Hua Xiaozhu is an app owned by Didi , known as the "Pinduoduo of the taxi industry"; it focuses on the sinking market, provides very high subsidies and discounts for new users, and can also make money through social fission, thus acquiring a large wave of users; the author of this article has conducted a detailed analysis of the Hua Xiaozhu APP, let's take a look together.

1. Experience the environment

2. Experience Direction

Hua Xiaozhu, the Pinduoduo of the taxi industry.

In April 2019, Didi acquired all products and resources of Tutu online car-hailing service and packaged them under Beijing Hongyi Bo Technology Co., Ltd., which is wholly owned by Didi.

In March 2020, Tutu online car-hailing service was transformed into "Hua Xiaozhu Taxi" and launched the slogan of "the lowest price on the entire network". After trial operations in Zunyi and Linyi, it quickly entered third- and fourth-tier cities and has now entered 120 cities.

Hua Xiaozhu focuses on the sinking market, and its operating methods are similar to Pinduoduo, providing large subsidies to both passengers and drivers; and adopting a social fission model, users can continue to obtain coupons through signing in, helping friends, etc., and they can get rewards by attracting new passengers.

We will take Hua Xiaozhu's Pinduoduo-style operation as the starting point, conduct a scenario analysis of Hua Xiaozhu, analyze the feasibility and risks of the Hua Xiaozhu model, and the profound meaning and purpose of Didi's move.

3. Product positioning and user analysis

1. Who is Flower Pig?

"Hua Xiaozhu Taxi" is a mobile travel platform that sought new growth points in the sinking market after Didi's online car-hailing growth hit a ceiling. It is committed to creating an affordable travel brand, advocating that travel return to its essence, providing passengers with more affordable, safe and convenient travel services; providing drivers with an additional service option and an additional income supplement; and conveying the positive energy of travel to society with a young, optimistic and positive attitude.

2. What problem does Flower Pig solve?

1) User pain points

The user pain points of taxi-hailing products are divided into two aspects: passengers and drivers.

Passengers: Didi Express has insufficient penetration in third- and fourth-tier cities. In some third- and fourth-tier cities with relatively outdated public transportation facilities, users still have difficulty traveling. Users in lower-tier markets are price sensitive and less willing to take a taxi. But at the same time, public transportation routes are complicated and less comfortable. There is an urgent need for low-priced, comfortable and cost-effective taxi products to fill the gap.

Drivers: In the sinking market where express cars are not popular enough, taxis and "black cars" are still the main means of hailing a taxi. Taxis are relatively safe but have high rental costs. In third- and fourth-tier cities, there are a large number of "black car" drivers who earn extra money in their spare time. Since they are not affiliated with a company, they have safety risks and it is difficult to gain the trust of users. Black cars in third- and fourth-tier cities are in urgent need of organizational affiliation and management to avoid safety issues and alleviate the difficulty for the public to get a taxi.

To sum up, the user pain points are as follows:

3. User portrait

Here we mainly analyze the user portrait of the passenger side of Hua Xiaozhu APP. In the author's survey of Hua Xiaozhu passengers and third-party data analysis, it was found that Hua Xiaozhu platform users have the following characteristics: most users are between 20 and 40 years old, are price sensitive, and mostly live in second- to fourth-tier cities.

(Data source: Baidu Index)

According to the Baidu Index data from July to August 2020, we analyzed that compared with Didi Chuxing, Hua Xiaozhu users are significantly more in third-tier and below cities.

The users are mostly between 20 and 40 years old. Hua Xiaozhu has more users over 30 years old than Didi, which means that Hua Xiaozhu is more attractive to price-sensitive users.

There are far more male users than female users, and the gender gap of Hua Xiaozhu is even larger than that of Didi, which shows that female users have concerns about the safety of Hua Xiaozhu.

Specific user description:

• User 1: Xiao Wang, male, 25 years old, from Qingdao, employee of a state-owned enterprise, monthly income 8K. As a stay-at-home guy, he lives a very frugal life and often takes a taxi home late at night.
• User 2: Ms. Chen, female, 36 years old, from the suburbs of Zhengzhou, an employee of a factory, has one son, and earns 4k a month. I like to participate in group buying on Pinduoduo every day, and will use taxi apps when there are discounts.
• User 3: Xiao Li, male, from Nanjing, 20 years old, intern, monthly income 2K, needs to commute between the company and school every day, usually takes the bus or carpools with classmates.

4. Product Development History

4. Flower Pig’s sinking attack

1. High subsidies

Passenger side:

Hua Xiaozhu has different preferential strategies in different cities, which generally include new user subsidies, discount coupons, allowances, cash back and other means.

On August 17, Hua Xiaozhu launched a subsidy campaign in nine cities including Beijing, Guangzhou, Chengdu, Hangzhou, Nanjing, Hefei, Zhengzhou, Qingdao and Taiyuan. The first 8,888 users in each city will receive a 20 yuan discount on their first order of the day. After the 8,888 places are used up, all orders will be 40% off and can be reduced by up to 10 yuan. Each user can enjoy a discount of no more than four orders per day.

According to the author's personal experience, during the event, I used Hua Xiaozhu to take a taxi in Chengdu, and finally paid 1 yuan for 12 kilometers.

(Newcomer subsidy up to 30 yuan)

Driver side:

New drivers who register on Hua Xiaozhu will receive a 300 yuan reward, and those who complete 5 orders a day will receive a 60 yuan reward; at the same time, if you persuade a driver to register, you can get a cash rebate ranging from 30 to 50 yuan.

(Hua Xiaozhu driver-side new customer acquisition activity advertisement)

2. Social fission

1) Exposure strategy

Inside the site:

When you open the Didi Chuxing app, a floating screen of red envelopes and gold coins will appear on the homepage. The destination input bar is at the bottom, occupying about one-third of the screen. The input bar as a whole presents a warm transition color from gold to purple, and the slogan in the upper right corner of the input bar is "20 yuan off for the first order every month"; the three words "20 yuan" are enlarged and present a striking gold color. The overall visual effect is highly impactful and full of festive atmosphere, stimulating users' impulse to consume.

The small "Click to Save Money" button in the upper right corner of the address input bar has the same color as the input bar; it has the portrait of spokesperson Guo Qilin, with a festive style that easily arouses the user's curiosity; there is also a striking separate banner below the input bar, which prompts "Share with friends and get up to 10 yuan in coupons", trying to induce users to participate in coupon collection and sharing activities, thereby accelerating social fission.

Off-site:

Open WeChat sharing, and promote bargaining among users through the mini-program sharing window + event landing page. You can also generate posters with one click and automatically share them to Moments, lowering the sharing threshold and improving sharing efficiency.

The copywriting is simple and straightforward: "Receive red envelopes worth hundreds of yuan every day" and "Don't let the big red envelopes run away", which directly touches the nerves of price-sensitive users in the sinking market. Click on the landing page to log in with one click. It is easy to operate and has a higher conversion rate.

2) Gameplay

The social gameplay of Hua Xiaozhu is completely Pinduoduo-style, including bargaining, group buying, helping each other, and signing in. For example, you can get a 1 yuan taxi allowance every day you sign in, and you can get extra rewards if you sign in for 7 consecutive days. You can get extra allowances if you have help from others.

It greatly occupies the minds of users and establishes the perception among users that "Hua Xiaozhu taxi is cheaper".

Hua Xiaozhu is almost spending money to attract new users. Users can get a 40% discount taxi coupon for free by inviting three friends to help. They can get a cash back of up to 18 yuan for attracting a new user.

According to the author's personal test, real money is credited to the account within one second; in addition, some regions' versions also have an activity called "Get Cash Every Day", and the gameplay is the same as Pinduoduo. You can get red envelopes with the help of others in the same region, and you will get cash back when the amount reaches 100 yuan; some netizens have personally tested that the initial red envelopes are around 80 yuan, and at the beginning, a few yuan will be returned for each new user attracted. As the number of new users increases, it gradually decreases to a few cents.

However, for residents in small towns who have close interpersonal relationships and plenty of free time, it is not difficult to attract enough new users to make up a 100 yuan red envelope for themselves. Such activities have a high participation rate in the sinking market and are very effective in attracting new users.

5. Business Model

Hua Xiaozhu is the sinking version of Didi. Its main business model is the B2C2C model. It collects commissions as a driver-passenger integration platform.

In fact, it is essentially the drivers who provide services to the passengers. Hua Xiaozhu has built a platform that provides communication channels between drivers and passengers, regulates user travel, and realizes intelligent ride dispatch. It integrates all driver and passenger information for unified intelligent allocation and dispatch management. At the same time, it provides additional services to maximize driver profits and passenger convenience.

As a provider of travel services, drivers can register on the platform, which will manage and dispatch them in a unified manner. At the same time, drivers will enjoy a series of convenient conditions such as automatic assignment of customers by the platform, as well as intelligent route planning and navigation.

Currently, Hua Xiaozhu is in a period of rapid growth. Relying on large subsidies and social fission investment, it is capturing the sinking market and competing with public transportation for the market.

Users in third-tier and lower cities who have been educated by Pinduoduo have already become familiar with the relevant gameplay and have accumulated connections for group buying; if the sinking market can be educated successfully, it will surely be a new revenue growth point.

At the same time, for Didi, the sinking of Hua Xiaozhu is to tap into the traffic depression. After occupying the leading position in the sinking market, it can use the traffic to direct monetization to other fields.

Didi's autonomous driving business has sufficient driving data in first- and second-tier cities, but lacks data in third-tier and lower-tier cities. In addition, the road conditions in third-tier and lower-tier cities are very different from those in first- and second-tier cities. Hua Xiaozhu's sinking business can just fill this data gap.

VI. Stakeholder Analysis

As a mobile travel platform, Hua Xiaozhu’s main stakeholders include: passengers (excluding corporate customers), drivers, the platform, and the government.

We now plan to analyze the impact of Hua Xiao Zhu on various stakeholders:

1. Passengers

1) Hua Xiaozhu currently adopts the strategy of using subsidies in exchange for a massive increase in users. For price-sensitive users, this is the carnival period of "fleecing capitalism". For third- and fourth-tier cities where public transportation is not convenient enough, cheap online ride-hailing services can bring a better experience; they are cheaper than taxis and safer than illegal taxis.

2) Hua Xiaozhu’s pricing method adopts a “fixed price” model, that is, when a user places an order, the system will estimate a price based on the distance, estimated duration, road conditions, etc. through big data calculations, which is the actual price paid by the passenger.

The "one-price" method allows users to determine the cost of a taxi from the beginning, and displays the price comparison with other platforms on the entire network, which gives users a greater sense of psychological security than traditional metered taxis. For some small towns where a 10-yuan ride covers the entire city, a one-price method can avoid many disputes.

3) In the absence of subsidies, the price difference between Hua Xiaozhu and Kuaiche for short-distance orders is almost the same, but for long-distance orders, Hua Xiaozhu’s price is lower.

2. Driver

• Compared with Didi, Hua Xiaozhu drivers are more flexible. It adopts a semi-assigned model in dispatching orders, and drivers can cancel four orders a day.
• Compared with the high share of taxi fares, drivers on the Hua Xiaozhu platform can get a higher share.
• After registering with online ride-hailing platforms, "black car" drivers have solved the trust issue between themselves and users and have a higher acceptance rate for orders.
• The subsidies are high, and there are additional rewards for placing more orders.

3. Platform

Didi’s current market share in first-tier markets exceeds 60%, and growth is becoming increasingly difficult. The soil for online ride-hailing services in the lower-tier cities is already mature: the lower-tier cities have become the main growth point of the automobile market, with a large number of idle vehicle resources emerging; moreover, since the lower-tier cities are vast incremental markets, the number of orders and travel penetration rate will both increase significantly.

Entering the sinking market is an inevitable choice for Didi, but the vehicle supervision in the sinking market is more difficult, and after a large amount of subsidies, it is a downgrade to Didi's existing brand image; therefore, the new brand Hua Xiaozhu was launched, targeting price-sensitive users, and separating the brand from Didi, with each taking its own rights and responsibilities.

After the ride-sharing service was removed from the shelves, Didi has been trying to regain the lost capacity. Compared with Didi, Hua Xiaozhu has lower requirements for drivers, providing a new way out for the ride-sharing capacity.

Risk points:

1) Security issues

Hua Xiaozhu's more rough screening of drivers has made many users wary of Hua Xiaozhu for safety reasons, and has also made Hua Xiaozhu unpopular in many places.

• In May this year, Hua Xiaozhu was taken off the shelves just after it opened for registration in Fuxin City, Liaoning Province, because it had not yet obtained a local online car-hailing business license.
• On July 13, Hua Xiaozhu was jointly interviewed by the Tianjin Road Transport Bureau and other departments due to issues such as its business qualifications and suspected illegal advertising.
• On August 18, the Qingdao Municipal Transportation Bureau also fined Hua Xiaozhu for operating without the qualifications to operate an online car-hailing service.

How to ensure passenger safety while regaining transport capacity is a problem that Hua Xiaozhu must solve.

2) Retention issues

On the passenger side: Hua Xiaozhu mainly attracts price-sensitive users. If Hua Xiaozhu wants to make a profit, it must either successfully educate users on consumption habits during the subsidy period so that they will truly stay after the subsidy ends; or it must gain market leadership and then monetize other new businesses by directing traffic.

For drivers: Hua Xiaozhu's commission rate is around 20%. Excluding subsidies, the average customer unit price is 3 to 4 yuan cheaper than Didi. It is difficult to retain drivers without subsidies. If you want to maintain the platform's capacity, you must ensure the drivers' income. This depends on whether Hua Xiaozhu can adopt new strategies to retain drivers in the post-subsidy era.

3) Management issues

According to the author’s research, many Hua Xiaozhu users said that their experience was poor. The experience issues are:

• One-price model, the price is inflated when compared with other prices on the Internet;
• The cars were old and unhygienic, and the drivers did not wear masks or turn on the air conditioner in confined spaces;
• The driver had a poor sense of service, did not follow the navigation, and rudely drove away passengers when they got off the car;
• There are few vehicles and drivers can cancel orders at will. In many places, you can get a Didi car within 1 minute, but with Hua Xiaozhu, you have to wait more than 10 minutes before a driver accepts the order.

This may be an unavoidable problem during the wild growth period; but in the long run, Hua Xiaozhu must focus on the management of drivers, provide users with a better experience, and maintain a long-term balance.

4. Government

During the epidemic, the overall economy was sluggish. Hua Xiaozhu entered the sinking market that Didi had not entered, integrated the transportation capacity of private car owners, and provided part-time jobs, which can effectively promote the economic recovery of third-tier and below cities.

7. Functional Experience

1. Product structure diagram

2. Flowchart of the Huaxiaozhu Taxi Passenger App

8. Summary of recommendations (SWOT)

1. Strength

In the sinking market, Hua Xiaozhu's strategy of attracting new customers is more advantageous than Didi.

Hua Xiaozhu has highly replicated Pinduoduo's strategy of attracting new users and promoting activation, using a social gamification approach and providing subsidies with real money. The high amount of allowances and cash back can easily touch the nerves of users in the lower-tier markets. Pinduoduo has instilled in the perception of users in the lower-tier markets that sharing with each other to help attract new users and receiving red envelopes has made them believe that as long as they are willing to spend money, rapidly attracting new users is not a dream.

Hua Xiaozhu has a natural advantage in acquiring transportation capacity - Hua Xiaozhu is backed by Didi, and Didi drivers can directly become registered drivers of Hua Xiaozhu and accept orders from both platforms at the same time. Hua Xiaozhu currently provides generous subsidies to drivers, and veteran drivers can get cash back by attracting new drivers. Some drivers have received subsidies of more than 2,000 yuan within a month by attracting new drivers. In addition, Hua Xiaozhu drivers have a higher degree of freedom. Under the semi-assigned mode, drivers can choose to accept some of the orders according to their current situation, and enjoy the "freedom to drive".

Hua Xiaozhu’s “one-price” way of calculating prices is more down-to-earth: the platform estimates the price, you pay first, and then take a taxi. No matter what route the driver takes or whether there is traffic jam along the way, the price remains unchanged.

On the one hand, it can avoid disputes over prices; on the other hand, in the sinking market, the "freeloaders" are more ferocious. If Didi's method of arriving at the station first and then paying is followed, some users will simply get off the car and refuse to pay, as if nothing happened; and in the "Internet depression", it is more difficult for the platform to collect debts, and the one-price approach can protect the interests of the platform and the drivers.

Under the current sluggish economic situation, Hua Xiaozhu integrates the transportation capacity of third-tier and below cities to provide income-generating opportunities for urban residents, which has certain policy advantages.

2. Weak

Compared with Didi, Hua Xiaozhu has more diverse vehicle models and a poorer service experience.

According to the author's personal experience, Didi in Hefei uses a uniform white Kia K3. Didi drivers usually accept orders within one minute and provide polite and thoughtful service. However, at the same location, Hua Xiaozhu drivers usually take more than ten minutes, the in-car experience is not good, the internal facilities are messy, dilapidated and smelly, and the drivers are impolite in service.

The difference in drivers' quality is probably related to the lower standards for drivers to enter the Hua Xiaozhu platform. On the Hua Xiaozhu platform, driver registration conditions mainly include: driving experience of more than three years, no criminal record, and no more than 12 points in three consecutive scoring periods - this standard is much lower than the driver threshold on the Didi platform; even if a driver's score on the Didi platform is extremely low, as long as he meets the requirements of Hua Xiaozhu, he can also enter.

Similar poor experiences are not uncommon among Hua Xiaozhu users. If the service quality cannot be improved, it will be difficult to retain users relying solely on subsidies.

It is difficult for users to get a taxi during rush hours in the morning and evening. Hua Xiaozhu is currently only open to Didi drivers who have passed the review. Didi has the task of picking up passengers during peak hours in the morning and evening, and Hua Xiaozhu has three irresponsible rejections every day. Therefore, it is difficult for the Hua Xiaozhu platform to receive orders during this period, which is very inconvenient for urban users who commute regularly, and the user stickiness is low.

3. Opportunity

Hua Xiaozhu can fill the gap left by Didi in third-tier and lower cities; the Internet has now entered an era of stock, and as it is difficult to increase user growth in first- and second-tier cities, the "Internet depression" can become a new growth point.

Hua Xiaozhu’s business logic of targeting the sinking market is feasible. In the sinking market, "small town youth" have less pressure from mortgage loans and have spare money to buy private cars; their pace of life is slow, and they have the leisure time to pick up passengers after get off work to earn extra money.

At the same time, public transportation in third-tier and below cities is not well developed, and there is a problem of "difficulty in travel"; Hua Xiaozhu has the same underlying logic as Pinduoduo. Its existence completes the resource docking and connects idle private cars with the travel needs of residents. This is the foundation for Hua Xiaozhu's long-term development in the future.

Didi's autonomous driving business is expected to become China's Waymo. It has sufficient driving data in first- and second-tier cities, but lacks data in third-tier and lower-tier cities. In addition, the road conditions in third-tier and lower-tier cities are very different from those in first- and second-tier cities. Hua Xiaozhu's sinking business can just fill this data gap.

The launch of Hua Xiaozhu can help Didi avoid its "big company disease"; a giant that is born in adversity and dies in comfort will fall into fatigue if it stands still on its already acquired market share. Only by opening up new fronts can it maintain its fighting spirit. Didi, which has a strong growth momentum, has opened up new tracks such as two-wheeled vehicles and freight to complete the "0188" plan.

Hua Xiaozhu, which is aimed at the sinking market, is part of this plan and requires stronger operation and promotion capabilities as well as the ability to better hone organizational capabilities.

4. Thread (Threat)

Competitors are lurking around as the company enters the lower-tier markets by issuing subsidies.

Didi's old rival Meituan Taxi is also currently issuing large subsidies to seize the sinking market, while some other online ride-hailing platforms and online ride-hailing platforms with car company backgrounds, such as Cao Cao Travel and Dongfeng Travel, are also expanding multi-scenario travel businesses, and the competition in the track is significant.

After Hua Xiaozhu relaxed the qualifications for drivers, there are greater safety risks.

It is reported that third- and fourth-tier cities and suburban county markets are one of Hua Xiaozhu's target markets. The penetration rate of Internet travel in these places is still very low, and the supervision of online ride-hailing is also in a gray area.

Didi has a history of safety issues, and if Hua Xiaozhu, as a supplementary brand of Didi, has a safety accident, it will cause huge damage to Didi's brand.

Author: Attila Lamp

Source: Attila Lamp