In today's era, growth remains an eternal topic for enterprises. However, when it comes to growth, many people inevitably fall into the pursuit of traffic through new user acquisition, fission, and private domain operations. But it should be warned that sustained growth is not about traffic-side tricks, but the ability of enterprises to create value. Value creation is thinking about where the buyer's utility comes from. Labor or capital does not naturally create value; only when the results of labor and capital achieve the buyer's utility do we consider it valuable. In the structure of "value creation + value delivery", we firmly believe that value creation is the 1, and value delivery is the 0 behind it. The more sufficient value creation is, the easier value delivery becomes. Traffic is one part of value delivery. When doing growth, the first thing to think about is what unique value you have created, not how to find cheap traffic. Value creation is a difficult but correct thing, and it is the underlying logic of long-term sustained growth. Traffic capability is important, but traffic can only play a greater role under the premise of value creation. Image source: sohu ******"Traffic" is addictive, enterprises need to quit it** When it comes to domestic enterprises that became famous through traffic, Perfect Diary is an unavoidable topic. This star cosmetics company, known as the "pride of domestic products", had annual revenue of 5.23 billion yuan in 2020, an increase of 72.6% from the previous year. Perfect Diary's product promotion trend Image source: ifeng In the growth circle, Perfect Diary is also the focus of discussion. People are learning its private domain traffic operation methods, celebrating that the pride of domestic products—Perfect Diary—has defeated the old foreign companies like "L'Oréal", and domestic brands have stood up from now on. But unexpectedly, just one year later, Perfect Diary encountered the ceiling of traffic. According to the company's financial report, although sales in 2020 were 5.23 billion yuan, the annual net loss exceeded 50% of revenue, reaching 2.69 billion yuan. Its marketing and sales expenses reached 3.41 billion yuan, accounting for more than 65% of total revenue, and still rising. In the same track, the predecessor L'Oréal has never let marketing expenses account for more than 15% in the past 5 years. In the prospectus, deeply cooperative KOL (Key Opinion Leader) resources were regarded as Perfect Diary's core competitiveness. The core capabilities of an enterprise must meet five characteristics: cannot be stolen, cannot be bought, cannot be dismantled, cannot be taken away, and cannot slip away. Obviously, KOL resources do not belong to core capabilities; they can leave at any time. Image source: zhihu Traffic is very important to enterprises, but "traffic thinking" is like drugs. As soon as you use it, you get pleasure immediately, and it makes people gradually unable to extricate themselves. Enterprises buy traffic and get feedback immediately, then think this is the way of doing business, but they don't realize they are getting deeper and deeper, without time and energy to build truly important core barriers. In 2019, L'Oréal's R&D expenses reached 914 million euros, while during the same period, Yixian E-commerce (Perfect Diary's parent company) invested a total of 23.179 million yuan in R&D for multiple brands including Perfect Diary, Little Ondine, and Wanzixinxuan. The two are not at the same level at all. What a company thinks is important, don't look at what it says, but where it spends its money. If you analyze carefully, you will find that companies that regard traffic as their core competitiveness are becoming more and more like empty shells. R&D has no advantage, marketing relies on cooperation with external KOLs who keep raising prices, and in the middle, there seems to be only the users accumulated in private domain communities and the empty shell of the brand. The company does not have the opportunity to deeply operate users, and can only do simple reach and send coupons. It is not that they don't want to operate deeply, but the cost structure does not support it. The rise of the Perfect Diary brand was based on a high cost-performance strategy—big brand replacement, cheapness is the biggest reason users choose it. The company can only earn very little money from each user, naturally not supporting deep user operation, leading to increasingly serious user loss, forming a negative growth flywheel. With the development of digital technology, the ability of enterprises to reach users, that is, "traffic capability", has been greatly improved. This is a good thing. Companies that catch the early dividend can often achieve rapid growth at low cost. But things cannot be seen only in the present; as long as you look one step further, it is not difficult to identify risks: others will follow, competition will intensify, and traffic prices will rise. At this time, if you still wave the traffic stick, the one most likely to be hurt is yourself. Image source: baidu This is also how things developed. Starting from 2019, brands such as Huaxizi began to make efforts in KOL, directly pushing up traffic prices. Perfect Diary can no longer make quick money; it needs to learn to make slow money and quickly shift from "traffic thinking" to "value creation thinking". It is a good thing for brands to face consumers directly, but consumers should not be regarded as traffic, but as living individuals. In this sense, continuing to expand marketing cannot bring Perfect Diary out of the quagmire; betting on product R&D may be possible. Value curve, helping value breakthrough The value curve is widely used in books such as "Blue Ocean Strategy". It can visually present the value proposition provided by a certain product. The horizontal axis tries to exhaust the user's possible value propositions, and the vertical axis is the degree of satisfaction of such value propositions. Taking the express delivery industry as an example, the value curve can be presented in the following way. The value propositions of the express delivery industry are nothing more than price, delivery speed, response speed, safety, brand, service, and other factors. Value curve of the express delivery industry Image source: "Growth Strategy" In order to highlight differences, when drawing the value curve, several "competitors" can be drawn together. Competitors are not entirely the usual "competitors that meet similar needs in similar ways", but often "substitutes that meet similar needs in different ways", or even "alternatives that meet different needs but complete the same user job to be done". For example, in the aviation field, we usually think that Air China, China Eastern, and China Southern are direct competitors. High-speed rail and airplanes have different implementation methods, but they meet the same need: transporting passengers from one city to another. In this sense, high-speed rail is a substitute for airplanes. Going further, some people travel across cities for business trips. They need to meet with clients. Now DingTalk, Feishu, and Tencent Meeting are becoming more and more useful, allowing smooth cross-city online meetings without much discount in effect. These users therefore reduce their flight needs, so DingTalk, Feishu, and Tencent Meeting are alternatives for airlines. In the Internet field, there is a term called "cross-border strike", which was once very popular: when enterprises stare at direct competitors in their field of vision, substitutes and alternatives may have already killed you and your competitors together. Unified and Master Kong have competed in the instant noodle field for many years, regarding each other as the biggest competitors. The rise of food delivery has caused the overall size of the instant noodle market to decline. Meituan is the truly important competitor they ignored. Presenting the value curve is only the first step. There are still several questions here: First, is the listed value proposition complete? Second, are these value propositions what users really care about? Third, how to adjust the value curve to highlight differentiation and achieve value breakthrough? Take Super Monkey Gym as an example. When the entire fitness industry showed "we need users", one company had no salespeople, and coaches did not promote, but it achieved rapid growth, with more than 100 stores and still expanding rapidly, over one million paying users, and annual course sales exceeding 500 million yuan. That is Super Monkey. Super Monkey Gym Image source: sina When it comes to gyms, we should have a picture in our minds: treadmills, swimming pools, coaches walking around, strong men lifting weights in the strength area, and girls jumping in the aerobics room. Maybe there are also "swimming fitness, let me introduce" and "Bro, I'll arrange a trial class for you, when can you come?" and "This is a place where you can take a shower." The business model of this industry is also very routine: rent a venue, decorate, buy equipment on credit, sell annual cards, and sell more annual cards under basically fixed costs, the more the better. As for whether users come or not, that is something to consider when renewing next year. Chinese gym users go to the gym only a single-digit number of times on average per annual card period. The entire industry has a very low social evaluation. When an industry falls to this point, there must be opportunities for innovation. The Super Monkey team saw this point. What value propositions does a user with fitness needs have for a gym? Maybe the following: whether the price is reasonable, whether transportation is convenient, what the coaches are like, whether there are results, etc. If a new entrant has all the same value points as existing gyms, then it is just another repetition of the original vicious cycle. If a new entrant wants to achieve a value breakthrough, it must achieve completely different value propositions. How did Super Monkey do it? After choosing a gym, users immediately face the annual card, but they worry about going less and losing money. Super Monkey said, it's okay, we pay per visit, pay once for each visit. "So, is each class very expensive?" Other gyms charge 300-400 yuan per class for personal training. Super Monkey charges tens of yuan per class, up to a hundred or so, which is a fraction of other gyms' prices, and all classes are taught by star coaches. "Then will it keep calling me to sell high-priced courses?" No, the company has no salespeople and will not disturb users at all. Image source: sohu The question is, how does it achieve such good quality and such low prices? Because Super Monkey strengthened some value propositions while weakening others, achieving differentiation from other gyms. For example, can you understand that a gym cannot take a shower? Super Monkey cannot take a shower. After exercising, you change your clothes and leave. Another example, can you imagine a gym without treadmills? Super Monkey does not have them. Its venues are very small, generally one or two areas, one aerobics classroom, and one spinning classroom. It also has no extra people to provide services. Except for coaches who teach classes, each store has only one or two people responsible for check-in and cleaning, and there is a vending machine. If you want to buy water, you do it yourself. Everything is about reducing costs, which enables low prices on the user side.** How can enterprises achieve a value curve? **It is not difficult to draw a value curve for your company. The real difficulty lies in adjusting the value curve to form differentiation. Before adjusting, you need to evaluate each value point, generally from the following 5 perspectives. First, it's okay not to have it. This is the first thing to do after drawing the value curve. Among so many value points, which ones can be removed? Over-delivery to users is the biggest problem. In the Super Monkey case, "shower" was verified by them as "okay not to have" for target users. Even the value point of "low price" is not needed by all users. For example, if you draw a value curve for a business school, for their users, "high-quality network" weighs more than "low price". Second, bottom-line needs. Some value points must be adhered to in the business model and cannot be broken. They are often a promise to users. For example, a school that promises to hire native English-speaking foreign teachers cannot hire Ukrainian teachers to teach, even though many users cannot tell the difference in appearance between blonde and blue-eyed teachers. Third, good enough is enough. Suppose a certain value point is indeed needed by users, but continuous effort on this value point does not continuously increase user utility. Then such value points can be done to a basic level. Many companies claim to pursue product perfection. Even if we don't consider that this is for communication needs, if we really pursue product perfection, we should distinguish at which points it is necessary to be perfect. For example, a restaurant promises to serve dishes within 10 minutes, which is already acceptable to users. After all, it's not fast food; users sit down and chat. If you continue to work on this value point and shorten the serving time to 5 minutes, on the one hand, the user's sense of value does not improve much; on the other hand, the restaurant bears high costs, so this is not a good choice. Fourth, the more the better. Before the threshold is reached, as a certain value point improves, user utility continues to increase. For example, ride-hailing software. After users send a ride request, they hope for a faster response. Optimizing this scenario is continuously necessary. Such value points often have high learning costs, meaning first movers have a longer advantage period. Another example is in the lithography machine field, where precision has developed from 100 nanometers to 5 nanometers; the more precise, the better. Fifth, bring surprises. Users did not originally expect a certain value, but the product may suddenly bring surprises. When users go to eat, they don't expect the restaurant to provide a phone bag to protect their phone from oil splashes, but the waiter at Haidilao did it, bringing surprise. This kind of value point is best not to add too much extra cost. It is not cost-effective to support surprises with high costs. For example, a delivery person takes away the trash when delivering food, which users find surprising, and the company does not pay extra costs. Li Shanyou, founder of Chaos Academy, said when talking about enterprise growth: Cognition is the cause, innovation is the effect, and growth is the result. No matter what kind of enterprise, no matter what development stage the enterprise is in, it cannot avoid the eternal goal of providing value to users. When enterprises get rid of the growth drugs floating on the traffic side such as "new user acquisition, fission, and private domain operations", they will discover that truly high-quality growth must rely on the high value that enterprises bring to users. The above content is compiled from the new book "Growth Strategy" published by CITIC Press in March 2022, written by Li Yunlong, founder of Growth Research Institute and instructor of Chaos Academy, and Zeng Nan, partner of Growth Research Institute. [Interactive Prize ]: From now until 18:00 on March 12, 2022, leave a comment in the comment section of this article. The user with the most likes will receive a free copy of "Growth Strategy", and we will mail it to you for free. Welcome to participate actively. The winner will be announced at 18:00 on March 12, 2022. 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