Web3 User Rise Strategy: How to Build a Sustainable Product Ecosystem

In the Web3 space, many projects often experience a rapid rise in a short period, followed by a swift loss of users. Compared to traditional industries, the impact of the cryptocurrency market on projects is more direct and significant. In a bull market, there is a flourishing of various projects, while a bear market tends to eliminate most of them. These failed projects often find themselves in a vicious cycle of user loss due to the continued decline in token prices, which leads to the failure of incentive mechanisms in a bear market.

User growth is a long-term goal of product development, focusing on continuously improving the ecosystem composed of products and users, and gaining market share through continuous iteration to achieve steady rise in user scale and value. In 2022, aside from social media applications showing a rapid growth trend, other major types of decentralized applications such as NFT, DeFi, and GameFi experienced varying degrees of decline in active user numbers.

Basic ideas for the rise of Web3 users

Although the crypto market cycle has a significant impact on user growth, entrepreneurs should not be constrained by macro factors. The key to user growth lies in finding a niche market that matches the product, which is the "market" part of product-market fit (PMF). It is important to focus on niche markets that suit the characteristics and resources of one's own product, rather than blindly pursuing the entire large market. For Chinese entrepreneurs, fully leveraging resources from the Chinese-speaking community is a wise choice, equivalent to grasping one-third of the potential user base globally.

In product development, the minimum viable product ( MVP ) is an effective strategy. It emphasizes launching basic functions that meet the core scenario needs first, and then continuously iterating and optimizing based on market feedback. Developers should focus on solving the user's most pressing problems, simplifying the user process, and building an MVP product that aligns with PMF. Throughout this process, it often requires saying "no" to many seemingly good ideas.

PMF can be understood as the state of a high match between product and market, while MVP is an effective way to achieve PMF. Launching an MVP that meets PMF into the market is known as "go-to-market"(GTM) strategy. The goal of GTM is to acquire and retain users, typically following the "funnel model": from customer acquisition at the top to user conversion and retention at the bottom, it is a process of gradually filtering the number of users.

Compared to traditional Web2 projects, the GTM strategy of Web3 is more diversified. "Community" plays a unique and important role in Web3, serving as the core battleground for user growth. The GTM strategy of Web3 projects typically accompanies token-based community incentives and corresponding referral programs, achieving user growth by incentivizing existing users to refer new users.

Product-Market Fit ( PMF ): Accurately identify market demand

When determining product-market fit, it is important to consider the following key questions:

1. What are the motivations and objectives of product development?
2. Can the product features meet market demands?
3. Why choose to launch this product or feature now instead of in the future?

According to CBInsights' research, the lack of market demand is the primary reason for startup project failures, accounting for as much as 42%. Therefore, deep consideration of market demand should be conducted during the product planning stage, rather than waiting until the product is about to launch to start searching for the market. Developers are prone to overlook necessary market research due to personal biases.

Finding PMF is a cyclical iterative process. By continuously collecting feedback and validating, the product gradually reaches the best match with the market. During this process, it is necessary to adjust and optimize strategies in a timely manner based on feedback information to improve the alignment between the product and the market.

1. Accurately identify niche markets, clarify target user groups, and discover unmet needs.

Accurately identifying niche markets and target users is key to determining whether a product can meet user needs. By segmenting the large market to pinpoint target user groups, user profiles can be established and demand analysis can be conducted. After understanding the characteristics of target users, it is essential to gain a deep understanding of their actual needs. While attempting to create value for users, market opportunities should also be assessed. If user needs in a particular market are already well met, new market opportunities should be sought. When it is discovered that there are unmet user needs in a market, it may be worth considering entry into that market.

2. Develop product strategy, clarify value propositions, highlight differentiated advantages and core competencies.

Users inevitably compare different products, so product satisfaction largely depends on its uniqueness. The value proposition is to highlight the product's strengths, allowing users to feel that the product can better meet their needs than competing products. When formulating product strategy, three core questions need to be considered: Which user need should be focused on? What unique features does the product have to attract users? How to stand out in competition?

3. Select the minimum viable product ( MVP ) feature set and complete user requirement testing.

Once the product strategy and value proposition are determined, the next step should be to filter the core features that the MVP needs to include. The purpose of the MVP is to validate whether the development direction is correct and to create sufficient value in areas recognized by the target users. After completing the MVP, it should be thoroughly tested within the target user group to ensure that the feedback collected comes from a sufficient number of users in the target market. Otherwise, it may lead to product iterations deviating from the correct direction. Based on precise user feedback, adjust assumptions and return to earlier process steps for MVP iteration until a product that closely fits the market is designed.

Minimum Viable Product ( MVP ): rapid iteration, avoiding resource waste

When developing a minimum viable product, the following key issues need to be considered:

1. What are the components of the product or feature?
2. What specific problems can it solve?
3. What are the future feature iteration plans?
4. What is the core value of the product or function?

The concept of MVP is to develop a usable product that can showcase the highlights and innovations of the project with the least development cost and in the shortest time. This minimalist product can quickly validate ideas. Compared to the Non-MVP approach, which pursues perfection, the MVP strategy can avoid spending a lot of time on secondary features during the development of the first version, and it can also reduce unnecessary development work in subsequent version updates.

MVP is not about pursuing perfection, but rather about quickly launching to the market to validate feasibility. By verifying market demand, constantly adjusting direction, and ultimately iterating to produce a product with market space and profitability. In fact, an MVP can even be a well-designed testnet product, which can help avoid investing a large amount of capital into developing a product that the market does not recognize.

Developers should provide the MVP to the target user group, collect their feedback on product preferences, and verify whether the initial version of the product has accurately targeted the niche market and the target user group. If the direction is correct, the product's exposure in the market should be rapidly increased to allow seed users to start using the product.

In internal product meetings, it is important to focus on which features are non-essential at the current stage. After eliminating these features, what remains constitutes the MVP. Developing the MVP requires the ability to simplify complex issues, define key functionalities around core needs, complete the nodes on the main path first, and then consider detailed branches and auxiliary functions. This ability to simplify is essentially about grasping the rhythm of business and user development: launching corresponding product features at the right time, not seeking to have many but rather to be accurate and effective.

Go to Market ( GTM ): Balancing User Acquisition and Community Operations

When formulating market entry strategies, the following key issues need to be considered:

1. How does the product interact with users?
2. Do users need help learning to use the product?
3. How frequent is the user's usage?
4. In which regions is the product launched? Local, domestic, or international market?
5. Which channel partners to choose?
6. What limitations exist for cooperation channels?

The GTM strategy of Web3 projects not only includes traditional marketing methods to acquire users but also involves managing a "community" with richer connotations. Community members include not only users but also developers, investors, and partners, all of whom are important stakeholders in Web3 projects. Excellent Web3 projects typically have a strong community foundation. Some projects adhere to the "community-first" principle, while others have decision-making "led by the community," and some even implement "community ownership" directly. Only by continuously meeting user needs and maximizing users' subjective utility of the product can a highly engaged and high-quality community be established.

Web3 has changed the user acquisition model of traditional Web2. Token rewards provide a new approach to solving the cold start problem. Project teams are not investing funds into traditional marketing channels to acquire early users, but are attracting users through token rewards at a stage where network effects have not yet manifested. The rewards for early users' contributions will attract more new users, who also hope to earn rewards through their contributions. From the perspective of user loyalty, early users of Web3 are more important to the community than the business development 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 directed by the project, sometimes with additional conditions, such as needing to hold specific tokens. By incentivizing early users to complete task interactions, it is possible to acquire the first batch of seed users at a lower cost, which is a common method for the project's cold start.

Publishing tasks on a Web3 task interaction platform and guiding users to participate in product interactions is a win-win strategy. For project parties, it can generate traffic; for users, they can obtain on-chain activity proofs and airdrop tokens, while also accumulating platform usage experience during the task interaction process.

2. Increase activity and retention rate

Relying solely on token incentives can attract users, but is insufficient to increase user stickiness. Since the cryptocurrency market entered a bear market in 2021, "users come quickly and leave quickly" has become a significant challenge for project operations. Low user activity and poor retention rates are the main issues faced by current Web3 projects. Project teams should invest more effort in converting first-time users into loyal users, continuously optimizing products, and regularly conducting community activities to enhance user experience. Hosting AMAs on Twitter Space, Discord, and Telegram is a common method to improve community activity and popularity.

3. Recommendation and Self-Propagation

Self-propagation refers to promoting products to more new users through existing users. If existing users have a good experience with the product, they will spontaneously share it in the community or recommend it to friends, which is the lowest cost and widest coverage method of customer acquisition. To encourage users to share, project parties need to design effective incentive mechanisms. They can choose to reward project tokens or offer physical prizes, such as clothing with logos, skateboards, snowboards, mugs, etc. Additionally, 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 refer new users and rewards for new user registrations, that is, advertising cost = rewards for existing users + rewards for new user registrations. This approach significantly reduces customer acquisition costs and is more efficient than directly purchasing keywords or information stream ads. Although this method is not novel, 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, and recommendations and self-propagation amplify the power of the community. These three steps all aim to create revenue, as only with an increase in users can scalable profits be achieved.

![Thoughts on the rise of Web3 users: How to launch a "Go To Market" strategy in the community?](