Traffic pool thinking and rapid creation of traffic pool!

Luckin Coffee co-founder and CMO Yang Fei shared with the audience Luckin Coffee's strategy for entering the Chinese market, including brand strategy and experience in building a traffic pool, with the theme of "Luckin Coffee's New Retail Thinking". Tencent Media Research Institute compiled some of the content into a manuscript. The following is the specific content.

01 Exploration in the early stages of entrepreneurship: Can Chinese people have their own coffee brand?

On January 1, 2018, we opened two test stores in Beijing, one to test the pricing system and the other to test the traffic strategy .

The current Zhongguancun headquarters was used at the time to test our prices, gift-giving systems, recharge systems, and store designs through WeChat. The Galaxy SOHO store mainly tests a special traffic strategy, which I will talk about later.

When starting a business, one of the biggest questions was “Do Chinese people like drinking coffee?” This problem seemed very pessimistic at the time because most people do not drink coffee, and people go to Starbucks more for socializing.

Later we went to Japan, South Korea, and Taiwan for research. These places used to mainly drink tea, but in the past five to ten years, with the progress of globalization and the improvement of young people's consumption levels, the pressure of work and life has become greater and greater, and the sales of coffee have been increasing, with an average of more than 300 cups per person per year. This is related to the refreshing properties of coffee itself.

Therefore, in South Korea, Japan, and Taiwan, coffee has become the first consumed beverage, rather than tea or other beverages.

We became more confident after reading this, especially in Taipei, where there is a brand called "CITY CAFE" that has more than 5,000 stores in the entire city of Taipei. This number exceeds the number of stores currently opened by Starbucks and Luckin Coffee across the country, so we were greatly encouraged after learning about this.

So the second question is, Starbucks is so powerful, do we have a chance to challenge it with limited resources and create a brand suitable for Chinese consumption? Will Chinese people accept a new coffee brand? Make this field a dual CP competition?

So we looked at some other countries. There is a Tim Hortons in Canada. Canadians are accustomed to going there to drink a cup of coffee every day, and its sales volume exceeds that of Starbucks.

In addition to Canada, there are many other countries with a relatively high proportion of coffee consumption, such as Australia, Japan, South Korea, Italy, etc. Their largest coffee brands are all local brands. So after seeing many cases of local brands, we believe that it is possible to create a competitive brand for China.

The third factor for starting a business is based on our confidence in China's mobile Internet , which is undoubtedly a global leader in user experience interaction. China's mobile Internet has created a new economy, especially mobile payment , which is very popular. Coupled with takeout, people can enjoy any service without leaving home. Therefore, we believe that mobile Internet technology can transform traditional retail and create a new retail coffee model.

Specifically, it is the fully digital design of the entire business model . It is not only the digitization of transaction behaviors, for example, there are no cash registers, all transactions are completed online, and users' consumption data is stored; at the same time, we have also achieved the Internet of Things digitization of store operations and professional equipment. For example, how much coffee a barista makes per hour, how stable each coffee machine is, all data are retained and scored, and the daily shipment volume of various materials will be collected in real time.

The benefit of fully digital design is that by retaining a large amount of data, we can start machine learning and intelligent computing, which allows us to have a very clear understanding of the consumption behavior of each consumer and the granularity of user portraits becomes finer . At the same time, after data collection, the inventory of each store in the next three to four months can be basically calculated, and the supply and demand of various raw materials can be inferred based on the weather, season, and surrounding competitive products.

So overall, we have achieved improvements in operational efficiency and marketing efficiency, which has reduced costs and enabled more accurate customer acquisition.

02 Luckin Coffee’s positioning and brand strategy

In terms of quality, to be honest, none of our founding team members are from a coffee background, so how do we create high-quality coffee?

So when we started our business, we set up a professional product team internally from famous coffee brands, and we also invited the champion team of the World Barista Championship (WBC), which are the champions from Italy, Japan and China. They participated in the entire process of blending our coffee recipe.

We have suffered some losses in the roasting process. Luckin's initial positioning was to make coffee better and fresher, so that Chinese people could drink more professional freshly ground coffee. So we listened to the advice of coffee masters to make the taste of boutique coffee. Therefore, the roasted beans we launched in early 2018 were all medium-light roasted, with a strong fruity and sour taste. However, most of the commercial coffee that people usually drink is deeply roasted. The beans are cooked for more than 2 months. They are bitter, mushy, and have a strong caramel flavor. The result is that people who understand coffee will say that your coffee is delicious and professional-grade, but many users who don’t know much about coffee complain that luckin coffee tastes too sour.

Later we reflected internally and decided that we should still follow the public taste and convention.

So in the third quarter of last year, we decided to start medium-to-dark roasting, with the preference for roasting sun-dried coffee beans from the Sidamo region of Ethiopia. As a result, the response after it was launched on the market was particularly good. This also gives us an inspiration, that is, to educate and cultivate the market, we should first comply with the conventions and then gradually change them, otherwise it may be a thankless task.

In terms of brand strategy, we proposed AnyMoment unlimited scenarios. Starbucks is a great opponent. Its founder proposed the concept of the third space. Coffee should provide people with a social space where they can chat comfortably. Therefore, Starbucks attaches great importance to the location, decoration, music and comfort of its retail stores. This is the offline user experience that traditional retail pays great attention to.

What do we do about this?

We did a systematic classification in the early days and divided the stores into four categories:

• The first is the flagship store, which enhances the brand’s tone;
• The second type is called a leisure shop, which is today’s commercial coffee shop, where people communicate offline.
• The third type is the PICKUP cache store;
• The fourth type is a takeaway kitchen store.

In the early days, we mainly operated cache stores and takeaway kitchen stores, but now the proportion of takeaway kitchen stores is less than 5%, because takeaway kitchen stores do not contact customers but the cost is very high.

Our focus is on developing PICKUP cache stores, which are generally lightweight super counters with inexpensive rents and small areas, but high efficiency. They handle large shipments during the morning and lunch rush hours. Whether you are commuting to get off work, holding meetings in the building, or receiving guests, you need a cup of coffee. Through this, we have locked in the online and offline traffic entrances.

Today, of Luckin’s more than 3,000 stores, more than 90% are PICKUP store models, meeting the diversified product needs of most people.

03 Quickly establish a traffic pool: brand, fission, and data efficiency

The marketing industry changes too fast. If you always try to keep up with the ever-changing trends, you will be extremely exhausted. But there are also many things that remain unchanged in the marketing industry, such as the "4Ps": product, price, channel, and promotion. No matter whether people finally invent "4C" or other marketing models, I think the starting point of all thinking is still the "4P".

In today's era, there are many business models and capital is very hot, but if you burn money without achieving efficiency and growth, or if you do not build strong brand barriers in your strategy, you will eventually die. Therefore, the core of the entire traffic pool is to quickly establish a brand. The brand is the most stable traffic pool, and then pursue the maximum monetization of traffic.

Before talking about traffic pool thinking, let me first talk about traffic thinking.

The essence of traffic thinking is advertising thinking . For example, if I spend money to buy advertisements on Baidu, WeChat Moments, Douyin, and Toutiao, then this traffic must immediately bring me orders and mobile phone number information. It is naturally a purchasing behavior. Traffic thinking is more suitable for some platform-level Internet companies.

For an enterprise like ours, talking about traffic thinking is actually helping others to promote themselves, because we don’t have traffic. When we talk about traffic thinking, it means buying traffic from others. Even if you open a store on Tmall or JD.com, the traffic is from others. You must do Juhuasuan at others' place, and you must find Li Jiaqi to do live broadcasts to bring traffic.

So what is traffic pool thinking?

Traffic pool thinking is an operational thinking , when my company is not a traffic platform. I should attach great importance to the retention of every traffic, keep every user, let the user stay in your APP, WeChat, Douyin account or community, and then bring user conversion and fission growth through repeated high-frequency interactions. This is operational growth thinking.

How to distinguish between traffic pool and traffic source?

Whether users can be retained or not, places that can provide you with data-based retention are traffic pools that companies should pay attention to.

For example, APP, DMP, communities, etc., all use data-based user retention. In addition, there are brands. Why are brands traffic pools? Although it seems a bit abstract sometimes, I think it must be done. It is the flow of people's hearts. I position the brand as a permanent and stable traffic pool.

This year, everyone has heard a term called private domain traffic. Why do we talk about private domain traffic? In fact, it is also the traffic pool thinking. It means building your own traffic pool, but today we are talking about private domain traffic which has a bit of micro-business meaning and is more inclined towards community marketing.

External traffic sources include BD cross-border marketing, digital advertising, and traditional advertising, which can essentially bring about an increase in overall traffic, but they are outsiders, not family members. They can bring about temporary growth, but cannot bring about long-term, low-cost growth.

1. Brand is the most stable traffic pool

A brand is the flow of people's hearts, making users think of you when they consume. To build a brand in China, you must first build a famous brand and then build a brand. Today, building a famous brand is much more difficult than making a good product.

We often say that if a product wants to reach consumers, it must first be recognized, then recognized, and finally subscribed.

Since the founding of the People's Republic of China, there are very few brands that truly have style, soul and connotation. It takes time and accumulation. But a brand name can be quickly established.

How to quickly launch a brand?

The key lies in positioning, symbols, and scenarios . Determine the most effective positioning for your brand, determine the most effective symbols, and determine your first phase of the strategy, which is your scenario.

Today we are creating a brand. From 0 to 1, I will be very clear in my thinking. What is our positioning? What are our core symbols? What is our early entry scenario?

What is positioning?

First, strong competitive positioning, which means “I have what others do not, and I am better than others.” For example, when we were running the Shenzhou private car business, there were already Didi, Uber and Yidao ahead of us. Our most core advantage over them was “safety.” This is a strong competitive positioning.

Second, USP positioning, that is, unique selling point. We sometimes call it positional marketing , because most Chinese people today don’t have the time to run so many products, so you must create a scene and give them a memory of the position, such as:

• "Give Melatonin as a gift" is a card position;
• "Use Stashu for stomachache, acid reflux and bloating", this is also a blocking position;
• OPPO's "five minutes of charging, two hours of talk time" emphasizes its fast charging, which are all unique selling points.

Third, create a new category. Traditional categories cannot compete, market demand has changed, and this is the time to explore a new demand market. Before the emergence of Xiaomi and LeTV smart TVs, China's traditional TVs were Skyworth and Changhong. When Xiaomi and LeTV started making Internet TVs, they occupied a category base to the maximum extent. We position Luckin Coffee as Internet coffee, which has become a new category.

Then comes the symbol, why is it called luckin coffee?

Luckin is a very good word - simple, easy to remember, and Chinese people can understand it at a glance, and it has a nice sound. Moreover, luckin is a plosive sound, which is easy to spread and catchy.

I was drinking with Feng Tang that day, and he agreed that poetry should also be catchy. He mentioned a very revealing name: Zhang Bangchang. Having a good name is very important. It can solve a lot of your memories and bring natural recognition to consumers.

We chose a deer as our brand image because more girls drink coffee and deer are lively and appealing. The Little Blue Cup also uses the visual habits that are currently easy for everyone to accept on mobile phone UI interfaces. Nowadays, more and more people like flat design. There is no gradient, no rendering, no need for highlighting, and the tone comes out with just one color and a few icons.

Finally, for the scene, I chose office buildings and weekdays for the coffee market, and let go of the shopping malls that everyone thinks should be opened. This is very focused and high-frequency, the lobby of the office building plus Monday to Friday, this is our vertical entry.

1. Fission

Let me talk about the AARRR model. Which of these links is the most important in operations?

Retention comes first. Frequency increase and retention are the left and right hands. If the frequency increase is done well, other things will not be bad. The core is the retention rate.

The characteristics of fission marketing are to make full use of social relationship chains, emphasize sharing, and post-payment rewards. There are three forms of designing fission through social relationship chains:

• The first is compound interest. Many people say that there are luckyin coupons everywhere. If there are no coupons, they won’t drink. Then why are there coupons every day? In fact, the original coupons were promotions, but now the coupons are naturally part of the price system, except that the discount rate is flexibly changed.
• The second type is crowdfunding. Help others to help you fulfill your wishes. A typical example of crowdfunding fission is Pinduoduo, which is also supported by ticket grabbing. He could have given you the discount, but he wants you to spread the word and get free traffic and free exposure.
• The third is sharing, which is to share the rights and interests with everyone. WeChat red envelopes are actually shared. For example, iQiyi launched a membership event where every VIP member can give a drama to a friend for free. What is actually happening behind the scenes is that they are using your rights to create fission, and through you they are encouraging your friends to download iQiyi.

You can design various fission forms through these three social relationship chains. For example, we have used Meitu fission, gift card fission, game fission, etc., as well as celebrities, IPs, movies, and TV series, but even the most popular movies and TV series have a sharing rate that is difficult to exceed 30%. But you can easily exceed 30% by using game fission, because playing games is human nature and everyone wants to try their luck.

Conventional fission, photo fission, gift card fission, game fission

The core idea of ​​fission is to use existing stock to increase volume, and high frequency to generate high frequency. If you don’t have any inventory, don’t do it, you won’t be able to expand it. "High frequency brings high frequency" means that high-frequency interaction brings high-frequency sharing. Only when your users retain and interact frequently will they be willing to help you share. Only in this sharing can you attract new users. This is a core idea.

1. DMP and PBL, making full use of the data management platform

For the marketing industry, DMP is a data labeling management and application platform, including consumer behavior and user portraits.

For example, luckin coffee users can type in more than a thousand tags, and the user portrait is already quite accurate - boy or girl? Drink it iced or hot? How's the social energy? Do you often drink coffee?

Through these, we can define users. Of course, in the Alibaba, Tencent or Toutiao systems, the granularity of labels will be finer and more three-dimensional. The more tags there are, the more accurate the portrait is, and the higher the marketing conversion efficiency is.

PBL is a means of membership management, summarized by an American professor. Specifically, it includes points, medals, and rankings. Everyone is using it in Internet operations. It can increase activity and even sharing rates. Use points to retain users, medals to create a sense of achievement and identity labels, and rankings to activate sharing and repurchase desire. Honor of Kings is a medal system that helps stimulate user sharing.

To sum up, how to quickly build a traffic pool?

There are two sections: one is how to obtain traffic, and the other is how to operate traffic.

• When it comes to acquiring traffic, it’s all about traffic pools and traffic sources. Brand is the most stable traffic pool, and fission is the lowest-cost way to acquire customers.
• In terms of operational traffic, I emphasized the AARRR model, where existing traffic carries incremental traffic and high frequency carries high frequency traffic.

Finally, here are my three traditional sentences:

• First, all products must be able to fission . I think many products need to seek ways to fission and seek users' desire to share.
• Second, all creative ideas must be shareable . For example, a photo should have a QR code, preferably a WeChat QR code, which is better for retaining fans than a mini program code.
• Third, all results must be traceable and digitized as much as possible.

Author: Yang Fei

Source: Tencent Media Research Institute