It is said that private domain can reduce costs and increase efficiency, but no one tells you what costs are reduced and what efficiency is increased.

In today's highly competitive and costly business environment, how can enterprises break through bottlenecks and achieve real cost reduction and efficiency improvement? The answer may lie in the profound wisdom of private domain operations. Next, let's explore the secrets of private domain operations and see how it helps enterprises achieve cost reduction and efficiency improvement.

If you ask why to do private domain, many people will tell you that private domain can reduce costs and increase efficiency.

Yes, private domains can indeed reduce costs and increase efficiency, but no one can tell you clearly what costs can be reduced and what efficiency can be increased.

1. What costs should be reduced?

The most common and effective means for companies to reduce costs is layoffs.

Because layoffs can significantly reduce (labor) costs.

What about private domain?

If your business is driven by human sales, you can also "lay off employees" with the help of private domains.

To put it simply, it means changing your sales model:

Originally, leads were fed directly to sales, who had neither the willingness nor the ability to follow up with most customers for a long time. Now, with the help of private domains, leads can be given to pre-sales first, and after cultivation (cultivating intention), they can be assigned to sales for follow-up.

The advantage of this is that sales only need to focus on customers with clear intentions , rather than all customers. This allows the company to carry more customers and achieve a higher conversion rate. For the company, it only needs to retain some of the sales with the highest conversion rates.

This reduces labor costs.

Secondly, reduce marketing costs and customer acquisition costs.

Take the catering industry as an example:

Group buying platforms are almost standard in the catering industry. The marketing cost of group buying platforms is about 23%, which means that it costs 23% to obtain each order. This cost is not low, but if you don’t do private domain, there is really no other way. After all, you need to rely on it to acquire customers (at least to a certain extent).

Doing private domain is equivalent to building your own platform, and your customers are all on your own platform.

Any business district will have no growth in just 2 or 3 years and become a stock market. A stock market means that there are only so many people.

Therefore, we spent two years gradually adding customers to WeChat, which basically completed the accumulation of existing customers.

Now that customers are on my WeChat, can I decide on my own marketing in the future and will it be free?

You can even take out 50% of the 23% to give back to customers, give the remaining 7%-8% to the private domain operation team, and then use 2%-3% for relationship marketing (even this money must be spent). Give autonomy to the front line. Believe me, they will be very happy and will find ways to serve customers.

Therefore, once you choose to do private domain, the cost of marketing can be saved.

What you save is what you earn.

2. What effects will it increase?

Effectiveness is efficiency + benefit.

How to improve efficiency in private domain?

• Through social groups (group buying, sales, flash sales, etc.) and live broadcasts, transactions can be completed in batches, improving transaction efficiency.
• Ordering and checking out through mini programs can improve ordering and checkout efficiency.
• Customer service efficiency can be improved through WeChat customer service.
• Marketing efficiency can be improved through Moments

…

In short, it improves operational efficiency.

How to increase profits in private domain?

Let's look at a formula:

Sales = Traffic × Conversion Rate × Average Order Value × Repeat Purchase/Referral

The key lies in the subsequent average order value, repeat purchases and referrals .

This formula represents the value of a customer or lifetime value (LTV).

Single customer value refers to the overall contribution of a single customer to a business, which mainly includes three levels:

Repeat purchase value, customers buy the same product or service multiple times, increasing sales.

Related consumption: merchants increase the transaction volume (average order value) of individual customers by expanding their business categories and utilizing the customer’s consumption radius.

Social fission, in a social environment, a single customer can bring in more new customers.

For example:

Xiao Ming buys a cup of Luckin Coffee for 9.9 yuan☕, drinks it 20 days a month, and continues to drink it for 30 years. What is Xiao Ming’s lifetime value to Luckin? The answer is 71,280 yuan.

Through refined operations, users can develop consumption habits, increase their repurchase rate and life cycle, and thereby increase their single-customer value/lifetime value.

This is how private domains can reduce costs and increase efficiency without changing their business models.

If the business model can be changed, the cost reduction and efficiency improvement brought by the private domain will be more powerful.

Take selling fruits as an example: traditionally, doing fruit business means opening a fruit store, but if you use private domains, you can create a group buying model, how about reducing costs and increasing efficiency?

Let’s take a look:

1. Rental costs

The monthly rent of a physical store is 5,000-10,000 yuan, but if you do private business, you don’t need a store (or rent a warehouse or something), you can save 10,000 yuan per month and 60,000-120,000 yuan per year.

2. Human cost

For a physical store, hire 2 people, each person is paid 60,000 per year, 120,000 per year. For a private domain, hire 1 part-time worker, 80 per person for each delivery (4 hours of work), 15 times a month, 1,200, 14,000 per year.

3. Marketing costs

If a store operates the Mei'e platform, the comprehensive marketing cost is 23%, but the private domain marketing cost is 0

4. Procurement costs

Because of bulk purchasing, the cost is reduced by 20%-30%. Once the purchasing cost is reduced, the selling price can be lower, but the profit remains the same (small profits but quick turnover).

5. Inventory costs

Private domain group purchase (pre-sale), 0 inventory

6. Loss cost

Group purchases are made and shipped according to orders, with almost no loss, but fruit loss in physical stores is generally 5%-10%

7. Capital turnover rate

The cash flow of fruit stores is not very fast, but the group purchase model can get the money back in one day at the fastest and two days on average. In this way, it is more like a subversion than a cost reduction and efficiency increase. Now you know why many physical stores can't continue to operate.

3. Finally

Times have changed. Whether it is physical business, e-commerce or self-media, it will become increasingly difficult to rely on only one leg.

+Private domain is helping enterprises reduce costs and increase efficiency.

But ahead of time, you know what to do.

Author: John Wu

Source public account: Dajiangwu