As we all know, the growth of an enterprise is closely related to its strategy and positioning. It can be said that whether an enterprise can grow rapidly, its growth space, growth opportunities and growth efficiency are largely affected by the growth strategy.

1. Two foundations of growth strategy

What is a growth strategy? The growth strategy consists of three parts:

1. First, it is the company’s own positioning. Enterprises must be clear about what kind of business they want to focus on, what kind of value they want to create, and what kind of customers they want to serve;
2. Secondly, it is the mode of deployment and configuration of enterprise resources;
3. The last and most crucial point is the company's business and customer base expansion ideas.

In the past 30 years, it can be said that there are two major strategic theories that have had a profound impact on the world's business community.

Strategy 1: Competitive Strategy

The first one is the famous Competitive Strategy by Michael Porter. This strategy focuses on creating differentiation and selecting different sequences of activities to provide a unique combination of value.

In the book "Competitive Strategy", competitive strategy is divided into three key points, or the competitive trilogy, namely, total cost leadership, differentiation and focus.

1) Total cost leadership

When it comes to total cost leadership, what probably comes to mind most easily is to effectively lower costs through large-scale production and large-scale sales.

But in fact, cost compression is everywhere.

Many companies reduce costs by improving sales channels, such as selling products through social media. The recent live streaming has taken the transformation of sales channels to a whole new level. Another example is compressing channel links by deeply integrating the supply chain and connecting with the source of production... These methods have enabled companies to rapidly reduce costs in certain aspects and gain cost advantages in certain links.

2) Differentiation

Differentiation is a completely different idea.

Let me give you a very typical example: in the 1980s and 1990s in China, China's home appliances developed rapidly, and many companies started from scratch and began to continuously launch various home appliances.

The home appliance industry then entered a very fierce round of price competition. Everyone is lowering prices in an attempt to quickly capture the market. But we all know that there is limited room for price reduction, and certain experience functions may be sacrificed.

But Haier has broken away from the norm of low-price competition and instead provided a full range of service systems. By differentiating our services, we were able to distance ourselves from many home appliances companies that were constantly sacrificing quality in pursuit of cheapness.

Ultimately, through differentiation at the "service" level, Haier has gained huge brand advantages in the home appliance industry.

3) Focus

Now let’s talk about focus.

A very obvious case is Gree. During its period of rapid development, Gree focused on making air conditioners. At its peak, air conditioning accounted for 97% of its business, and it can almost be said that it only made air conditioning at that time.

Of course, once an enterprise reaches a certain scale, it will inevitably begin to pursue diversification. However, in the process of its rapid growth and development, focus should be said to be an important strategic factor for Gree to gain industry leadership.

Strategy 2: Blue Ocean Strategy

Competitive strategy can be said to be the first source of ideas for growth strategy, but in the past 15 years a new strategy has emerged that has influenced the entire business community, especially the entire Internet industry, and that is the blue ocean strategy.

The blue ocean strategy can be said to be an amplification of differentiation in competitive strategy. It focuses on providing users with value that is not yet available in the market today, finding some new value orientations and value entry points, so that unsatisfied consumer groups can be quickly satisfied.

It may be easier for everyone to think that this is avoiding the current red ocean and doing something that others have not done. But in fact, the so-called blue ocean strategy is far more than doing things that no one has done before, but it can explore new dimensions of value.

For example, a very obvious example in recent years is Heytea. In everyone's traditional concept, when talking about tea drinking, people will naturally pay attention to the type of tea, baking process, taste, and even its packaging and brand positioning.

But Heytea took a completely different route. It has found a new entry point for value through its exquisite appearance, a name that hits the mark among young people, and a design and innovation that is very much in line with young people's tastes, thus creating some brand-new value in the relatively traditional field of tea drinks.

These two strategies are important foundations for formulating corporate growth and development strategies.

So let’s reinterpret the growth strategy.

First of all, if an enterprise wants to achieve rapid growth, it obviously should not get stuck in the red ocean, unless it has huge capital to crush it. For most companies, finding blue ocean of value is a key to success.

Where will the blue ocean of value appear?

It often comes from brand new technological trends. For example, China is currently promoting 5G with all its strength, so 5G-related industries will have new opportunities. The traditional civilian optical fiber industry will gradually begin to decline. Therefore, how to find future trends is the key to finding the blue ocean.

Of course, we can also focus on new consumers and consumption concepts. Young consumers like those born after 1995 and 2000 pay more attention to individuality and identify more with domestic products. They may focus on value for money while spending a lot of money on the things they like. In fact, all of these new trends can find growth points, and finding growth points is a very critical idea in the blue ocean strategy.

In addition, we can also acquire seed users by segmenting user groups and gradually expand and penetrate into larger groups.

For example, when Pinduoduo was rising, its core user group was the so-called young people in small towns (and middle-aged people in small towns). They have plenty of time and interest to participate in some interesting gameplay to gain some small profits, and are more inclined to buy some relatively cost-effective products on the platform. They were the entry point for Pinduoduo, and then Pinduoduo continued to expand in user circles and groups.

There is another way, which is to start from a field of rigid demand (catering group buying) like Meituan , and then continue to iterate.

2. Comprehensive case: Meituan’s eight-step growth strategy

Next, I will show you a comprehensive growth case, which is Meituan.

Meituan’s earliest approach was to imitate a group buying model that had just emerged in the United States at the time - the Groupon model. A typical value point in this model is the so-called “one group a day”, which launches a selected group purchase every day for consumers to purchase.

But soon, some problems arose in this model. Because catering is subject to strong geographical restrictions, but our purchases on the Internet are not subject to geographical restrictions. So if a consumer sees a very good restaurant group buying product on Meituan, but the restaurant is far away from him, most people are unlikely to buy this product. In this situation, consumers can only watch and feel the benefits, but cannot enjoy group purchases.

For restaurants, the platform only launches one group a day, and the huge influx of traffic will cause the order volume to far exceed the restaurant's reception capacity, similar to the explosion of the e-commerce industry.

In this situation, Meituan improved the traditional model.

1. From "one group per day" to "multiple groups per day"

Meituan improved the "one group a day" model to "multiple groups a day", providing consumers with more choices while achieving restaurant diversion.

2. From "short-term fixed-term" to "long-term flexible"

The original group buying products were short-term, for example, a group buying coupon might only be valid for two weeks. However, based on the common demands of consumers and merchants, Meituan extended the product life. For merchants, extending the time will bring more customers; for consumers, it reduces the purchasing burden.

3. From "No refund after expiration" to "Refund after expiration"

This is Meituan’s most exciting operation. At that time, it was the so-called "Thousands of Group Buying Wars" period, and almost all group buying companies used a large amount of financing on advertising and marketing.

However, during the extremely money-burning stage of the "Thousands of Groups War", Meituan did not choose to spend all the money on advertising. Instead, it chose to use the money to implement "expired refunds."

For consumers, if they buy a coupon with an expiration date but do not use it when it expires, it is a loss. The money users spend on group-buying coupons becomes the profit of the group-buying platform. This was a standard profit model for group buying platforms at the time.

At this time, Meituan suddenly launched an automatic refund policy for expired group-buying coupons. This practice was very popular among consumers and eliminated the worries of purchasing group-buying coupons, but it also brought tremendous pressure to other companies. Although there was an uproar and protest in the group buying industry, most people had no choice but to follow suit, but a large number of customers had already turned to the Meituan platform.

Meituan's strategies have rapidly improved user experience step by step.

In growth theory, there is a concept called the PMF index, which represents the fit between product and market. It is calculated by conducting a survey to find out the proportion of users who would be very disappointed if the product disappeared from the market.

The magic number is 40%, which means that only when the PMF index of a product exceeds 40%, it means that the entire product is in a stage of very good user experience, which means that users like it very much. Only then will the company be recommended to carry out the next step of rapid promotion and diversion.

After this series of operations, Meituan’s PMF index should have far exceeded 40%. Therefore, Meituan has polished a very good user experience during this stage, and at the same time has gathered a group of loyal users in the entire catering direction.

4. From "crazy visits and crazy top laners" to "head, waist and tail"

Objectively speaking, Meituan is a two-sided platform. There are two major groups on its platform, one is customers and the other is catering merchants.

The continuous improvement and growth of catering businesses can better satisfy everyone's tastes, provide more abundant products, and give customers more choices. Therefore, customers will also increase rapidly with the improvement of businesses, and the improvement of customers will bring more orders. More orders will give businesses greater motivation to join the platform and provide more products and better discounts.

So we can see that these two sides circulate and promote each other, but in the process of building such a bilateral platform, a very critical point is which end we start to drive from.

Companies on multi-sided platforms often choose one end as the main driving force. Taobao is driven by merchants, Uber is driven by drivers, and Meituan chooses merchants as the driving side.

Meituan’s initial strategy of “crazy visits and crazy orders” was to mobilize a ground-based team to expand the merchants on Meituan. When the number of merchants reaches a certain scale, it further enters into the "head, waist and tail" strategy, dividing the merchants into head merchants, waist merchants and tail merchants, and adopting certain strategies for them respectively.

Let’s talk about the top merchants first. Top merchants mainly refer to restaurants with famous brands and a large number of customers, rather than high-end catering businesses, such as the typical KFC, McDonald's, and Pizza Hut. There are a huge number of restaurants like this, and Meituan’s strategy is to persuade them to join Meituan through strategies such as “prepayment to ensure volume and key subsidies”.

For these restaurants, they did not have enough motivation to join the group buying platform at that stage, especially in the early stages of Meituan, many catering companies were still in a wait-and-see state about this new form of "group buying". For these well-known, high-volume companies, there seems to be little need to attract customers through discounts.

But for Meituan, it is actually very important to win over such leading companies, so Meituan launched a so-called "key subsidies, prepayment to ensure volume" strategy.

For example, Meituan went to negotiate with KFC and promised, "I will help you sell 100,000 hamburgers a day." For KFC, sales are guaranteed, and it would certainly be happy, but it is unwilling to provide discount subsidies. Meituan said it was okay and that they would use their own funds for subsidies.

So when KFC was put on the shelves, many consumers saw that a burger that cost 10 yuan at KFC could be bought for 8 yuan. For many people who were going to buy KFC anyway, they would of course be happy to buy such a product. Therefore, these consumers became Meituan users because of the KFC brand and Meituan's discounts and subsidies.

At the same time, for restaurants, Meituan is bold enough to advance the funds they promised to the merchants, so the merchants don’t have to worry about whether sales can be achieved. Why not do it?

So just like that, they took over many top merchants.

Let’s look at the operations of mid-level merchants. Mid-level merchants refer to those stores whose brands are very famous but may not be that large in scale, such as regional chains like Quanjude and South Beauty. These stores may not have as many chains as KFC and McDonald's, but their brand awareness is very high and they have a large fan base.

For these mid-tier merchants, Meituan adopted an exclusive signing strategy. Because for Meituan, it can introduce these companies exclusively to its own platform, and their users will naturally become loyal users of Meituan.

In this case, the exclusive strategy can actually get the support of merchants. Because the traffic on the Meituan platform is so huge, these merchants can attract a lot of customers to their stores. Meituan has successfully won over many mid-level merchants.

The tail merchants refer to small shops on the roadside. These restaurants may not be so well-known, but they are numerous and very long-tail. If we add up all the customers of these long-tail restaurants across the country, their number might be even larger than that of the head.

The number of tail merchants is staggering, so Meituan adopted the strategy of "focusing on coverage and letting merchants provide self-service." It is to help them develop a self-service backend, and define and list group-buying products on their own in accordance with Meituan’s rules. In this way, the tail merchants can list their own restaurants on Meituan, and then list their group purchase products, thereby obtaining traffic from the Meituan platform.

So we can see that at these three levels, Meituan has formulated very beautifully targeted strategies, allowing traffic to grow rapidly driven by merchants.

5. From "online customer acquisition" to "offline traffic acquisition "

For Meituan at that time, when online traffic reached a very high level, it began to expand in dimension and demand traffic from offline.

You may still remember that around 2014 or 2015, QR codes of group buying companies appeared on the tables of many restaurants. By scanning this code, you can directly enter your own restaurant on the group buying platform, and you can get certain discounts by paying with discounts or directly purchasing group buying products.

In fact, you may find it a little strange that why the restaurant should ask customers to scan the code to get discounts when the customers have already come to the store to consume.

But in fact, the logic of the restaurant is this: in exchange for a sacrifice or payment in exchange for the traffic of the group buying platform, they have the conditions to join the group buying platform and then get more traffic support. Therefore, under the terms, many merchants are willing to further direct their offline traffic to Meituan’s online.

6. T-shaped development strategy

Next, let’s take a look at the so-called “T-shaped development strategy”.

What is "T" type? The horizontal one refers to the group buying platform, and the vertical one refers to the vertical field. Meituan initially entered the catering group buying field. After gathering a large amount of traffic in the catering group buying field, it began to develop more vertical fields.

One of the earliest vertical fields was film. Meituan launched Maoyan Movies in 2012 and began to continuously acquire movie customers. Because movies are relatively standardized, and most theaters are connected to standardized systems (online ticket purchase, online seat selection), objectively speaking, connecting the purchase of movie tickets to their own platform is just a technical breakthrough.

Therefore, movie users are imported into the group buying platform and become users of the group buying platform, and catering users are also brought into the movie field.

In this case, a virtuous cycle of both businesses is formed.

Subsequently, Meituan continued to expand into many businesses, integrating traffic on the entire platform, forming an ecosystem, and conducting vertical interactions between various businesses.

Including before, Meituan acquired Mobike and launched its own shared bicycles. In fact, Meituan does not intend to make a profit through this business, but wants to compete for payment methods through a high-frequency application such as shared bicycles, and bring traffic and higher usage frequency to the entire Meituan platform.

In this way, Meituan gradually became a giant life service platform.

7. Regional expansion strategy

The so-called regional expansion means that Meituan rose from the bottom-line level, fought fiercely with Dianping in the process of penetrating the high-line level, and finally merged to complete full coverage of high and low-line levels.

8. Deepening the industrial chain

Meituan’s final strategy is to build a broad moat by deepening the industrial chain.

After Meituan became a giant in the life service platform, it began to rapidly deepen its industrial chain to help merchants increase their value, build systems, and improve efficiency.

All of these operations actually produce a very powerful effect - huge stickiness.

This is because if the system used by merchants is connected to Meituan, or even provided by Meituan, the data is deposited in it, and the service efficiency is guaranteed by the platform's system, then the platform's stickiness to merchants will naturally be very strong, and it will be difficult for merchants to leave.

At each stage, Meituan has a very clear focus. At the same time, under the entire growth system, it also perfectly matches what the growth theory pursues: from the entry point to PMF, to multilateral platforms and dimensional expansion, and finally to the establishment of a large thinking system of industry barriers and stickiness.

This is the end of this issue. In the next issue, I will analyze the five dimensions of growth strategy with you based on classic cases such as Amap, LeTV, and Keep.

Author: GrowingIO

Source: GrowingIO