The underlying logic of growth products

Today I will introduce to you a growth framework, product-based growth and growth-based products.

1. Two major growth paths

1. What is the difference between product-based growth and growth-based products?

We give three perspectives. Let’s talk about the case first, then discuss the case.

First, from the perspective of Sun Tzu's Art of War: the best strategic strategy is to attack the enemy's plans, the next best is to attack their alliances, the next best is to attack their troops, and the worst is to attack their cities.

On the growth product side:

At the beginning, no troops were moved. The best military strategy is to win by strategy, and the second best strategy is to engage in diplomacy and find partners. These two sides have absolutely nothing to do with direct fighting. Then they would organize the food, fodder, and troops, and finally fight a battle if they had no choice.

Product-based growth:

Prepare the product first, then what? Hurry up and fight (large-scale sales).

After the sale, we discovered that there were problems with the supply chain and channels...we quickly optimized the upstream and downstream (ecological integration).

Finally, when you become big enough, you find that competitors are coming to seize your territory, and this is when you start to implement competitive strategies.

Second, from the perspective of corporate management: first-rate companies set benchmarks, second-rate companies build brands, and third-rate companies make products. This is just theoretical stuff, so I won’t go into details here.

Third, the customer demand perspective.

Leading demand: When a company leads demand, most people will not agree with the concept it proposes at the beginning and think you are wrong. However, the difficult path is easy to succeed, while the easy path is difficult to succeed. Once successful, the benefits will be huge.

Creating demand and satisfying demand: no need to explain further.

2. Summarize the two growth paths

Product-based growth:

First, develop the core product, sell it on a large scale, and quickly sort out the upstream and downstream cooperative ecosystem. After we became bigger, some people started to compete with us, or we started to compete with others. Only then did we begin to pay attention to competitive strategy.

Growth products:

Determine the growth strategy right from the start. The next step is to establish a competitive and cooperative ecosystem (for example, Pinduoduo and WeChat, which have both competition and cooperation), and then gain insight into customer scenarios.

The scene is particularly important. Scenes are tools to enhance consumer desire. Many times, our products don’t sell well, not because consumers have no desire to consume, but because we haven’t found a consumption scenario. For example, popcorn is a strong scene consumer product.

After finding the scenarios, the next step is the product matrix. The product is just a carrier, and customer-perceived value is the real delivery target.

2. Three-step method for product-based growth

I guess everyone will faint when they see this framework. It doesn’t matter, let’s talk about a real case first and then talk about the framework later.

(1) How do you differentiate yourself when facing competitors who are stronger than you?

Now let’s fast forward to the end of 2008, when Ele.me was officially launched at the Minhang campus of Shanghai Jiao Tong University.

There is a competitor called Xiaoyezi, which has been in business for more than a year and has more financial resources than it. Both companies do takeout. Now Xiao Ye Zi hit it and said that anyone who ordered takeout from me would be given a free poached egg or a box of iced black tea.

In this case, how can Ele.me fight it?

Xiaoyezi opened for business more than a year ago and has relatively strong financial strength. When Ele.me was just starting out, it only had 50,000 yuan in available funds.

(2) Xiaoyezi has now started to provide subsidies to start a price war. How does Ele.me develop its products? How to break through?

This is very similar to the problem many of us entrepreneurs encounter. You have no way out and you meet an opponent that is bigger and earlier than you in a very small market space. Our competitors are now offering price subsidies, trying to strangle us. How can we break the impasse?

On-site students: Change the battlefield to the white-collar market, raise personal funds and engage in price wars.

Teacher Cao: At that time, the founding team of Ele.me consisted of senior college students and first-year graduate students. How did they raise funds? It was more than two years later that I met Zhu Xiaohu.

On-site students: Provide differentiated merchant resources?

Teacher Cao: You are absolutely right. What are differentiated merchant resources? What kind of assumption is this based on? Your proposal contains implicit assumptions. How do you differentiate yourself from your competitors? What does Xiaoye do? What does Ele.me do?

On-site student: Sign an exclusive merchant contract?

Teacher Cao: It is difficult to sign an exclusive contract. Xiaoye has already picked the easy-to-pick fruits. Ele.me lags behind others and has no financial strength, shareholder resources, or traffic.

On-site student: Change place?

Teacher Cao: We later concluded that the Minhang Campus of Shanghai Jiao Tong University may be the best single food delivery market in the world.

This campus has a lot of science and engineering geeks, and the newly built cafeteria on campus has incomplete facilities and is a long way to get to. Men from science and engineering backgrounds don’t want to walk, and even though there’s East China Normal University nearby with lots of pretty girls, they still don’t want to go there, so this place is a very good takeaway market. What should Ele.me do if it cannot leave this market? The answer is differentiation.

(3) How to differentiate merchants?

Xiaoye’s growth strategy is to convert all nearby telephone takeout services into PC takeout services. The advantage is that we have seized market share. The downside is that more than 50% of merchants have a minimum order value of more than 25 yuan.

What's the problem here?

For ordinary college students, eating takeout for more than 25 yuan is too expensive.

After analyzing the situation, Ele.me decided that it could no longer engage in a price war, so it differentiated itself by offering takeout services ranging from 18 to 25 yuan.

Let's sort it out:

What are Xiaoye's products? Takeaway service provider around Pan University.

What are Ele.me’s products? A food delivery service provider exclusively for college students.

Back to this framework, are the three product elements of Ele.me clearer than those of Xiaoye? More precise needs?

Customer needs determine product attributes. Obviously, Ele.me is ahead of Xiaoyezi in terms of customer demand.

Let's continue the analysis:

It's easy to say, but most meals that cost 18 to 25 yuan are only available in mom-and-pop restaurants. They may not even be able to place orders by phone, let alone computers. what to do?

So it launched a policy and told the mom-and-pop stores that it would help them assemble computers for free.

(4) How do husband-and-wife businesses make decisions?

Even though you helped me build the computer for free, I still had to pay 3,000 yuan. You can't prove now that the order volume increased immediately after I started PC takeout, so why should I believe you?

What should a husband-and-wife shop do if it is unwilling to spend 3,000 yuan to buy a computer?

On-site students: We will advance the money to them for free.

Teacher Cao: Ele.me only has 50,000 yuan in total, which also includes living expenses.

On-site students: They can use computers in the dormitory and then call the husband-and-wife store.

Teacher Cao: This operation is extremely inefficient. Zhang San called and said, let’s order a meal, fish-flavored shredded pork, eggplant, etc. The person on Ele.me answered the phone and said, "I'll find a pen and wait a moment." The efficiency is too low.

If you go to the store and observe, you will find that the boss lady has some free time every afternoon with nothing to do. If you tell the boss lady that she can watch TV series in her free time, the customer value of buying a computer will be revealed.

At this time, let's sort it out:

What is the food delivery product? Functional products.

What kind of product is it that helps couples in stores assemble computers? Service products.

After buying it, the boss lady can watch TV series now. What is this product? Content-based products.

Let’s look back at this framework diagram and see if we can understand it better now.

Let's continue the analysis:

I think Zhang Xuhao and his colleagues may be the most amazing group of Chinese college students who are starting their own businesses. At that time, they had never done business and did not understand the things that were summarized later. However, they were able to vaguely think of and use these business frameworks and techniques in the early stages of their entrepreneurship, which is really amazing.

Businesses have a store maintenance period. After delivering so many orders with great difficulty, Ele.me is still making a loss. What should it do if it lacks money for operations?

They came up with an idea: we are college students and can help you do data analysis. For example, when does the number of orders for fish-flavored shredded pork increase, and at what time does a certain type of barbecue sell well.

I will analyze your operating data from last month and then sell it to the merchants. The question is, are merchants willing to pay? If you are willing, how much would you pay?

Working in finance is different from working in industry. People working in finance can easily make 1 billion or 1.5 billion, which is very normal. But for those in the manufacturing industry, no matter how big the company is, they will never have a revenue of 100 million. Everything is accumulated penny by penny, transaction by transaction.

Therefore, if you ask a mom-and-pop store to spend 100 yuan to buy this data product, they will most likely be unwilling to pay. what to do?

So Ele.me made a deal with them and said, "Can I give it to you for free?" But I had a condition. Now the sales commission for both companies was the same, 8%. This was the industry rule at the time.

We'll calculate it based on 8% of the transaction volume I helped you achieve last month. On the 1st of this month, you pay me the commission based on last month's transaction volume, and then we'll settle the bill on the 31st of this month, and I'll refund any excess and make up for any shortfall.

What product is this? Service products (financial services).

Finance itself is a service product. Does this service serve the customers or yourself? Serve myself. Ele.me is equivalent to obtaining a one-month interest-free small loan from the merchant.

Even with this product, it still doesn't work, the operating cash flow is still insufficient.

Therefore, Ele.me learned SaaS pricing methods from the United States:

Suppose Ele.me received a commission of 500 yuan from a merchant’s sales last month. But now I tell you, I am willing to charge you only 400 yuan a month, and charge you an annual fee of 4,800 yuan in one lump sum.

Are customers willing to do it?

There are two types of customers here, one is those with small order quantities. I gave you 200 yuan last month, and now I have to pay you 400 yuan. It’s not cost-effective, so I won’t do it.

The other type is that it was 500 yuan last month and more than 400 yuan the month before, so they must have done it. Everyone will make decisions based on maximizing their own interests.

Here, I want to express a point of view that may subvert your cognition. Many businesses are narcissistic and think that their products are so good that customers need them.

In fact, customers do not need our products. What they need is to solve their problems.

The service product Ele.me is equivalent to sacrificing gross profit in exchange for a one-year interest-free loan for merchants, and the amount is not small.

This behavior gave rise to another behavior.

Suppose you are the owner of this husband-and-wife store, you own 8% in Xiaoye, and you have already paid the annual fee of 4,800 yuan to Ele.me. Has there been any change in your behavior?

Do you feel like spending 8% on Xiaoye is a bit of a loss? When customers are ordering food, would you tell them to go to Ele.me, which is faster and better, and that we at Xiaoyezi are slower in delivering orders... Would you do that?

It is rational for merchants to want to make money, so gradually merchants helped Ele.me divert customers from Xiaoyezi. In about 9 months, Xiaoye, such a strong competitor, was completely squeezed out of the market by Ele.me.

Let’s summarize and see how Ele.me fought in the early days.

First, solve the demand problem.

There was a price war between Ele.me and Xiaoyezi. As soon as the other party started to provide subsidies, its products stopped selling. How do you solve the problem when the products are not selling well?

Ele.me has locked the price of takeout at 18-25 yuan, compared to Xiaoyezi. What are the three elements of its products? A food delivery service provider exclusively for college students.

More than 50% of the takeout on Xiaoye is supplied to young people living around universities (not college students).

Is this a demand issue?

One need is more focused, and the other is not focused enough. Can we understand that one person's needs are of a higher dimension than the other person's needs? One is accurate, the other is not.

Second, solve the traffic problem.

But even if they do this, they still cannot survive because the economies of scale have not been achieved and the company is still making losses.

Every startup has a death valley. What should you do in the death valley? What problem needs to be solved? Why should we equip a mom-and-pop store with a computer?

Why do we need to develop several service products? I still hope I can grow bigger and faster.

This is a traffic issue. Many people think that traffic is advertising and traffic is distributing flyers. Actually, that’s not true. WeChat is China’s largest traffic-based product. Have you ever paid a penny for WeChat itself? No.

The normal price of eggs is 10 yuan per pound. I put up a sign at the entrance of the supermarket: 5 yuan per pound, limited to 100 pounds, first come first served. What is this? Flow type products.

So don’t think that traffic is not a product. If you can achieve product-type traffic, this traffic must be very powerful.

Third, address competition issues.

How to differentiate yourself when facing stronger competitors?

Let’s talk about the mindset first: I am a takeout food provider that is more suitable for college students.

The supply chain remains unchanged, this slogan is always a lie, so the supply chain must be implemented. Ele.me’s supply chain became takeout at 18 to 25 yuan, and it collected one year’s commission from merchants in advance for pricing, helping it to quickly and safely pass through the Death Valley.

What is the problem? Competition issues. Competition also includes competing with yourself, and whether you can run through the Death Canyon quickly is also the key.

Therefore, through the above case, we have come to the following conclusion:

Among the three elements of a product, demand must be raised in dimension, we must look for incremental markets, find ways to meet demand, and look for high-desire consumption.

The third structure of the product is to find high-dimensional and diversified traffic. When the company reaches this step and you work hard on this, the market growth is often not that fast. At this time, you need to create some demand.

In the third battlefield of products, when it comes to the stock market, you must lead the demand in order to survive. When you become big, there will be too many competitors and consumers will not have such a strong desire to consume from your company.

This is the underlying logic of product-based growth.

3. Three-step approach to growth products

For growth products, it’s the opposite: growth strategy comes first, customer decisions come second, and product matrix comes third.

1. 8 growth strategies of traditional industries + Internet

Demand-oriented: always look for incremental markets. Staying away from competition is the best competition.

Competition-oriented: In the stock market, some indicators are better than those of rival products.

Cost leadership type: I can survive if I sell my products for 10 yuan, but my competitors will die if they sell their products for 10 yuan.

Solution-oriented: When customers make decisions, it is difficult for them to find my competitors for comparison, so I can sell at a higher price.

Traffic-driven: I fish in the rivers and lakes.

User-driven: I have a fish pond at home.

Data-driven: I can find business value through data.

Cognition-driven: When making the same product, different entrepreneurs may adopt completely different business models.

Growth strategies are not isolated but usually used in combination. For example, an enterprise may be a combination of demand-oriented + solution-oriented + user-driven.

A good growth strategy is by no means as simple as a market positioning or a marketing strategy.

A good growth strategy is a series of business actions + a series of business results.

Here we talk about two comprehensive cases of growth strategies:

Growth strategy case 1: Wenheyou

Wenheyou seized the consumption trend of crayfish. With the rise of the crayfish industry, popular crayfish products were created. During peak hours, it is claimed that only 8,000 numbers are released a day, but 20,000 people make reservations.

After having the popular crayfish product, for some unknown reason, Wenheyou began to learn the Japanese single-product store strategy.

When we travel to Japan, we will find that many stores on one street are single-product stores, and each one sells different things. Tempura is sold over here, and barbecue is sold over there. The layman watches the excitement, while the expert watches the details. In fact, it is very likely that you will eat at the restaurants under the four major catering brands.

What makes Wenheyou different from traditional restaurants is that it puts a lot of effort into customer awareness management.

In the customer's perception, Wenheyou is a collection of single-product stores, such as crayfish, stinky tofu, etc., all of which use single products to create a product portfolio, rather than traditional restaurants that prioritize the main brand and then promote a few signature dishes.

By the way, Xibei has launched new fast food brands almost every year in recent years, but the results have not been ideal. Here is one of the main reasons.

With the launch of the popular crayfish product and a series of single-product stores, Wenheyou has obtained data value that is even better than Haidilao (table turnover rate of 8.3).

8.3 What is it used for? The customers have changed, and Shopping Mall has become the new customer. Wenheyou can get new commercial value from Shopping Mall, which has cheap rent and good location.

The store opened by Wenheyou is a big store, so big that it goes beyond the scope of a restaurant. These stores have become an urban space.

Every city has some essential functions, just like a building, it must have an elevator, a toilet, a canteen and a parking lot. An urban space should have something in it.

Wenheyou created an old street. The old street has two functions. One function is to be the carrier of the city’s memory, which is a social, historical, cultural and other function. It is not our catering commercial function and has nothing to do with what is sold. This is the first one.

Second, if there are high-frequency applications in the old street, what will it become? A space and gathering place for citizens’ leisure.

Almost every city has old streets, but why are many of them deserted? The main problem is the lack of high-frequency applications.

Wenheyou is not only a carrier of urban memory, but also has high-frequency applications (catering), which is what makes it unique.

What’s the next step after it reaches this point? It has become a high-quality supplier of Shopping Mall.

It is very similar to the early Dalian Wanda. For a period of time, almost all cities wanted to invite Dalian Wanda to open a store in the city center. Why? One is an urban carrier, the other is a high-frequency application, both are necessary.

Let’s review the five steps of Wenheyou’s growth strategy:

1. Seize the trend of single products and form basic traffic.

2. Manage customer awareness and establish a product matrix of multiple single-product stores (not multiple signature dishes under one brand).

3. Driven by data, we found new business value of table turnover rate of 8.3.

4. Create an “old street” and grow it into an urban space carrier.

5. Expand outward from Changsha and replicate the Wanda model.

Obviously, Wenheyou’s growth strategy = demand-oriented + traffic-driven + solution-driven + data-driven + cognition-driven.

Growth Strategy Case 2: Ramen Says

If we move forward to 2016, instant noodles have declined by 30% in three years. Someone asks you to invest 1 million yuan in order to make high-end instant noodles. Do you dare to do so? I certainly wouldn’t dare. Because I can't convince myself logically.

How did Ramen break the deadlock?

The first step is to make a bold assumption.

The Ramen Theory originated from the bold hypothesis of three girls born in the 1990s.

Japanese ramen restaurants that sell dine-in dishes in China have a huge customer flow, which is recognized by everyone and does not require market education. For example, in the Ajisen Ramen restaurant at Beijing Airport, crowds of people go in and come out after a while, and the table turnover is very fast.

Why can’t we eat Japanese ramen at home?

We have the thesis, but where are the supporting evidence? Why should I believe you?

The second step is to differentiate products by categories. Categories must be differentiated, and markets must be differentiated.

Suppose you start by selling pepper beef noodles + Chongqing noodles + Japanese pork bone noodles, will there be market differentiation? No.

Although Ramen said it would expand its product line in the future, it would be difficult to break through in the early stages without making a market segmentation or a single breakthrough.

The so-called market segmentation can be summed up in one sentence: everyone in this industry is going left, but I am going right.

As for market segmentation, most businesses sell Chinese instant noodles, but they are not the only ones selling Japanese instant noodles, there are others as well. Only it broke through.

The third step is to perceive value. How is its value perceived?

It said that my noodles were semi-dry fresh noodles, and that my meat was frozen using aerospace technology, and was large pieces of meat that could be preserved at room temperature. Generally, you can't see meat in instant noodles. It's just small pieces. Why are these the biggest pieces?

The soup is made from 32 ingredients and is simmered for 12 hours. This is the customer awareness management and market education that cuts to the heart. I give you the value perception, 3+1, and the final sense of value is the Japanese-style packaging.

The fourth step is to promote. I personally think that the best effect of Ramen Talk’s early promotion was on Bilibili. Although it has a large exposure on Weibo, the promotion effect is not as good as that of Bilibili.

Bilibili is a place where direct transactions cannot be conducted, which brings us to the next step.

The fifth step is to have several big hit products to take over.

After generating traffic in one place, it would be a waste if there is no explosive product to take over the traffic.

The growth that Ramen mentioned came out like this. I don’t know whether success can be replicated, but the essential difference between having a method and not having a method is the difference between amateurs and professionals.

Let’s also sort out the five steps of Ramen’s growth strategy:

1. A bold hypothesis: Why are there no high-end Japanese instant noodles that can be eaten at home?

2. Category differentiation: Mainly Japanese high-end.

3. Value perception: What you see is what you get, 3+1 customer perception management.

4. Traffic interception: In the early stages of promotion, Bilibili had the best effect.

5. Conversion succession: Tmall and Taobao platforms must have products with high traffic and conversion rates.

Obviously, Ramen Says’ growth strategy = demand-oriented + traffic-driven + solution-driven + cognition-driven.

IV. Conclusion

1. Underlying Logic

Product-based growth starts from goods, to places, and finally to people.

Growth products start with people, then go to places, and finally to goods.

When we summarize, we focus on growth products.

2. Growth-oriented growth products

Growth-oriented products must meet the different consumption needs of the target customer groups in three scenarios: long-distance scenarios, near-distance scenarios, and super-scenarios, and achieve full-scenario traffic interception and conversion.

For example, Ramen Says is collaborating with Sanjiu Cold Relief to create a co-branded product. This is a consumer demand in a non-shopping scenario. What does this mean? It is mainly about communication, supplemented by sales.

3. Customer-centric growth products

For growth products, identifying demand and increasing desire are of paramount importance.

Ele.me is better at adjusting its consumer desires than Xiaoye, so different consumer desires require different marketing methods, and customer value must be visualized. There is no visualization, and after talking for a long time, consumers are not interested, and the coding efficiency is low.

4. Growth products based on product matrix

Growth products are all product matrix type. It’s just that not everyone can feel it.

Here is a core idea:

The product is just a carrier, and customer-perceived value is the real delivery target. This is bound to be a huge cognitive upgrade from traditional retail to new retail.

5. Conclusion

Today's content mainly focuses on two major growth paths: product-based growth and growth-based products.

Product-based growth involves three product elements, three product structures, and then three product battlefields, which respectively solve demand problems, traffic problems, and competition problems.

But growth products are completely different.

First, it is growth-oriented (creating business value), then customer-centric (creating marketing value), and finally, it is product-based (creating perceived value, which is the real delivery target).

Author: Grayscale Cognitive Society

Source: HDrenzhishe