Analyze the underlying logic of growth from the perspective of growth cognition model

These years, everyone has said that growth is difficult. It seems that everyone’s suffering started with the slowdown in growth.

Even Coca-Cola, which abolished the CMO and embraced the CGO two years ago, has changed its mind and re-established the CMO position. In fact, the failure of growth in the eyes of many people is simply because they have ignored the underlying logic of growth and are doing useless work.

Therefore, in order to fundamentally avoid everyone from choosing the wrong growth model. Today, I will analyze the underlying logic behind the growth of products/enterprises at different stages from the perspective of the growth cognition model.

From CMO to CGO and back to CMO: Marketing drives growth

In March 2017, Coca-Cola abolished its global chief marketing officer and established a chief growth officer (CGO). Francisco Crespo, who was CGO at the time, put forward a point of view on growth: the path to scientific growth, including building a brand portfolio with "high-quality leadership", and the ultimate result was: higher profit margins than competitors.

In December 2019, Coca-Cola re-established the position of global chief marketing officer (CMO).

From CMO to CGO and then back to CMO, looking at growth from the perspective of the business, we will find that the way of marketing has not changed, the core logic of growth has not changed, and the essence of growth has not changed.

• For the existing market, Coca-Cola insists on the route of Marketing & campaign, attaches importance to promotional means, controls advertising costs, and can see the effect of growth.
• For the incremental market, Coca-Cola adds value by launching new products, expanding packaging solutions for new occasions or price points through packaging innovation, and ultimately forming a richer product line to achieve its growth goals.

Philip Kotler, the father of modern marketing, has mentioned many times that marketing is the law that drives business growth . There is no doubt that the case of Coca-Cola fully proves this point.

However, everything has its reasons, and reasons have their assumptions. Are all the marketing-driven growth methods suitable for your company? What are the differences in marketing-driven growth methods for companies at different stages of growth?

Next, we will start with the analysis of the essence of corporate growth:

Analysis of the Nature of Growth

1. Understanding the essence from the growth type

Everyone is talking about growth. From a mathematical formula, growth is a variable per unit time, and we often think that this variable refers to an increase (but it can actually refer to a decrease, such as cost reduction, loss reduction, etc.).

However, if we look at growth from the perspective of the speed at which variables are generated, then growth can be fast or slow, so growth can be divided into two major types: exponential growth and linear growth.

Obviously, exponential growth is a representative of rapid growth, which is common in Internet companies. They serve unlimited users through intangible services. For example, Meituan has continuously launched new businesses throughout its development process, meeting user needs through group buying, takeout, hotels, movies, grocery shopping and other services. In this process, users migrate at low cost, and the marginal cost can be considered to be tending to zero. Meituan maximizes the user value provided and continues to extend its service content, thereby achieving continuous growth.

There is no doubt that linear growth is a relatively slow type of growth, which is common in traditional enterprises. Product and service delivery relies on offline, and channels and time are constraints. Therefore, it is not difficult for us to understand why traditional enterprises need to transform and upgrade, hoping to bring growth with the dual drive of data and technology. For example, the impact of new retail on traditional retail is that business data has been digitized, which can provide a better basis for business decisions; online business can effectively improve transaction efficiency.

To sum up the above, exponential growth is a more ideal growth. Its essence is the connection between intangible services and unlimited users, and the process of achieving marginal costs approaching zero.

2. Understand the essence of enterprise growth from its stages

In the process of enterprise growth, growth is usually divided into several stages: 0-1, 1-10, and 10-100.

Stage 0-1

This stage is often referred to as the PMF-verification stage, which is to find the match between the product and the market and the user's aha moment. Among them, the verification method is the often mentioned MVP (minimum viable product). The verification standard is relatively simple and crude, that is, users come actively, user growth is fast, and users are willing to pay.

This coincides with Philip Kotler's point that "the essence of growth is user demand". The essence of enterprise growth in the 0-1 stage is that demand is verified and satisfied.

Stages 1-10

After the demand is verified, the essence of growth that companies should focus on at this stage is how to acquire, activate, retain customers, and make money to gain more profits. The commonly mentioned AARRR model is mostly used by companies in stages 1-10.

10-100 Stages

Companies in the 10-100 stage are very close to us. For example, fast-growing companies such as Luckin Coffee, Heytea, and Pinduoduo belong to this stage. These companies have a more mature understanding of the nature of growth and usually divide the nature of growth into two types: structured growth and strategic growth.

Structured growth mainly involves refined operations in acquiring more users, locking in users, and managing user value. For example, to acquire more users, regional channels, customer groups, and promotion methods will be optimized in combination with data to achieve the effect of improving conversion. To lock in users, the feasibility of user operation strategies is often evaluated from the perspective of service efficiency and quality, while managing user value is usually achieved through two aspects: deepening and expanding product categories.

From a strategic perspective, strategic growth means finding differences and integrating them. These differences include positioning differentiation, cognitive differentiation, and visualization of differences. Integration is expressed through new value integration, upward resource integration (such as supply chain resource integration), and downward resource integration (such as distribution logistics resource integration).

Under the dual effects of structural growth and strategic growth, companies in the 10-100 stage can quickly find ways to make money and generate more profits (even if there are losses, they are temporary and will turn losses into profits when marginal costs are very low).

It is worth mentioning that some business giants, when they reach the 10-100 stage, can gain insight into the development trend of the industry and start exploring new businesses based on their own advantages. At this time, the company's new business returns to the 0-1 stage. We usually believe that the company has embarked on the journey of the second curve of innovative growth.

Take Meituan as an example. After its group buying business, which stood out in the Hundred Regiments Campaign, reached the 10-100 stage, it started to explore the food delivery business. When the food delivery business entered the 10-100 stage, Meituan started to explore new businesses such as hotels and grocery shopping. Therefore, Meituan is a company that is constantly embarking on the second curve of innovative growth.

From the perspective of enterprise growth stages, it is not difficult to find that the development of an enterprise from the 0-1 stage to the 1-10 stage, and then to the 10-100 stage, and even after the 10-100 stage, is a process of continuous upgrading of growth. The nature of growth is different: the essence of growth in the 0-1 stage is the commercial verification of user needs, the essence of growth in the 1-10 and 10-100 stages is monetization and expansion, and the essence of growth after the 10-100 stage is innovation.

As mentioned above, the nature of growth is different for companies at different stages. So how can we understand growth at different stages to help companies develop? We will analyze the core of growth for each stage of the enterprise.

Growth analysis of the 0-1 stage: Self-growth stage, product-driven

1. The growth core of the 0-1 stage

In the 0-1 stage, since it is the PMF-verification stage, we need to do the following two things:

1. Based on the reasons for purchasing/using the product, select precise user groups to test conversion and sharing
2. Improve and iterate products based on accurate user feedback

Therefore, the important indicators of PMF are conversion rate and sharing rate.

Let me give you an example that you will understand immediately. In the 0-1 phase, Luckin Coffee did two very important things to promote growth:

• The first thing is to push discounts to encourage users to place orders and complete sales transactions;
• The second thing is to reward users who share and forward. New users can get free coffee, and old users can get more discounts. At the same time, a series of promotional activities were carried out, and elevator and building advertisements could be seen everywhere. The dissemination effect was very rapid, and Luckin Coffee quickly became known to users.

2. The relationship between growth and products

From the above cases, we can see that in the 0-1 stage, products are the fundamental driving force of growth. The relationship between growth and products can be described as:

In this relationship, we clearly understand the relationship between transaction, sharing, dissemination and growth:

make a deal

A transaction can often be verified through social relationship chains (such as friend circles, communities, etc.) in the 0-1 stage, or it can be a transaction in an offline scenario. This is a small closed loop of a business unit.

share

We should pay attention to the design of sharing points. Usually, the fission behaviors that promote sharing are selfish, such as earning commissions through distribution, helping to bargain and save money, and buying in groups at low prices. However, it is worth noting that due to the strict control of WeChat rules, fission in the WeChat ecosystem cannot touch the red line of inducing sharing.

spread

The communication process must not only reach precise user groups, but also pay attention to the speed of communication. Therefore, on the one hand, it is necessary to select precise media and communities as delivery channels, and on the other hand, it is necessary to determine appropriate copywriting based on the user portraits and scenarios of the channels, guide users to actively participate, and complete the commercial verification of needs.

3. Growth enlightenment from the 0-1 stage

To understand further, since products are an important factor in driving growth in the 0-1 stage, creating products that can complete transactions and spread on their own will undoubtedly accelerate the pace of growth. We commonly call such products "explosive products", which can fully meet user needs in terms of functions, allow users to quickly feel the beauty of the product in terms of experience, and realize more connections between users and products through self-spreading.

Functions are problems, and problems are needs. This requires creating products based on insights into users, needs, and environmental changes. Understanding what users lack and what they need to fill the gaps enables us to close deals quickly and easily.

Only by fully grasping the user portrait, understanding the user's expectations and goals, providing appropriate and sufficient service touchpoints, and allowing users to quickly find the scenarios and paths for using the product, can we naturally bring a good experience to users.

In the design of self-propagation, the simple and easy-to-understand gameplay can easily achieve twice the result with half the effort.

Growth analysis of 1-10 and 10-100 stages: Positioning stage, channel driven

1. The growth core of 1-10 and 10-100 stages

When a product enters the 1-10 and 10-100 stages, it means that the user needs have been commercially verified. The value that the product can bring to users is very clear. How to better present the value of the product can be achieved through the following two points:

• Choose precise channels based on product purchase reasons to drive growth
• Combine user feedback to continuously improve and iterate products

Therefore, when a product is in the 1-10 and 10-100 stages, it is the product positioning stage. It can clearly bring specific value to precise user groups and provide users with sufficient reasons to buy.

To give an example from our daily life, Perfect Diary, which is known as a popular domestic beauty brand, has now used Xiaohongshu KOL as an important precise delivery channel after going through the 0-1 stage. Currently, Perfect Diary’s official account on Xiaohongshu has 1.68 million followers, more than 120,000 notes on the entire platform, and a total exposure of over 100 million.

Perfect Diary's huge scale of advertising has quickly driven up sales, mainly through niche KOLs at the mid-level and below on Xiaohongshu, continuously creating popular products, and using subsequent big promotions to rapidly boost sales, which has led to spontaneous dissemination among users.

At the same time, Perfect Diary also attaches great importance to retention and repurchase, and fully utilizes private domain traffic in the WeChat ecosystem. When users purchase Perfect Diary products, a "red envelope card" will be included in the package. Scratch the layer to get a special password, scan the code to follow the official account, and then the official account will immediately push a page containing a personal account QR code. After adding the personal account, the user will receive a small program QR code. Scan the code and enter the password to receive a 1-2 yuan red envelope.

Here comes the key point. The personal account will then be operated in a refined manner in the Moments and communities. Not only will it post various daily selfies, but it will also release new products, hold lucky draws, etc. This will guide the user's purchasing decisions to a large extent, and gradually cultivate a KOC that users will trust and be willing to repurchase.

2. The relationship between growth and purchase reasons

Through the case of Perfect Diary, we can easily find that in the channel-driven stages of 1-10 and 10-100, the reason for purchase is the driving force for rapid growth. The relationship between growth and reason for purchase can be described as:

In this relationship, we can deeply understand the relationship between transaction, sharing, dissemination and growth :

make a deal

Transactions in the 1-10 and 10-100 stages are achieved through global traffic. The so-called global traffic is not limited to the WeChat ecosystem, but also includes e-commerce platforms such as Tmall/Taobao/JD.com, and even diversified channels such as live streaming e-commerce can be considered to promote sales. As long as the channel is accurate enough and the ROI is in line with expectations, it can be fine.

share

In the sharing process, it is necessary not only to design the sharing points well, but also to expand the sharing points, which can be achieved through personal account-community-mini program.

Perfect Diary’s private domain traffic operation is the best example. On the one hand, after the personal account adds users, they are pulled into the community. The community will operate around multiple mini-programs. Thousands of communities have been formed, and differentiated operations will be carried out according to user interests. On the other hand, the personal account will publish high-quality beauty content on the mini-program every day, and then share it in the community, attracting continuous attention and discussion from users. At the same time, live broadcasts, lotteries, and user surveys will also be carried out in the community, continuously serving users well and effectively influencing users’ purchasing decisions.

spread

In terms of communication, in addition to self-media and communities, public relations and advertising are also very important means. For example, cooperating with popular KOLs to sell products through live broadcasts to create brand events, inviting popular celebrities to endorse the brand, etc., can quickly attract public attention, increase the brand's voice and reputation, and ultimately effectively accelerate the growth of the company.

3. Growth enlightenment from 1-10 and 10-100 stages

Since the purchase reason is an important factor in driving growth in the 1-10 and 10-100 stages, we need to build sufficient purchase reasons for users. We can do this through the following two points:

Function

Function is still an important reason to impress users to buy. We must always adhere to the principle of highlighting how functions can bring value to users through differentiated operation methods according to different user portraits, just as Perfect Diary uses refined operation of private domain traffic and content operation to share high-quality beauty information with users, allowing users to fully perceive the powerful functions of the product and the value of beauty it can bring, ultimately prompting users to place orders and repurchase.

emotion

When users have full trust in a brand, they tend to be more likely to place orders. This trust is inextricably based on product quality and professional service. On the one hand, it can reduce users' doubts, and on the other hand, it can continuously strengthen users' minds, gradually making the brand synonymous with a category. Whether Perfect Diary uses Xiaohongshu KOL or WeChat ecosystem's private traffic, its ultimate goal is to make users have enough trust in the product, fully believe in the product's effectiveness, and let users convince themselves and form reasons to buy.

Analysis of growth after the 10-100 stage: cultural stage, brand-driven

1. Growth kernel after 10-100 stage

Now that the products have developed to the 10-100 stage, the companies obviously already have very good brand assets and culture and have formed a stable corporate gene. Companies like Xiaomi, ByteDance, and Meituan are typical examples. These companies often leverage the power of their brands and use innovative products to achieve new growth. Innovative products still serve the brand, becoming a tool to continuously expand the brand's influence, and completely occupying the minds of users around the unchanging corporate mission.

It is not difficult to find that the growth after the 10-100 stage is the expansion and extension of the brand, which embodies two major characteristics: First, it completes the process from product and channel driven to brand driven; second, innovative products still serve the brand and carry the culture and genes of the enterprise.

To give an easy-to-understand example, take Xiaomi. Everyone first got to know Xiaomi through the Xiaomi mobile phone. The cost-effective Redmi mobile phone once became a popular mobile phone, but Xiaomi's growth is not just in the mobile phone itself. It is through building the Xiaomi smart ecological chain that it has formed a smart hardware symbiosis with many upstream and downstream partners in the supply chain, and launched a series of innovative products based on the smart ecology, highlighting Xiaomi's ecological culture, thereby continuously strengthening Xiaomi's brand influence and achieving leapfrog growth from products to ecology.

Take ByteDance, a company valued at US$75 billion, as an example. Many of its popular products, such as Toutiao, Douyin, Xigua Video, and Huoshan Video, are applications based on artificial intelligence algorithms applied to mobile Internet scenarios. From a single product to a multi-product matrix, ByteDance's growth is driven by a brand marked by algorithm culture. Algorithm culture efficiently enables traffic operations, and the multi-product matrix is ​​a rich and diverse innovation ecosystem, which ultimately became ByteDance's growth engine.

2. The relationship between growth and brand

Through the two cases of Xiaomi and ByteDance, it is not difficult to find that after the 10-100 stage, brand is the driving force for sustained growth. The relationship between growth and brand can be described as:

In this relationship, we deeply understand the relationship between transaction, sharing, communication and growth :

make a deal

Whether it is Xiaomi or ByteDance, transactions are completed through full-line coverage: for Xiaomi, full-line coverage refers to major e-commerce platforms and offline retail stores, and transactions are made for physical goods such as mobile phones; for ByteDance, full-line coverage refers to the traffic brought by creative content in all fields, and transactions are made for advertising business monetization, which currently relies heavily on the potential explosion of Douyin and the commercialization of the overseas version of Douyin TikTok.

share

The sharing mentioned here is different from the forwarding and fission level. It is based on the sharing point matrix under the brand dimension. Anything that can serve the brand and reflect the brand symbol belongs to the brand's sharing point matrix.

Just like Xiaomi, its matrix products such as Redmi mobile phones, smart bracelets, and smart speakers can vividly demonstrate Xiaomi's ecological culture and high cost-effectiveness. The brand has penetrated into the hearts of users, and offline flagship stores have also better helped Xiaomi express its brand tone.

Just like the matrix products of Toutiao and Douyin, both are applications based on algorithm-based personalized recommendations, and the brand symbol they carry is algorithm recommendation. The daily active users of these two products have already exceeded 100 million, and the valuation of the ByteDance brand illustrates all of this well.

spread

From the perspective of brand-driven growth, the important means of communication are still hard advertising and public relations, which demonstrate the influence of the brand and thus promote business growth.

Therefore, you will see that when Xiaomi launches new mobile phone products, it will convey the brand image to the general public through celebrity spokesperson advertisements, attracting more attention to new products; you will also see that Douyin conveys the message of encouraging creators to produce more excellent original content through the ecological conference.

This will make the content creation ecosystem more diversified and enriched, and ultimately form a larger traffic pool, which is undoubtedly an important strategy for achieving growth.

3. Growth enlightenment after the 10-100 stage

Since the brand is the driving force for rapid growth after the 10-100 stage, the most critical action is to continuously enhance the brand's influence. In this process, the brand will gradually become a part of the lives of the general public. If a brand wants to continuously increase its influence, it cannot just stay at the functional level to meet user needs, but should make users perceive the brand from the emotional, experiential, scenario, entertainment and other levels.

In the new ecology of the entertainment economy, some brands have established close connections with the general public in terms of emotion, experience, scene, and entertainment. For example, Chunzhen Xiaomanyao played anthropomorphic emotional marketing in the online talent show "Creation Camp 2019". She was given a personality with a strong sense of substitution and became the "Chief Support Officer", leading the founders of the boy bands in the show to actively support the boys on the stage, effectively establishing a bond between the brand and the audience.

Such a clever combination of brand marketing and the program not only establishes a good emotional interaction with the audience, but also invisibly dilutes the traces of awkward brand implantation. As the program continues to be broadcast, the brand's voice is getting louder and louder.

Having said that, the importance of brand marketing to growth after the 10-100 stage is self-evident.

Summary: Growth Cognition Model

The core of growth varies at different stages of an enterprise. The growth cognition model is as follows:

• Stage 0-1 : Self-growth stage, product-driven, the product itself is the fundamental driving force for growth;
• 1-10 and 10-100 stages : Positioning stage, channel driven, purchase reasons are the driving force for rapid growth;
• After the 10-100 stage : cultural stage, brand-driven, brand influence is the driving force for sustained growth.

We need to understand growth from the underlying logic based on the characteristics of different stages in order to design effective growth strategies and solve growth problems.

Author: Mr. Dark Horse

Source: Mr. Dark Horse