Chapter 2: The Core Logic and Loop of Online Marketing

1. The Phenomenon: “Great Ads, No Money”

There is a common, awkward scenario in marketing: the owner sees beautiful backend data—clicks are soaring, shares are high—but at the end of the month, the profit is negative.

This is because Advertising is Reach, not Business.

Without a complete “closed-loop” logic, your traffic is like pouring water into a bucket with a hole in the bottom. In this chapter, we introduce two classic models to understand how money actually flows in.

2. Classic Model: The Marketing Funnel

The marketing funnel describes the user journey from having no idea who you are to eventually paying you. It’s called a “funnel” because users drop off at every layer; the further down you go, the fewer people remain.

Case Study: Wang’s Coffee Machine Journey

• Awareness: While scrolling through his feed, Wang sees a minimalist video of a semi-automatic coffee machine. He hears of the brand for the first time.
• Interest & Consideration: Wang thinks the coffee looks great and clicks through to the landing page. He reads reviews, compares prices with De’Longhi (a competitor), and follows the brand’s social account.
• Conversion: While Wang is hesitating, the brand sends a precisely timed “20% off + free beans for 6 months” coupon. Wang finally places an order.

Insight: If the brand only made a cool video (Awareness) but had no detailed spec comparisons (Consideration) or a buggy checkout page (Conversion), Wang would have dropped off at any stage.

3. Advanced Perspective: The AARRR Funnel (Pirate Metrics)

For online marketing and digital products, we use the growth-focused AARRR model, which looks beyond the first purchase.

1. Acquisition: Where are users coming from? (Ads, Search, Referral)
2. Activation: The user experiences the product’s value for the first time (Aha! Moment).
3. Retention: Do users come back? (If users buy once and leave, you’ll never recover your acquisition cost.)
4. Revenue: Did the user pay?
5. Referral: Are users willing to recommend you to friends? (This is the lowest-cost growth method.)

Case Study: A Fitness App’s Path to Growth

If a fitness app spends $100k on TikTok ads to get 100k downloads (Acquisition) but users open the app and don’t know what to do (Activation failure), that $100k is wasted. But if they guide the user through a 5-minute meditation on day one (Aha! Moment) and remind them to check in every day (Retention), the user eventually subscribes (Revenue).

4. Key Conflict: Acquisition vs. Retention

The most expensive part of online marketing is always Acquisition.

• Acquisition: Like fishing in the high seas—you need to buy the boat, the net, and pay for fuel.
• Retention: Like digging a fish pond in your own backyard.

A healthy business model derives long-term profit from repeat customers, not first-time buyers. If your marketing loop lacks a retention strategy, you are essentially pouring expensive fuel into a machine destined to lose money.

5. Tension: Performance vs. Brand

• Performance Marketing: Like taking Painkillers. You spend $100 today, you see orders today.
  • Example: Pinduoduo’s “Slash Price” or flash sales.
• Brand Marketing: Like taking Vitamins. You spend money today, you might not see orders, but the user remembers you.
  • Example: Nike ads rarely tell you to “buy now”; they build a spirit. Next time you need shoes, you search “Nike,” saving them huge bid costs.

Conclusion: Without Performance, you starve today; without Brand, you exhaust yourself tomorrow.

6. Data’s Role: The Navigator, Not the Engine

In a closed loop, data tells you where the leak is:

• High Clicks, High Bounce: The ad is alluring, but the landing page doesn’t match—users feel cheated.
• High Add-to-Cart, Low Checkout: There’s a problem at the finish line. Maybe shipping is too expensive, or you don’t support their preferred payment method.

7. Summary: Loop Thinking

1. Don’t look at ads in isolation: They are just the top of the funnel.
2. Fix the leaks: Improving conversion by 1% is often cheaper than increasing ad budget by 10%.
3. Pursue LTV (Lifetime Value): Making a customer come back is the only true “moat” in online marketing.

8. Brand in Action: Dollar Shave Club’s “God-Tier” Loop

Background: In 2012, a small company called Dollar Shave Club (DSC) released a video that cost only $4,500. It went viral, bringing in 12,000 orders in 48 hours.

Loop Breakdown: DSC’s genius wasn’t just the viral video (Acquisition), but the AARRR loop behind it:

1. Activation: The copy was provocative: “Do you think your razor needs a vibrator, a flashlight, and 10 blades?” Users resonated immediately.
2. Revenue & Retention: DSC didn’t sell single razors; they sold subscriptions ($1/month, blades mailed automatically). This solved the “forgetting to buy blades” pain point, turning a one-off sale into a lifetime subscription.
3. Referral: They put funny cards and freebies in every box, encouraging users to share photos on social media.

Result: In 2016, Unilever acquired DSC for $1 Billion in cash. They didn’t just buy a razor company; they bought a high-retention growth system.

Next Chapter: Now that we have the logic, let’s learn the language. Chapter 3: Common Terms and Abbreviations Explained. We will translate those dizzying acronyms (CPC, ROAS, Pixel, etc.) into plain English.