When products are increasingly raising the payment scythe, where will the user experience go?

The Internet industry has always been free, but with rapid growth, it has gradually put payment on the table. This article will start from membership products and explore the payment rate standards of different types of products, balancing user experience while pursuing payment rates.

When the Internet industry first started, it was famous for being free and losing money to gain publicity. After more than 20 years of ups and downs, after the high growth rate slowed down, payment was gradually put on the table.

Do you need to watch a 120-second ad before watching a video?

5G network download speed is still stuck at 5k/s?

You were listening to a song when you found out that your membership was suddenly cut off?

Whether it is an online entertainment platform, a news subscription service or a software application, the paid model is becoming the main way to make money. However, this payment-oriented trend raises a key question: when products are all raising the payment sickle, where will the user experience go?

This article will start from membership products and deeply explore the payment rate standards of different types of products, balancing user experience while pursuing payment rates. Whether you are an entrepreneur, product manager or marketer, you can get valuable dry goods.

Without further ado, let's go straight to the main text. Enjoy:

01 Battle for survival: How to achieve the payment rate target

1. The importance of payment rate to product profitability and sustainable development

There are four common ways to make money on the Internet: advertising, games, e-commerce, and membership. After going through the barbaric era, as traffic becomes more and more expensive and more and more difficult to obtain, the paid membership business model is becoming a new round of dividends for the growth of various platforms or products.

For membership products, the payment rate (number of paying users/number of active users) directly determines the source of revenue for the product. If the product cannot attract enough paying users, it will be difficult for the product to make a profit.

The payout rate is critical to the sustainability of a product. Products need to have enough revenue to support operations, develop new features, conduct marketing, and expand their user base. By increasing the payout rate, products can establish a sustainable business model and provide a stable foundation for future development.

The payment rate also reflects the user's recognition of the value of the product. If users are willing to pay for a product, it means that they believe the product provides sufficient value and benefits.

Taking the SaaS industry as an example, the Rule of 40 is an easy-to-understand metric that combines revenue growth with profit margin and can be used as a simple way to assess a SaaS company’s ability to manage growth and profitability: Growth Rate + Profit Margin > 40%.

2. Overview of payment rates for different types of membership products

The payment rates of different types of membership products vary depending on the product type, market demand and business model. The following are some common types of membership products and their payment rates:

For example, Bilibili’s premium membership payment rate increased by 250,000 subscriptions in Q2 (average monthly active users: 324 million), but it was less than the expansion of the overall traffic pool, and the payment rate further dropped to 6.3%.

For example: By the end of 2022, the cumulative annual paying users of Kingsoft WPS was 29.97 million, and the cumulative annual paying rate calculated based on 242 million PC monthly active users as the denominator was approximately 12.4%.

02 Battle of Prosperity: User Experience and User Retention

1. User experience plays a key role in product success

User experience plays a critical role in product success and has a significant impact on engagement, loyalty, and word of mouth.

• Engagement: When a product provides a smooth, intuitive, and enjoyable user experience, users are more likely to actively participate in and continue to use the product. Good user interface design, simplified operation processes, efficient response speed, and other factors can increase user engagement. Increased user engagement helps increase user activity, usage frequency, and product stickiness.
• Loyalty: When users have a good experience using a product and feel that the product is valuable and meets their needs, they are more likely to become loyal users and continue to choose to use the product. A good user experience can establish an emotional connection between users and products, enhance users' trust and satisfaction with the product, and thus increase user loyalty.
• Word-of-mouth: When users have a positive experience using a product, they are likely to recommend the product to others and share their good experience. Word-of-mouth plays an important role in product marketing and user growth. Positive word-of-mouth from users can bring in more users and increase product visibility and recognition.

Engagement, loyalty and word of mouth ultimately lead to user retention. Providing an engaging experience, building user loyalty and promoting positive word of mouth can effectively improve user retention.

2. Overview of retention rates of different types of products

Retention rate values ​​will vary depending on different Internet product types, market environment and user behavior.

Generally speaking, higher user retention rates are generally considered a good performance, but the specific values ​​may vary by industry and product.

03 Both ends of the scale: the battle between user experience and payment rate

1. Potential conflicts and contradictions

A payment-oriented approach may have a negative impact on user experience.

• Ad disruption: In order to increase the payment rate, some products may increase the number of ads or highlight ads in the user interface to obtain more advertising revenue. This may cause the user experience to be disrupted and disturbed, reducing the ease of use and attractiveness of the product.
• Functionality restrictions: Sometimes, in order to encourage users to purchase the paid version, the product may restrict the functionality of the free version. This may result in free users not being able to enjoy the full functionality and experience, thus reducing the value and attractiveness of the product.
• Content restrictions: Some paid products may restrict the content or services that free users can access. This may result in free users not being able to obtain the same content quality or experience as paid users, thereby reducing the attractiveness of the product and user satisfaction.
• Ad targeting: In order to increase advertising revenue, some products may target ads based on users’ personal information and behaviors. This may raise concerns about user privacy and data security, and reduce user trust and satisfaction with the product. (No examples given here)

2. Balancing strategies and methods

In order to balance the conflict between payment rate and user experience, we can try the following strategies and methods:

（1）Personalized pricing

Provide different pricing plans based on the needs and payment capabilities of different user groups. Personalized pricing can be determined based on the user's usage frequency, feature requirements, or other specific factors to ensure that users can choose a payment option that suits their needs and budget.

For example, Netflix’s tiered packages are often imitated by domestic platforms such as iQiyi, Youku, Tencent Video and Mango TV.

(2) Increase added value

Provide additional added value to paying users so that they can feel the actual benefits of purchasing the paid version. This can include exclusive content, advanced features, personalized services, exclusive events, etc. By providing unique and attractive added value, the product can increase user recognition and satisfaction with the paid version.

For example: Costco members can enjoy more offline exclusive services.

(3) Optimize the free version

Ensure that the user experience of the free version is still attractive and valuable to retain free users and attract more users. Optimize the interface design, functions, and content of the free version so that it can meet the basic needs of users and provide a good user experience, thereby providing users with motivation to upgrade to the paid version.

For example, there is almost no difference between Slack’s free product and paid product. All users can use Slack’s full functionality, which increases user dependence and cultivates user usage habits, leading to paid users.

(4) Providing trial opportunities

In the boundary between free and paid, you can also provide trial opportunities. Let users experience the value of paying at a low cost. After they fully recognize it, there will be a higher conversion rate. There is also a mature model in the industry: Freemium or Free trail.

For example, CamScanner offers a 7-day free trial before signing a contract; Fan Deng Reading offers new users a free trial period; and QQ Music offers a 1-yuan membership for the first month.

(5) User participation and feedback

Actively interact with users and listen to their opinions and feedback. Understand users' needs and concerns, and continuously improve products based on user feedback to improve user experience and satisfaction. The process of user participation can increase users' investment and loyalty to the product.

For example, Slack once released a preview version in an experience mode, inviting 8,000 people to use it and collect feedback.

(6) Advertising balance and personalization

Seek a balance in ad display to ensure that ads do not overly disrupt the user experience. Reduce the number and disruption of ads while providing a personalized ad experience to ensure that ad content matches user interests and preferences, making ads more attractive and effective.

For example, Xiaohongshu’s discovery and search pages support advertising, pay attention to the quality of advertisements, and clearly mark them to give users expectations.

（7）Provide high-quality user support

Whether it is a free user or a paid user, it is important to provide timely, professional and personalized user support. Ensure that users can get the help and support they need to solve problems, and improve user satisfaction and loyalty.

For example, ProcessOn embeds a help module in the lower right corner of the page to facilitate users to find online customer service, provide feedback, and aggregate frequently asked questions to the help center.

04 Conclusion

Survive and thrive: payment rates and user experience are at opposite ends of the scale.

There is nothing shameful in charging fees. This is not only crucial to the sustainable development of the product, but also reflects the user's recognition of the product's value.

On the road of guiding users to pay, not treating users as freeloaders or leeks, and fully respecting user choices can also achieve a win-win situation for products and users and become the underlying pillar of membership operations.

The above is the content of "Balancing User Experience and Payment Rate", which is based on user growth work practice & research. If you have any good insights, please leave a message in the comment area below for discussion.