The Path to User Growth for Web3 Products: Community-Driven Marketing Strategies

A common phenomenon in Web3 products is that they achieve a good rise in the short term, but users quickly churn and ultimately fall into a "death spiral." Unlike traditional sectors, the cryptocurrency market has a huge impact on Web3 projects: in a bull market, everything rises, while in a bear market, the vast majority of projects are eliminated. These failed projects often share a common point: during a bear market, the token price continues to decline, incentive measures become ineffective or even harm user interests, leading to significant user loss.

User growth is a long-term goal of the product, focusing on building an ecosystem between the product and users, continuously iterating the product, gradually gaining market share, and achieving sustained rise in user scale and value. In 2022, the number of active addresses for mainstream dApps such as Collectibles, DeFi, GameFi, and MarketPlaces saw a significant decline, while social media applications showed a rapid upward trend.

Basic Ideas for Web3 User Rise

Although the cyclical nature of the cryptocurrency market greatly impacts user growth, entrepreneurs should not be constrained by macro factors. The primary task for user growth is to find the "market" that matches the product, namely the "M" in PMF(Product Market Fit). Focus should be on niche markets that align with the product characteristics and resources, rather than trying to satisfy the entire large market. First, delve deeply into a vertical market, and only consider horizontal expansion after occupying a leading position in a single market. For Chinese entrepreneurs, it is unwise to abandon the familiar Chinese-speaking community and users, as this amounts to giving up one-third of potential customers worldwide.

In terms of product development, the minimum viable product ( MVP ) is a great concept. First, launch the basic functions to meet the minimum business loop of the core scenarios, and then iterate and optimize based on market feedback to ultimately create a product that aligns best with market and user needs. Developers should avoid pursuing a perfect "whole" product from the beginning and instead focus on solving the most urgent "single" problem for users, simplifying the usage process and building an MVP that meets PMF. In this process, developers often need to say "no" to many seemingly good ideas.

Launching a PMF-compliant MVP to the market is the GTM( Go To Market) strategy. The goal is to acquire and retain users, typically following the "funnel model": from acquiring new customers at the top to user conversion and retention at the bottom, which is a process of decreasing user numbers.

The GTM of traditional Web2 projects includes aspects such as pricing, marketing, and sales, focusing on metrics like website click-through rates and average revenue per user. In contrast, the GTM of Web3 is more diverse, with "community" being a unique and important component, serving as a traffic pool for user growth. Web3 GTM strategies often accompany token-based community incentives and corresponding referral programs, where existing users are rewarded with tokens for referring new users, who may also receive rewards as a result.

PMF: Find the right market, meet real demand

Product market fit ( PMF ) needs to consider the following issues:

• Why develop this product/function?
• Do the products/features meet market demand?
• Why develop now rather than later?

The lack of market demand is the primary reason for the failure of entrepreneurial projects. Developers should consider this issue during the product planning stage, rather than waiting until the product is about to launch to look for the market. People tend to overlook the importance of early market research due to personal biases.

Finding PMF is a cyclical iterative process. By continuously collecting feedback and validating, the product gradually reaches a match with the market, and in subsequent validations, it is optimized and improved based on feedback information, enhancing the product's fit with the market.

1. Lock in target user groups and identify unmet needs

Accurately identifying niche markets and target users determines the extent to which a product can meet user needs. By segmenting the larger market to identify the target user group, user profiles can be established and needs can be analyzed. After understanding user needs, corresponding market opportunities should be evaluated. If user needs in a certain market have already been well met, do not rush to enter; if a market with unmet needs is discovered, it can be considered for entry.

2. Develop product strategy and clarify value proposition

Users inevitably compare various competitors' products with yours, so user satisfaction largely depends on the uniqueness of the product. The value proposition is to highlight the product's features, allowing users to feel that this product better meets their needs than competitors. The product strategy needs to answer three core questions: What specific need are we focusing on satisfying? What unique features does the product have to attract users? How can we stand out in the competition?

3. Selected MVP feature set to conduct user requirement testing

After defining the product strategy and value proposition, you should start selecting the features that the MVP should include. The purpose of the MVP is to verify whether the development direction is correct, and then to create sufficient value in areas recognized by users. After completing the MVP, it should be thoroughly tested among the target user group to ensure that enough feedback from the target market users is collected. Otherwise, it may lead to a deviation in the product iteration direction. Based on accurate user feedback, adjust hypotheses and return to early process steps to iterate the MVP until a product that closely fits the market is designed.

MVP: Rapid iteration, avoiding detours

The minimum viable product ( MVP ) needs to consider the following issues:

• What components make up the product/function?
• What problems can it solve?
• What are the future iteration plans?
• What is the value of the product/function?

The MVP aims to develop a usable product that showcases the highlights and innovations of the project with minimal cost and in the shortest time. Although the features are extremely simple, it can quickly validate ideas. People often pursue perfection and believe that lacking certain features is terrible, but this is not the case. Using a non-MVP approach not only may waste a lot of time on secondary features during the development of the first version, but subsequent version updates may also take a wrong turn. On the other hand, developing products with an MVP mindset can focus attention on more important aspects.

The MVP is not the most perfect product; its purpose is to quickly launch into the market to validate feasibility. By verifying market demand, the direction is continuously adjusted to iterate products that have market space and revenue. In fact, the MVP does not even have to be a mainnet product; it can simply be a well-designed testnet product that allows users to have a clear experience. This can avoid spending a large amount of money on products that are not recognized by the market.

Developers should deliver the MVP to the target user group, collect their feedback on product preferences, and see if they feel the need for this product, thus validating the ideas behind the initial product regarding market and user positioning. If the ideas are correct, they should quickly increase the product's exposure in the market, allowing these seed users to truly start using the product.

Hold more internal product meetings to discuss which features are unnecessary at the current stage. What remains after removing these features is the MVP. Developing the MVP requires the ability to simplify complexity, defining key functions around core needs, focusing first on the nodes in the critical path, and then refining the details and auxiliary functions. This ability is essentially about grasping the rhythm, aligning with the rhythm of business and user development: launching corresponding product features at the right time, not seeking abundance but rather appropriateness.

GTM: Attract new users and retain existing ones, manage the community

To enter the market ( GTM ), the following issues need to be considered:

• How do products interact with users?
• Do users need help learning to use the product?
• How frequently do users use it?
• Where to launch the product? Locally, domestically, or internationally?
• Which channels to cooperate with?
• Are there any restrictions on cooperation channels?

In Web2, GTM mainly acquires users through marketing methods. In Web3, GTM not only needs to acquire users but also to manage a more enriched "community". The community includes users, developers, investors, and partners, all of whom are stakeholders in Web3 projects. Excellent Web3 projects typically have strong communities. Some projects adhere to the "community first" principle, some projects are "community-led" in decision-making, and others directly allow the "community to own". Only by continuously meeting user needs and maximizing the subjective utility of the product for users can a highly engaged and high-quality community be achieved.

Web3 has changed the user acquisition funnel of traditional Web2. Token rewards provide a new solution to the cold start problem. Instead of investing funds in traditional marketing to acquire early users, development teams use token rewards to attract users while the network effects have yet to materialize. Rewarding users for their early contributions will attract more new users, who also hope to receive rewards through their contributions. From the perspective of user loyalty, early users of Web3 are more important to the community than the BD personnel of traditional Web2.

1. Acquire new users

Airdrops with task interactions are an important GTM strategy, referring to the distribution of tokens to users who complete specific tasks in the direction of the project, sometimes with additional conditions, such as having to hold specific tokens. Incentivizing early users to complete task interactions is a commonly used cold start method for projects, allowing for the acquisition of the first batch of seed users at a low cost.

Publishing tasks on a Web3 task interaction platform and guiding users to participate in product interactions is a win-win operation. Project parties gain traffic; users can obtain on-chain activity proofs, receive airdropped tokens, and accumulate platform usage experience during the task interaction process.

2. Increase activity and retention rate

Relying solely on token incentives is not enough to increase user stickiness. Since the 2021 cryptocurrency bear market, "users come quickly and go quickly" has become a major challenge for project management. User inactivity and retention difficulties are the main issues facing current Web3 projects. Project teams should pay more attention to how to convert first-time users into loyal users, continuously optimize products, engage in community activities, and provide a better user experience. Holding AMAs on Twitter Space, Discord, and Telegram is a common method to enhance community activity and enthusiasm.

3. Recommendation and Self-Propagation

Self-propagation refers to promoting products to more new users through existing users. If existing users like and have a good experience, they will spontaneously share the product within the community or recommend it to friends on a peer-to-peer basis. This is the lowest-cost and widest-reaching method of customer acquisition. Project teams need to design incentive mechanisms to encourage users to share, which can reward project tokens or use physical gifts, such as clothing, skateboards, snowboards, mugs, etc., printed with the logo. In addition, it is necessary to analyze the on-chain behavior data of new and old users to improve conversion rates and adjust operational strategies.

The referral program breaks down the advertising costs originally used for acquiring new users into rewards for existing users who make referrals and rewards for new users who register. This approach significantly reduces customer acquisition costs and is more efficient than directly purchasing keywords or information flow ads. Although it is not an innovative practice, it can bring lasting and effective conversion results for the project.

Acquiring new users is the entry point for traffic, improving retention relies on product value, while referrals and self-propagation amplify community power. These three steps are all aimed at generating revenue, as only with an increase in users can scalable profitability be achieved.