KFC’s private domain traffic operation strategy!

Speaking of KFC , many people think it is the best localized Western fast food. Not only does it sell fried chicken, it also launches Chinese and Western fast food from time to time. Now it also has beauty and personal care products, and its private domain traffic operations are also very good. The author of this article has analyzed this and shared it with you.

Recently, Yum China released its second quarter 2021 financial report. The financial report shows that as of the second quarter of 2021, KFC and Pizza Hut's membership programs had a total of more than 330 million members. In the second quarter of 2021, member sales accounted for approximately 61% of system sales.

In its second quarter financial report, Yum China did not break down the number of members for KFC and Pizza Hut. However, it can be seen from its 2020 annual report that as of December 31, 2020, KFC's membership program had more than 275 million members, accounting for approximately 62% of KFC's system sales in 2020.

KFC APP and WeChat mini program are the main platforms for KFC to guide consumers to register as members. Morketing observed that in the APP, in addition to selling its main products such as hamburgers, fried chicken and French fries, KFC also sells digital toys, grains, oils, rice and noodles, snacks, fresh food, small kitchen appliances, and beauty products.

It can be seen that KFC, based on its 300 million members in its own private traffic pool, is building its own APP into an e-commerce platform around the life cycle of its members , and continuously launching its main products including hamburgers, fried chicken, etc., as well as other non-main products such as Lego, eyebrow pencils, coffee, electric ovens, etc. to its members. At the same time, it supports members to use V gold to offset part of the cash.

A closer look reveals that this is essentially the result of KFC's digital transformation over the years. KFC's digital transformation can be traced back to 2010, when it established its own food delivery platform and application, and then launched the APP and implemented the KFC membership program in 2016.

In fact, these operations of KFC are the hottest private domain traffic methods at the moment. With the help of KFC's brand and product power accumulated over the years, members and even consumers are more likely to accept it and will place orders on this "reliable" platform.

So, how did KFC do it? Why do this?

01 Why does KFC want to enter the private domain?

In recent years, private domains have become particularly popular. Catering companies like KFC, as well as companies in the automotive, beauty, and retail sectors, are all planning to expand into private domains.

"Morketing Research Institute" found that under the pressure of the economic growth environment, Chinese companies are paying more and more attention to the private domain. The survey results show that only 8% of the companies surveyed have no understanding of the private domain at all. Moreover, compared with the past, companies today are generally more open and embracing of private domain operation tools. Among the surveyed companies, 32.7% have already deployed private domain marketing tools, while 37.8% plan to deploy private domain marketing tools in the future.

So, why do "KFCs" attach importance to private domains and are eager to develop private domains?

There is a metaphor in the industry that the public domain is like a river with many people fishing in it. In the past, there were many fish in the river, but very few people fished, so people could always get a good catch every time. Later, as more and more people started fishing, competition became more and more fierce, and it became increasingly difficult to continue catching large numbers of fish.

Since 2014, traffic costs have increased by 15%-20% each year, especially in the field of performance advertising. The demographic dividend of mobile Internet has peaked, and more and more companies are doing public domain promotion. This means that more and more people are fishing. In this situation, many companies are thinking, in addition to competing with other companies in the public domain, whether they can also establish a private traffic pool, cultivate their own fry, and then catch them after the fry have grown into big fish.

In addition to the peak of traffic dividends, the difficulty and cost of obtaining public domain leads continue to rise. More importantly, the difficulty of conversion after diversion is also increasing, and marketing has entered deep waters. Therefore, whether it is a large enterprise, a medium-sized enterprise, or even a small enterprise, they are all trying to establish a private traffic pool.

After all, many companies have realized that private domain traffic belongs to the company's exclusive and proprietary groups and has a certain degree of personalization. Companies can communicate with these users anytime and anywhere throughout their life cycle to continuously tap into greater value and continue operations and conversions. At this time, private domain has become a powerful tool for enterprises to cope with growth challenges.

From the perspective of marketing costs, companies do not need to spend a lot of extra money to reach users in the private traffic pool, except for the coupon costs spent on advertising marketing.

It is worth mentioning that in the long run, enterprises can ensure the security and stability of data by establishing private traffic pools, thereby generating more long-term value.

Data shows that in 2019, the marketing expenses generated by stores within the Yum China system were US$409 million. As the company that carries the banner of Yum China's revenue, KFC's marketing expenses are also a considerable amount. And this fee, as the unit price of traffic increases every year, makes its total marketing revenue or cost higher and higher. If private domain cultivation is not carried out, the profit margin or long-term sustainability of its business will become increasingly difficult.

02 Own APP + WeChat applet

So, how does KFC plan its own private ecosystem?

KFC has two main platforms to guide consumers to register as members: one is KFC’s own APP, and the other is the WeChat applet that many brands use to develop private domains.

First, KFC has its own APP.

According to a report by Frost & Sullivan, KFC is the first fast food brand in China to launch a super APP. In 2015, KFC launched its own APP for market testing and promoted it nationwide in early 2016.

In order to improve user stickiness and retention rate, in December 2018, KFC launched the KFC Pocket Fried Chicken Shop game in the APP, inviting users to build personalized virtual KFC stores, unlock new products and design store functions, etc., to enhance user experience and strengthen interaction.

As of June 30, 2020, Yum China had approximately 700 million KFC and Pizza Hut app downloads and upgrades, with more than 100 million monthly active users in June 2020. The APP makes it convenient for consumers to order takeout, order food by themselves via mobile phones, and order food by scanning a QR code at the table. The proportion of digital orders in sales increased from 38% in 2018 to 55% in 2019, and reached 80% in the first half of 2020.

Today, the KFC APP has developed into an e-commerce platform, focusing on traditional main products such as hamburgers, French fries, and fried chicken, supplemented by beauty and personal care products such as facial masks, electric ovens, coffee, yogurt, digital toys, food and beverages, etc., and constantly launching more products to users.

KFC APP

Second, WeChat mini-programs.

Different from the diversified gameplay of the APP, the KFC WeChat mini program carries more functions such as self-service ordering and forming a closed-loop purchase by jumping to the official account link.

For example, at the bottom of KFC’s WeChat official account promotional articles or in the text, a product purchase jump link will be set up. When consumers click on it, a prompt will pop up on the link page saying "The mini program is about to open, KFC self-service ordering", and after entering the mini program, consumers can place orders directly.

In the WeChat mini program, in addition to setting up a one-click ordering function, KFC has also added three main function keys: membership code, my card wallet, and my order, as well as five more service items at the bottom of the page: V Gold Mall, K Coffee, Pocket Fried Chicken Shop, WOW Membership, and Home Delivery. Each different service item can jump to the corresponding mini program.

That is to say, when consumers choose home delivery, KFC will recommend consumers to open the "KFC Home Delivery" mini program. When consumers choose V Gold Mall, there will be a corresponding "V Gold Mall" mini program. Different mini programs carry different functions to meet the diverse needs of consumers in a more targeted manner.

KFC WeChat Official Account

03 Construction of a membership system of nearly 300 million

Offline stores, KFC APP and WeChat mini-programs located in the core business districts of major cities constitute KFC's largest traffic entrance, helping it to continuously expand its membership system.

In 2016, KFC began operating a membership program, allowing registered consumers to earn points according to certain rules after completing purchases. The points can be used to purchase other KFC products for free or at a discount in the future.

In addition, Yum China is also connecting the membership systems of its various brands to provide consumers with opportunities for cross-brand consumption.

Starting from May 2018, KFC and Pizza Hut's K Gold Plan was merged into the "V Gold Plan" and further upgraded internally to incorporate the Taco Bell Plan. KFC hopes to create cross-selling opportunities by combining multiple brands into a single membership plan. After the integration, members can earn V-gold points when purchasing products at Yum China’s KFC, Pizza Hut and other brands, and can use the points to redeem coupons or vouchers for other brands. In the first half of 2020, about 15% of membership points were redeemed across brands, nearly 10% of KFC points were used for Pizza Hut products, and about 50% of Pizza Hut points were used for KFC products. Yum China's membership program also brings additional revenue to KFC.

For example, the average revenue per active KFC and Pizza Hut member almost doubled in 2019 compared to 2016. In addition to revenue, the most important thing is that the huge membership system can provide KFC with a large amount of consumer behavior data. This data helps KFC conduct big data and artificial intelligence analysis, and better understand consumers' preferences for food and taste, providing information for its innovative dishes, allowing KFC to provide a variety of personalized value-added services.

In addition to opening up the membership system, in order to further improve customer loyalty, realize the monetization of basic memberships, and increase the consumption frequency of members, in July 2018, KFC also launched a subscription-based paid exclusive membership plan, including monthly, quarterly, and annual memberships. Paid members can enjoy different types of benefits that cater to consumer preferences, such as KFC home delivery, breakfast and coffee privileges, as well as Pizza Hut's parent-child, delivery and steak benefits.

The paid membership program effectively improves order efficiency and enhances consumer loyalty. According to KFC's official statistics, from the launch of the paid exclusive membership plan to June 30, 2020, KFC has sold a total of approximately 26 million equity membership cards. Paid Exclusive members more than doubled their purchase frequency and overall spending during the paid period.

04 Conclusion

KFC leveraged its existing capabilities to develop an APP and launch a WeChat mini-program, which ensures that it does not directly reach consumers through any media channels. The KFC brand itself is like a huge KOL, with nearly 300 million members and a huge number of followers, which can motivate these people to produce a lot of content for it.

Compared with large-scale publicity in the public domain, this method can ensure that KFC reduces large marketing investments, and can also continuously bring more traffic to itself and continuously expand its private traffic pool.

In short, the private domain itself is not a hot spot or a short-term trend, but requires long-term improvement by the brand. KFC’s various practices also illustrate this point.

Author: Amy Ma

Source: Morketing