The Key to Web3 User Growth: Product-Market Fit, Minimum Viable Product, and Community Management

In the Web3 space, many projects experience a rapid rise in the short term followed by a quick decline, ultimately falling into a "death spiral." Compared to traditional sectors, the impact of the crypto market on Web3 projects is more direct and severe. In a bull market, there is a flourishing of various projects, while a bear market sees the demise of many. These failing projects often share a common characteristic: in a bear market environment, the project token price continues to fall, incentive mechanisms fail or even harm user interests, leading to a significant loss of users.

User growth is a long-term goal of the product, focusing on building a positive system between the product and users, continuously iterating to gain market share, and achieving sustained rise in user scale and value. In 2022, apart from social media applications, the number of active addresses for other major Web3 applications declined to varying degrees. Here are some thoughts on Web3 user growth.

Basic Ideas for Web3 User Growth

Although the cycles of the cryptocurrency market have a huge impact on user growth, entrepreneurs should not be bound by macro factors. The primary task of user growth is to find a "market" that matches the product. Do not be greedy in pursuing to satisfy the entire market; instead, combine the characteristics of your product and resources to position yourself in the appropriate niche market. Focus on deepening your presence in vertical fields and consider horizontal expansion only after achieving a leading position. For Chinese entrepreneurs, abandoning the familiar Chinese-speaking community is unwise, as it is equivalent to giving up one third of the global user base.

In terms of product design and development, the Minimum Viable Product ( MVP ) is a great concept. It refers to launching the basic features that can meet the most core scenarios first, and then continuously iterating and optimizing based on market feedback, ultimately developing the product that is best suited for the market. Developers should focus on solving the user's biggest "one" problem, simplify the usage process, and build an MVP that aligns with product-market fit ( PMF ). In this process, it often requires saying "no" to many good ideas.

If PMF is the state of product-market fit, then MVP is an effective way to achieve PMF. Launching an MVP that meets PMF into the market is the "go-to-market" ( GTM ) strategy. The purpose of GTM is to acquire and retain users, usually following the "funnel model": from the top of customer acquisition to the bottom of user conversion and retention, it is a process where the number of users gradually decreases.

Compared to traditional internet projects, the GTM of Web3 is more profound. "Community" is a unique user growth traffic pool in Web3. The GTM strategy of Web3 often comes with token-based community incentives and corresponding referral programs, rewarding old users with tokens for referring new users.

Product Market Fit ( PMF ): Identify the market, meet real needs

Regarding PMF, mainly consider the following issues:

• Why develop this product/feature?
• Do the products/features meet market demand?
• Why now instead of later for development?

The lack of market demand is the primary reason for the failure of entrepreneurial projects. Therefore, developers should think deeply about these issues during the product planning stage, rather than waiting until the product is ready to launch to search for the market. People tend to overlook necessary market research due to their own 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, the product is optimized and improved based on feedback information, continuously increasing the product's fit with the market.

The specific steps include:

1. Lock in target segmented markets and user groups, and identify unmet needs.

Identify target users by segmenting the large market, establish user profiles, and analyze needs. When trying to create value for users, also look for corresponding market opportunities. If the user demand in a certain market is already well met, do not enter; if you find that the demand in a certain market has not yet been satisfied, then you can cut in.

2. Develop product strategy, clarify value proposition, highlight differentiation and competitiveness

Users inevitably compare various products, so user satisfaction largely depends on the highlights of the products, which constitute product differentiation. The value proposition is to highlight the product's strengths, allowing users to feel that the product meets their needs better than competitors. The product strategy needs to answer: which needs should we focus on fulfilling? What unique features do we have? How to win in competition?

3. Selected MVP feature set, completed user需求测试

After clarifying the product strategy and value proposition, it is necessary to carefully select the features that the MVP should include. The purpose of the MVP is to determine whether the development direction is correct and to create sufficient value at points that users consider valuable. After completing the MVP, it should be adequately tested among the target user group to ensure accurate feedback is collected. Adjust the assumptions based on user feedback and iterate the MVP until a product that closely matches the market is designed.

Minimum Viable Product ( MVP ): Rapid iteration, avoiding detours

Regarding MVP, the following issues are primarily considered:

• What are the components of the product/function?
• What problems can it solve?
• What is the plan for future iterations?
• What is the value of the product/function?

MVP refers to a product developed with the minimum development cost and the shortest time that is usable and can reflect the highlights and innovations of the project. Although this kind of product is simple, it can quickly validate ideas. People often pursue perfection and believe that lacking certain features would be terrible, but in reality, this is not the case. Adopting a non-MVP approach can not only spend a lot of time on secondary features in the first version but also lead to many detours in subsequent version updates. By adopting the MVP mindset, attention can be focused on the most important aspects.

The MVP is not the most perfect product; its purpose is to quickly push to market to verify feasibility. Through market demand validation, continuously adjusting direction, and ultimately iterating to produce a product with market space and revenue. In fact, the MVP does not even need to be a mainnet product; it can simply be a well-designed testnet product that provides a clear experience for users. This can avoid investing a large amount of funds to create a product that the market does not recognize.

Developers should deliver the MVP to the target user group, collect their feedback on product preferences, and validate whether the initial ideas about market and user group positioning are correct. If the ideas are correct, they should quickly increase the product's exposure and get seed users to actually use it.

Hold more internal product meetings to discuss which features are unnecessary at the current stage. After cutting these features, what remains is the MVP. Developing the MVP requires the ability to simplify, defining key functions around core needs, first addressing the nodes on the critical path, and then developing detailed branches and auxiliary functions. This ability is essentially about grasping the rhythm, launching corresponding features at the appropriate time, not seeking completeness, but correctness.

Going to Market ( GTM ): Acquire new users and retain them, manage the community

Regarding GTM, the main considerations are as follows:

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

In Web3, GTM not only acquires users through marketing but also manages a rich "community". The community includes stakeholders such as users, developers, investors, and partners. Excellent Web3 projects often have strong communities. Some projects adhere to the "community-first" principle, some are governed by "community-led" decisions, and some are directly "community-owned". Only by continuously meeting user needs and maximizing the subjective utility of the product for users can one achieve high engagement and high-quality communities.

Web3 has changed the traditional user acquisition funnel. Token rewards provide a new approach to solving the cold start problem. Instead of spending funds on traditional marketing to acquire early users, teams attract users with token rewards when network effects are not yet apparent. Rewarding early contributions will attract more new users, who also hope to gain rewards through their contributions. In terms of user loyalty, early Web3 users' contributions to the community are more important than those of traditional internet business development personnel.

1. Acquire new users

Airdrops with task interactions are an important GTM strategy. Tokens are distributed to users who complete specific tasks in the project direction, sometimes with additional conditions such as holding specific tokens. This is a commonly used method for project cold starts, allowing for the acquisition of the initial seed users at a low cost.

Publishing tasks on the Web3 task platform and guiding users to participate in product interactions is a win-win operation. The project party gains traffic; users receive on-chain activity proof and token rewards, and can also accumulate usage experience.

2. Increase activity and retention rate

Relying solely on token incentives is insufficient to increase user stickiness. Since the bear market in 2021, user churn has been a significant challenge for Web3 projects. Project parties should focus more on converting first-time users into loyal users, continuously optimizing products, conducting community activities, and providing better experiences. Holding AMAs on social platforms is a common method to enhance community activity and engagement.

3. Recommendation and Self-Propagation

Self-propagation refers to the promotion of products to more new users through existing users. If existing users have a good experience, they will spontaneously share or recommend it to friends within the community, which is the lowest cost and the widest way to acquire customers. Project parties need to design incentive mechanisms to encourage users to share. Rewards can be project tokens or physical gifts such as logo apparel, skateboards, cups, etc. In addition, it is necessary to analyze on-chain behavior data of users to improve conversion rates and adjust operational strategies.

The referral program breaks down the costs originally used for advertising into rewards for existing users who refer new users and rewards for new users who register. This greatly reduces customer acquisition costs and is more efficient than directly purchasing ads. Although not novel, it can bring lasting and effective conversions for the project.

Acquiring new users is the traffic entrance, improving retention relies on product value, and leveraging the power of large communities through recommendations and self-broadcasting. These three steps are all aimed at generating revenue; only by increasing users can scalable profitability be achieved.