3 ways to break down your user growth strategy

When making your growth strategy for the new year, have you tried to break it down in new ways? In this article, the author shares three ways to break down a growth strategy, and summarizes it from the perspective of "why to break it down, how to break it down, and practical cases."

1. Why dismantle?

As for why we need to break down the growth strategy, we must first understand the "growth strategy". The growth strategy is systematic and methodological, which can make business growth traceable; it can also quickly locate the problem link when the business is not growing. Of course, the growth strategy is not about saying we want to do this today, we think about the strategy, and tomorrow we say we want to add another one, and we reorganize the strategy... This is how we formulate a growth strategy scientifically , which involves "demolition".

Secondly, how to understand "dismantling". It is not about daydreaming: trying whatever the market and competitors are using (the "ever-changing" take-it-or-leave-it approach); nor is it about taking shortcuts: using cheap channels or methods to quickly increase the volume; and then quickly dropping it without knowing why. "Disassembly" is to establish a growth model, find the key assumptions at each stage (the one that most affects growth), continuously and quickly verify them, and then optimize them based on data and user feedback, always experimenting and iterating around this growth model .

The first step in taking action is often the hardest, and the same goes for dismantling. So there is a big difference between "demolishing" and "not demolishing" ! Whether the demolition is done well is secondary. Therefore, don’t think about whether you are dismantling it right or not, just start dismantling it from several dimensions, then engage in self-discussion + group co-creation, and you will naturally get the answer.

2. How to disassemble & practical examples

Method 1: Strategy + Tactics + Playing Style

1.1 Strategic Choice

The first thing that the strategic level should decide is “whether to do it” , which can be evaluated from two aspects: 1) ROI evaluation; 2) value analysis

• ROI assessment : Evaluate costs and revenues to measure whether it is cost-effective to do this.
• Value analysis : Horizontally evaluate and consider the value of alternatives.

My personal feeling is that ROI evaluation is suitable for new businesses and new activities of small and medium-sized companies, but not very suitable for existing businesses of large companies. The reason is that there are too many variables in large companies, and they are also affected by the actions of other departments. It is more difficult to measure with just a single ROI indicator, so it usually results in "recalculation" of the number of conversions.

Value analysis is particularly suitable for evaluating whether a strategy or an activity should be implemented. Value analysis can be done from two aspects:

• Opportunity cost : Before that, you must first understand "who the users are, what the current situation is, and what the contradictions are" to help judge opportunities.
• Window period : It mainly depends on how much space the external environment provides to determine whether now is the best time to do it.

Taking Didi as an example, the window period is particularly important. Founded in 2012, it has developed rapidly in the following few years. This is inseparable from the opportunities and momentum brought by China's entire Internet environment. Assuming we move the time forward 10 years, China's Internet had not yet developed, and various technologies, people's concepts, and popularity were not enough to support Didi's development in a more refined direction.

After the strategic level has determined whether to do it or not, it needs to "lock the first indicator" . The benefit of locking is that it prevents team members from having to abandon demand points due to various situations during the execution process. They can always consider the first indicator as the highest priority and will not lose their way.

1.2 Strategy formulation

The method for strategy formulation is "indicator breakdown → addition and subtraction thinking → periodic review".

• Indicator decomposition : This is explained in detail in decomposition method 2.
• Addition and subtraction thinking : based on analyzing users and scenarios; then do a lot of addition to find out all possible options for activity gameplay; then continue to screen to find the best option.
• Periodic review : Review is a very good reflection process. In the past, we would think that review would be done after the end of an activity/project. This would have a disadvantage of taking too long to get feedback and cognition, so we need to do periodic reviews. Now the frequency has changed to weekly/biweekly reviews, and it is a very good habit to attach importance to review in the team.

1.3 Tactical Play

From strategy to tactics to tactics, it is a step-by-step process from macro to meso to micro. The tactical layer refers to the micro-skills and routines. Please note that the words "skills and routines" here require review and summary. I hope that each time I play, I can form methods and routines based on the previous experience. The more I reuse them, the more exploration costs I can save.

1.4 Practical Examples

Take the growth strategy of the stock conversion business that I was recently responsible for as an example:

① Step 1: Strategic Selection

It is best to update each aspect of the strategy on a Q1 or H1 basis, paying more attention to whether there are changes in the user base, points of conflict, and external environment.

② Step 2: Strategy formulation

The following are some strategic thoughts on the indicators that need to be focused on in the decomposition formula. They are incomplete and are still being supplemented and battled. We also need to look at it from different perspectives, such as whether it is a short-term strategy or a long-term strategy, and whether the current requirement for indicators is rapid growth or steady increase. These will help us do subtraction and find the strategies that are most suitable for achieving current goals.

③ Step 3: Tactical Play

I won’t go into details about the tactical play here, but at a more micro level, it is constantly adjusted based on the business.

Method 2: Business formula model

Method 2 is based on the business formula model and has four steps to complete: ① Build a model & break down GMV → ② Clarify indicators → ③ Sort out directions and formulate strategies → ④ Implement

2.1 Model building & GMV analysis

Model building is a preliminary quantitative analysis method that requires finding the connections between various aspects of the existing business. The common ways of splitting are: splitting by income and splitting by ROI.

• Breaking down revenue : The model can be assembled in a reverse manner. For example, in the education industry, revenue comes from the number of courses/packages purchased by users (average order value). The overall revenue can be understood as = number of users * average order value. Working backwards from this, the number of users is equal to the number of people entering the landing page * conversion rate; the number of people entering the landing page is equal to A * B... and so on, we can build a model by working backwards.
• Break down ROI : ROI=Revenue/Cost. The above is the dismantling income, and the dismantling cost can be divided into explicit cost and implicit cost. Taking an activity as an example, explicit costs include activity promotion costs, activity reward costs, procurement costs, etc.; implicit costs include activity labor costs, maintenance costs, etc. There are also fulfillment costs, such as communication costs, tax costs, warehousing costs, etc.

The method of dismantling depends on the company's development stage and business. For example, for small and medium-sized companies and new businesses, the main focus is on ROI; for listed companies and businesses in the expansion phase, the main focus is on revenue. (Personal understanding)

Figure: Core indicator system, source book "Exploding User Growth "

2.2 Clarify indicators

There are three steps to clarify the indicators: ① Beware of vanity indicators → ② Find the first indicator → ③ Find the indicator that needs to be solved urgently

• Be wary of vanity metrics : those that inspire confidence but don’t guide growth decisions. There is no convincing indicator that cannot reflect the true value of the product. Such as click volume, number of visitors, etc. (see the figure below for details)
• Find the first indicator : it has three characteristics, namely, it is real, feasible and pioneering. Usually the first indicator is directly for conversion or revenue, which will be determined by senior leadership and business development. (This has been mentioned in previous articles, so I won’t repeat it here)
• Find the indicators that need to be solved urgently : This is very important for product managers with at least 0-2 years of experience; it is also a valuable opportunity to exercise data analysis and hypothesis-making capabilities . How to find the funnel situation of each link that needs to be analyzed, and clearly understand which indicator can have the greatest impact on the first indicator at the moment. On this basis, put forward reasonable hypotheses and constantly engage in self-game, and then verify them at low cost; this is a better way to train growth product managers to achieve scientific growth.

Figure: 8 vanity indicators, source book "Lean Data Analysis"

2.3 Sorting out directions and formulating strategies

The following figure is a template for personal thinking strategy, which is still based on the business formula model and is broken down from [goal → indicator → execution direction → implementation]. The benefits of doing so are:

• Clear positioning : Know clearly which indicator your work serves, and don’t just do it for the sake of doing it.
• Reasonable prediction : When others make a request to you, you can use this set of strategies to judge whether the request is reasonable and which direction to attack, so as not to lose your way and cause great losses due to wrong prediction.

Figure: Personal thinking strategy template

2.4 Practical Examples

Still using the example in method 1, change to method 2:

① Step 1: Disassemble the business formula and build a model

• The set Q1 goal is to increase the number of PCs (paying clients). Number of PCs = number of existing users x user activity rate x activity participation rate x activity conversion rate x review approval rate. Just knowing this formula is difficult to implement, so let’s break it down further:
• Number of PCs = Number of applicants x Approval rate
• Number of applicants = Number of participants x Activity conversion rate
• Number of participants = Number of available users x Activity participation rate
• Available users = Number of existing users x User activity rate

After breaking it down, you can clearly identify which indicator you can focus on and how to work on it. Otherwise, just knowing "increase the number of PC users" is too broad and difficult to focus.

② Step 2: Clarify indicators

• First of all, the first indicator is clear: increase the number of PC users
• Secondly, the indicators that need to be urgently addressed are based on data analysis. For example, if the data shows that many people participate in the event, but few convert, and the number is significantly reduced in the entire business formula , then the top priority is to optimize the event process/experience and increase the conversion rate. After clarifying this indicator, it is necessary to implement the indicator, such as increasing it from 25% to 35%. You cannot just say "increase conversion rate". Then break it down further to find out which link leads to poor conversion, how users perform in this link, at which step they stop, why they stop, what are the ways to make them continue... This series of thinking is very challenging!

③ Step 3: Develop a growth strategy

• For example, if I want to increase the participation rate of an event, how should I think about the execution direction to be less MECE? I am used to thinking from the three dimensions of " channel, content, and product ":
• Channel: Don’t think in a narrow sense, understand it in a broad sense. In addition to various resource locations inside and outside the site, channels also include MOT (moment of truth), which refers to the key moment in the process of users using the product. It can be simply understood as "the moment when the experience is good and he is willing to pay for you." These are also very good and cost-effective "channels" that are much more effective than information flow.
• Content: Now that we have channels to attract users, what content should we provide to them? Whether to add more activity types, iterate existing types, or..., these all need to be considered carefully.
• Product: With good content, the role of the product is to allow users to enjoy the content to the greatest extent during this "experience journey". It includes product path design, page packaging, appropriate retention, regular recall, etc.

Figure: Developing execution directions to increase activity participation rates based on channels, content, and products

④ Step 4: Implementation

• I will not elaborate on the implementation, as it should be arranged based on the priority of needs. How to prioritize experiments? My personal preference is to prioritize them according to the two methods : "strategies with high cost-effectiveness have high priority" and "strategies with great impact have high priority" .

Method 3: Growth Flywheel

Amazon's Jeff Bezos' growth flywheel essentially connects key growth factors to form an efficient and convenient closed loop for business growth that operates continuously. Once the flywheel starts rolling, it will get bigger and bigger, eventually forming a growth barrier.

3.1 To make a flywheel, you need the following 4 steps:

• Find out the key growth factors: especially the successes that the company has already achieved and can be replicated. If not, try to summarize and find out the growth factors that may succeed from the failed experiences.
• Analyze relationships: analyze the cause-effect relationship between various factors, such as the logical relationship between A→B→C.
• Try to close the loop: try to connect several sets of relationships in series, and then try and fail quickly.
• Run smoothly and pull: Run a closed loop, accumulate and reuse as much as possible, so that the wheels can roll more and more effortlessly.

The growth flywheel is more suitable for the strategic level, especially when thinking about the growth direction and focus. Only once the key growth factors are found can we continue to break them down.

3.2 Practical Examples

Still using the example in method 1, change to method 3:

① Step 1: Find out the key growth factors

• Success that has been achieved: word-of-mouth recommendation, interest incentives within the APP, manual outbound calls…
• Opportunity to succeed: KOL program, live broadcast, lectures, premium content paid packages...

② Step 2: Sort out and analyze relationships

③ Step 3: Try to close the loop and draw a version first

3. Conclusion

At the end of the article, I attached a diagram of the disassembly methodology. In addition, there are two special notes:

Figure: Summary of 3 disassembly methods

1. What is the connection between these three dismantling methods: As you can see from the red arrows in the picture, I understand that these three dismantling methods are from top to bottom, from macro judgment to micro implementation. Starting from the formulation of the strategy of Dismantling Method 1, you can use the model of Dismantling Method 2 to build and refine it; the specific implementation of Dismantling Method 2 can be explored and tried from Dismantling Method 3.
2. How to judge when to use which method of dismantling: There is no clear scope definition, it depends on the company's current development stage, the individual's responsible business segment and personal proficiency. If I am doing a new business, I will usually use method 1 to evaluate whether this new business is suitable; and use method 2 to clarify the GMV formula and strategic direction. Of course , no matter what method you use to dismantle it, the most important thing is to get it running first .

"Methodology" is always learned from books, and one must practice it to truly understand it. Therefore, deliberate practice → continuous updating → repeated iteration are good steps to internalize the methodology.

Author: Maureen

Source: Maureen