At the same time, with the injection of a large amount of capital, Yuanfudao, which has a cash flow advantage, started a "money-burning" marketing war in brand promotion and achieved remarkable results.

6) From the above analysis of the Yuanfudao functional structure diagram, we can see that its functional structure is simple, but it is designed around the user's demand scenarios before, during and after purchase, and can well meet most of the consumers' needs.

7) As stated in the book “The Light of Operations”, products are responsible for defining and providing long-term user value, while operations are responsible for creating short-term user value and assisting products in improving long-term value. Yuanfudao focuses on building its own brand image and popularity in attracting new users. It has clear goals, and continues to sponsor and form strategic cooperation with CCTV's educational knowledge programs, with remarkable results. At the same time, its subsequent performance in improving user activity, user retention, increasing revenue, and sharing and dissemination has also been very stable, and the control and coordination between products and operations is very perfect.

IX. Future Outlook/Optimization Suggestions

Through the above analysis, we understand the reasons for the rapid rise of Yuanfudao. So where will this unicorn go in the future? Next, the author will use the SWOT model to conduct a system analysis, hoping to draw effective conclusions from it.

1. Strengths

• The "double-teacher large class" curriculum model and excellent teacher resources can well meet the needs of parents and children.
• The courses cover a wide range, including tutoring for elementary school to high school grades. Relatively speaking, its user base will be larger and more competitive.
• Brand influence. Unlike other companies, Yuanfudao does not seek "traffic" cooperation to promote its brand, but instead establishes long-term strategic cooperation with CCTV's educational knowledge programs. This makes its brand image as an educational product more deeply rooted in the hearts of the people.
• The user experience is good and can well meet the user's needs in different scenarios before, during and after purchasing courses.
• There is a complete product matrix, including Yuantiku, Xiaoyuansouti, and Xiaoyuankousuan, all of which provide a steady stream of traffic for Yuanfudao, the core product, and the converted user loyalty will be extremely high.
• In this industry, Yuanfudao has obvious advantages in corporate revenue and user scale, a deep moat, and an obvious Matthew effect.

2. Weaknesses

• The business model seems to be working, but it still relies mainly on capital transfusions and is still some distance away from achieving large-scale profitability.
• There is no differentiated competition with market competitors and the competitiveness is not strong enough.

3. Opportunities

• The combined factors of policy, economy, social culture, technology, etc. have promoted the rapid development of the K12 online education industry in recent years, and will continue to maintain a certain high growth rate in the next few years.
• The development of both online and offline education markets is mainly concentrated in first- and second-tier cities. As competition in the education and training markets in first- and second-tier cities becomes more intense, the sinking market has become a new focus.

4. Threat

• Zuoyebang’s core business is the same as Yuanfudao’s, its user scale is similar, and its financing situation is also smooth. It has strong technical support from Baidu, making it a very tough rival of Yuanfudao.
• Behind the hot scene of high growth and high financing amounts, there are rising customer acquisition costs and widespread losses in the industry.
• As online education continues to develop, it also faces stricter supervision from government departments, and its compliance costs increase.

In order to gain stronger comprehensive competitiveness and maintain long-term development, I believe Yuanfudao should also:

1) Horizontal expansion of business model. In addition to exam courses, it is also a very good choice for Yuanfudao to expand the types of courses in other directions, such as opening interest classes, such as musical instruments, Go, etc., to form differentiated competition with competitors.

2) In-depth exploration of user needs. The author believes that for children in the stage of entering school, especially those in the stage of entering junior high school and high school, psychological counseling is a huge need. Junior high school students are in adolescence, and coupled with the pressure of going to higher education, they are very likely to become bored with school and rebel. For children in the third year of high school, the psychological pressure at this stage is very enormous, but they usually rarely or are unwilling to communicate with their parents. If we could offer psychological counseling services specifically for children in the third year of junior high school and the third year of high school, I think that would be a good direction, but psychological counseling courses are somewhat difficult.

3) Strengthen the review of teacher qualifications and strictly follow the recruitment process. As government departments impose stricter supervision on the online education industry, policy restrictions are a sword of Damocles hanging over the heads of Chinese companies. If Yuanfudao wants to achieve more sustainable development, it must strictly abide by national laws and regulations. The establishment of a brand image is not a matter of one day or one night, but its collapse can happen in an instant.

4) Vertical expansion. In addition to expanding the types of courses, expanding the scale of service users is also a direction. For users who enter university after graduating from high school, there are still many rigid demands, such as CET-4, CET-6, computer exams, etc.; users who graduate from university and enter society will still have many needs, such as upgrading from junior college to undergraduate, civil service exams, etc. For Yuanfudao’s old users, they have already formed a dependence on the platform and built up a sense of trust. On this basis, Yuanfudao can once again develop new and old users and develop adult education businesses.

5) In the face of fierce competition in first- and second-tier cities, we will focus on investing in lower-tier markets and launch regional specialty courses based on the characteristics of third- and fourth-tier cities. For example, if you purchase online courses from Yuanfudao, the head teacher will organize classes locally and watch the online courses together. The head teacher will also be responsible for answering questions and grading homework offline. By capturing users in third- and fourth-tier cities, we will continue to expand the market size and enhance our competitiveness.

The above is an analysis report I made for the purpose of familiarizing myself with the K12 online education industry. Due to my limited personal ability, there are inevitably some inadequate analysis. I would like to ask all the experts to give me advice and corrections.

Author: Marketing Notes

Source: Marketing Notes