The secret of Pinduoduo’s cash flow for user growth

It has only been five years since Pinduoduo went online in 2015. In 2016, the number of Pinduoduo users exceeded 100 million; in 2017, Pinduoduo ranked first in the iOS overall ranking and shopping category for nearly a month; in 2018, Pinduoduo became China's second largest e-commerce platform; in 2019, Pinduoduo was selected as one of the 100 role model brands at the 2019 China Brand Power Festival; in 2020, Pinduoduo became the exclusive red envelope interactive partner of the 2021 Spring Festival Gala. Next, the author of this article reveals to us the secret of capital flow for Pinduoduo ’s user growth .

To summarize Pinduoduo from the user's perspective: I can give you discounts, but you need to fight for it and make efforts on your own, whether it is group buying, games, bargaining, etc.

1. Analysis of Pinduoduo User Mindset

Mind and user growth are closely related. Pinduoduo’s core logic: grasp the weaknesses of human nature!

"Really good" has become a unique label for Pinduoduo. In real life, many friends say that they/their family members are addicted to Pinduoduo. If we analyze it in depth, we will find that Pinduoduo's user mindset is fully reflected in its products. Let's first look at Pinduoduo's e-commerce mindset from the homepage of the App.

Home page keywords: cheap, free, make money by playing games, save money, really good...

Take a look at the mentality that Pinduoduo gives people:

First level entrance:

The mindset of user-centricity is similar. From the first-level entrance on the homepage and the user center, we can see that Pinduoduo’s main user mentality is cheapness: things are free, you can make money by playing games, you can make money by social sharing, you can save money by buying things, you can make money by signing in, and so on.

For the vast majority of Chinese people, why not save or make money by just moving your fingers?

The platform gives users some small favors, but what it wants is the users’ online time and the conversion opportunities in the process. The fast version of Douyin and Kuaishou, you can make money by watching videos, but if you do the math, you basically have to watch Douyin for 8 hours in a row to make 1 yuan.

However, doing so will make this part of users very loyal, because Pinduoduo has grasped the weakness of people: their time is not valuable, but they are greedy for small profits, and do not mind using social relationships to monetize (there is nothing wrong with sending Pinduoduo links in Moments or WeChat groups).

For users, affordability is the most important thing.

Especially for new users, such product design can easily keep them stuck. With this mindset, even if some products are cheaper on Taobao than on Pinduoduo, Pinduoduo users have already formed the habit.

From the perspective of user growth, the Pinduoduo APP has placed hooks in various places to occupy users' time.

2. Analysis of the mentality of mobile Taobao users

Compared with Taobao, the existing Taobao App cannot compete directly with Pinduoduo in terms of cheap and good quality. Let's first look at the user mind-building scenario of the Taobao App's homepage:

1. Home

• Today’s hot item -> Hot item == cheap? ->Minds need to be transformed, and users need to think;
• Luxury product discounts -> Personalized recommendations. Luxury products may still be expensive after discounts.
• Receive Taobao coins-> Taobao coins can be exchanged for cash;
• Save money and eliminate -> Play games to save money, but it will be at the end.

2. User Center

• Tmall Farm -> Games can make money, and users need to be educated for the first time
• Idle can be exchanged for money -> Xianyu Mindset

In a comprehensive comparison, in terms of cultivating user minds, it is now more difficult for Taobao App to educate users than Pinduoduo. The first-level entrance of Taobao Mobile is basically designed according to the organizational structure: Tmall Global, Ele.me, Maochao, Koubei, Ali Health, etc., so Taobao Mobile can be regarded as a super APP.

Regarding user growth logic, if users need to use the product according to its functions, the cost of educating users will be very high.

For example, for low-tier users, it takes time to understand what Tmall Global sells, why they need Tmall Global, and what needs it can meet. Compared with Pinduoduo's grasp of human weaknesses, the efficiency of Taobao APP user hooks is lower than Pinduoduo.

Taobao's first-level entrance is now designed according to the organizational structure, and the user education cost based on each entrance will be very high. This is equivalent to each business requiring an independent APP to support and educate users and cultivate their specific mindsets, even if these businesses do not have an APP now.

As mentioned in our previous article "Recommendations and Attention Economy", recommendations can be used to eliminate the entire information barrier. If we need to improve user growth efficiency, such as targeting Pinduoduo among low-tier populations, the existing Taobao App organization method may not be the most effective one.

These functional resource locations can be dynamically adjusted according to the user's life cycle to truly be tailored to each individual.

It's not just the products that are tailored to each individual, but the functions that are tailored to each individual. For example, the first-level entrance of the Taobao App that new users see is designed based on new users. There may not be Tmall Global or Ele.me, but there are gold coins, money-saving elimination, and Tmall Farm to attract users.

Alternatively, you can copy Pinduoduo's strategy on other apps, cultivate customer minds, and then direct traffic through an APP matrix. For example, using the special price version of Taobao Mobile and Taobao Shop may be one way. Tik Tok and Kuaishou Speed ​​​​Version have already cultivated users’ minds at the App level, allowing them to make money just by watching videos.

3. Pinduoduo’s product logic

1. Pinduoduo’s traffic efficiency

The essence of Pinduoduo's social e-commerce is actually the decentralization of traffic. Alimama’s traffic logic is centralized control, so brands need to buy traffic packages and bid. The traffic costs of the two models will be very different.

Assuming the cost of one user is 100, Pinduoduo uses the group buying model (10 people in a group), so the average cost per user is 10. Assuming the cost of Taobao App is the same, the traffic cost of merchants will be 10 times that of PDD.

If Taobao App adopts the group buying model:

1. Group buying within the app – this will directly affect Alimama’s revenue;
2. Social networking is not complete in the Taobao system. Group buying is very inefficient for the Taobao app and the user experience is poor.

Therefore, from the perspective of merchants' operating costs, Pinduoduo's traffic costs are lower than Taobao. Unless Taobao can take drastic measures to reduce its traffic costs, it will continue to face the threat from Pinduoduo in the future.

2. Pinduoduo’s shopping logic

1) Pinduoduo does not have a shopping cart

Pinduoduo only has search, not a shopping cart in the usual sense. When shopping carts were originally designed, people could buy multiple items at the same time, across categories and brands. Shopping carts can also have marketing functions (JD.com and Taobao’s shopping carts will prompt that XX coupons can be used).

However, Chinese people’s shopping carts not only support the ordering function, but also serve as a collection function. Although most platforms have a favorites function, Chinese people generally don’t use it much because the user path is long (there is no data to confirm this, just an intuitive feeling).

Pinduoduo only has a search function but no shopping cart, which actually tells consumers: the things on my platform are the cheapest and most affordable. There is no need to collect them, compare prices, or hesitate. Just place an order directly. Just like the line goes, "You can't afford to suffer a loss, and you can't afford to be cheated."

In contrast, the Taobao app uses various marketing tactics, and consumers feel like they are being tricked.

Without big promotions, there will be no large-scale consumption, so the platform must promote various activities every day to boost consumption. Without activities, transactions will drop. Taobao’s big sales have become a regular occurrence now, and are said to happen more than 60 times a year.

PDD has favorites, which can be used for cross-store purchases, group purchases, and platform coupons, but the user experience is not good (the entrance is too deep).

2) Pinduoduo does not have a strengthened coupon redemption center

The lack of a strengthened coupon redemption center means that coupon-based marketing will be weakened (Pinduoduo offers coupons for monthly memberships and store coupons). It also means that the platform does not need to set aside N days every year to hold activities. In the minds of consumers, the platform’s prices are still positioned as the cheapest and most affordable, and there is no need to deliberately redeem coupons or place orders.

This also corresponds to Pinduoduo's product logic that is dominated by goods, rather than store or brand dimensional logic. Therefore, there is no need for cross-store coupons or platform coupons, and there are no complicated ways of playing.

For Taobao, platform coupons (category coupons, cross-store coupons, etc.) require costs, but Pinduoduo does not have this part of the cost (now Pinduoduo monthly cards will have coupons). This can be associated with the basic product logic of Pinduoduo analyzed at the beginning. This part of the cost that was originally required to be paid can be converted into the user's own efforts (user activity).

For example, it originally cost 100 yuan to get coupons on the platform, but Pinduoduo used this 100 yuan to give users cash subsidies every day by signing in, playing games (to please users). In this way, Pinduoduo’s entire logic can be explained. This is also one of the reasons why Pinduoduo's monetization rate is lower than Alibaba's.

Pinduoduo saves the coupon marketing costs in e-commerce and then transfers this money to attract new users and promote activation. In other words, the coupon costs, or the discounts given to users, which were originally borne by the platform and merchants, have been transferred to users who must log in, play games, and spread social media every day to win the price difference originally given to users by the platform and merchants.

IV. Conclusion

The logic of Pinduoduo from attracting new customers to shopping carts to coupons can be summarized as follows:

To summarize Pinduoduo from the user's perspective: I can give you discounts, but you need to fight for it and make efforts on your own, whether it is group buying, games, bargaining, etc.

Author: Broken Brother

Source: pojuge (Coder Breakthrough)