Why does Taobao keep 88VIP, a seemingly consistently loss-making freemium strategy?
Taobao is one of the largest e-commerce
platforms in China. In Taobao, users can freely browse the shopping interface,
select the required items and then complete the payment. Additionally, Taobao
offers premium services named 88VIP Membership to its users on a paid
subscription basis.
88VIP Membership uses the Taoqi Number,
which is calculated based on a user's consumption amount, activity, and
purchase frequency on the platform, to categorize user levels. Users with a
Taoqi Number of over 1,000 can purchase the membership for 88 RMB per year at a
discounted price, while users with a Taoqi Number below 1,000 must pay 888 RMB
per year. 88VIP members enjoy a wide range of perks and privileges, including
shopping discounts, coupons, and sophisticated after-sales services, as well as
annual memberships of other applications such as the music software NetEase
Cloud Music. It covers various life scenarios ranging from eating and living to
traveling and entertainment.
However, from the project manager of the
88VIP to the Vice President of Alibaba Group, Liu Bo, both have publicly stated
that the 88VIP Membership programme has been consistently losing money. It is
not difficult to estimate, simply the annual membership fee for video-streaming
website Youku, which is included in the perks of 88VIP Membership, has exceeded
the 88 RMB. In addition, Taobao had held the 88VIP Carnival for three
consecutive years from 2018 to 2020, inviting many superstars to perform, which
is undoubtedly another considerable expenditure. In that case, why has Taobao
not given up instead of continuing to deepen this project?
Firstly, the highly disparate pricing strategy of
88VIP Membership actually sets an invisible threshold for gaining the membership.
It has also helped Taobao screen out a considerable portion of high-quality
customers with high purchasing willingness and consumption capacity, and they
are the core users that Taobao needs to carefully maintain. 88VIP Membership can
improve the stickiness and loyalty of these members, as well as further increase
their repurchase frequency and spending amount on the platform.
Secondly, on the eve of the 2023 Double
Eleven Shopping Carnival, Taobao made a major update to the 88VIP Membership,
splitting the original one card into three cards, Life
Card, Shopping Card and All-purpose Card. Among them, the annual fee for
the Life Card and the Shopping Card remained unchanged, while the annual fee
for the All-purpose Card was raised to 168 RMB. This more refined membership
tiering initiative not only lives up to the needs of different members, but
also increases membership fee revenue to a certain extent.
Thirdly, through 20 years of development,
Alibaba has evolved from a single e-commerce platform to a giant digital
economy of “1+6+N”. Its business covers basically every scenario of people’s
daily lives, ranging from payment and finance, entertainment to local life
services. Consequently, 88VIP Membership programme has played an important role
in attracting traffic. Abundant membership perks and privileges can attract a
huge number of users, and help link these high-net-worth customers to other platforms
within Alibaba Group’s business ecosystem, such as Youku, Fliggy, Ele.me and Gaode
Map. These platforms have correspondingly increased their advantages when
competing with other external platforms and stimulated users' consumption willingness
through the deep binding of 88VIP Membership. As a result, most of the users'
consumption scenario would rarely go beyond the Alibaba ecosystem and its related commerce empire,
achieving the largest extent of user retention.
In summary, in terms of simple calculations of
specific revenue, the 88VIP Membership project is indeed difficult to turn from
a loss into a profit. However, the construction of the 88VIP Membership system
has brought about the growth of a number of platform operating indicators, as
well as the promotion of other modules of Alibaba's business map. It is of
great strategic significance within the Alibaba Group, and reflects the Alibaba
Group's long-term perspective and overall view.
This essay explores Taobao's 88VIP membership programe. Although it appears to be a free value-added strategy that continues to lose money, it actually has important strategic significance for Taobao and Alibaba Group. It plays a key role in attracting traffic and retaining users in the business ecosystem of Alibaba. By deeply binding users, it promotes the development of other businesses within the group. In my opinion, the 88vip membership is also helpful for companies to provide more complete user portraits through data analysis. By analyzing the consumption habits and preferences of members, the platform can provide more personalized services and product recommendations, thereby further improving user experience and consumption willingness. At the same time, Taobao can also explore cooperation with other industries, such as tourism, education, etc., to expand the service scope of 88VIP to a wider range of fields (as a member of 88vip, I personally hope that the benefits will be expanded more), so as to attract more users to join the membership, increase membership fee income, and also bring more diversified sources of income to the group.
ReplyDeleteIt's interesting that Taobao keeps 88VIP despite reported losses. The article makes a good case that it's not just about the direct membership fees. Targeting high-value customers, boosting loyalty, and tying them into the wider Alibaba ecosystem are all key. Essentially, it's a long-term play to increase overall engagement and spending across their various platforms.
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