Marketing promotion case: 6 keywords of Luckin Coffee!

Luckin Coffee's sophisticated and sharp Internet strategies, its fierce and effective traffic pool and user fission, and its precision and efficiency based on APP and data analysis are worth learning. So, this article will analyze several key words of Luckin Coffee.

In 2018, competition in China's coffee market became fierce, with new models and new stores emerging one after another. Instant coffee, ready-to-drink coffee, coffee machine coffee, convenience store coffee, takeaway coffee, fast food coffee and professional coffee shop coffee, different business models and products are blended with each other. Starbucks, Costa, Luckin Coffee, Lian Coffee, Man Coffee, ZOO Coffee, Wings of Coffee, etc. can be said to be a hundred schools of thought, but the fact is that some are happy and some are worried.

Latest News——

Coffee giant Starbucks reached a comprehensive new retail strategy cooperation with Alibaba in August this year, embarking on the road to digitalization in China. The first important decision was to launch food delivery service on the Ele.me platform.

In addition to focusing on online channels, in May this year, Starbucks announced at its first China Investor Conference that by 2022, it will open more than 6,000 stores in China and continue to expand its offline outlets.

At the same time, on August 28th, US time, Nestlé and Starbucks issued a joint statement announcing that Nestlé acquired Starbucks' retail coffee business for US$7.15 billion and will obtain permanent global marketing rights, allowing it to sell Starbucks products such as packaged consumer goods outside Starbucks stores.

According to the agreement, Nestlé will obtain the permanent right to promote, sell and distribute Starbucks products such as Starbucks, Starbucks Reserve, Starbucks VIA and Seattle's Best Coffee through relevant channels around the world, including packaged coffee and beverages sold in supermarkets, but the agreement does not include ready-to-drink products and any products sold in Starbucks coffee shops.

The fact that Starbucks was acquired in 2018 and expanded rapidly at the same time shows that too many hyenas and mosquitoes will erode the elephant's body, so the elephant fought back.

Luckin Coffee is undoubtedly the leading hyena.

Little Blue Cup:

Luckin Coffee prepared 1 billion yuan from the beginning, spent 300 million yuan on targeted advertising, invited millions of white-collar friends to drink coffee for free, opened 525 stores in half a year, accumulated 1.3 million customers, sold 5 million cups of coffee, and threatened to surpass Starbucks in China...

As of December 12, Luckin Coffee announced the completion of a US$200 million Series B financing round, with a post-investment valuation of US$2.2 billion.

According to its public annual report, by the end of 2018, Luckin Coffee will have 2,000 stores, achieving 100% coverage in the core areas of all cities where it operates, with the distance between stores less than 500 meters, and customers can find a Luckin Coffee store within a 10-minute walk. (Source: China Merchants Securities, "Luckin Coffee: A New Beginning in the Light Food Category," August 3, 2018)

Luckin Coffee, which was born out of the previous "Shenzhou Taxi", has become an "Internet celebrity" by spending a lot of money on online subsidies and crazy offline store expansion, openly challenging Starbucks.

Keyword 1: Opportunity

The emergence of Luckin Coffee has thrown a time bomb in the coffee, marketing, Internet and capital industries.

Most people in the coffee industry believe that it is courting death. According to the history of coffee, dozens of coffee brands that threatened to challenge Starbucks basically all failed in the end.

Some people also believe that what Starbucks sells is not coffee, but the environment, service and quality. Luckin Coffee will be killed in seconds if it plays the "Master Coffee" card from the beginning. In fact, more people view Luckin Coffee from the perspective of Shenzhou Taxi and shared bicycles. Who made the founder Qian Zhiya use the Shenzhou strategy right from the start?

Indeed, the sharing economy died miserably in 2018.

So what is the reason for action? Actually, it is——

1. Are there still opportunities in the market? How big are the chances?
2. Are the conditions ripe to seize the opportunity?
3. What is the reason for action?

Try to answer the above logical chain:

First of all, are there opportunities in the market? How big are the chances?

Two pieces of data:

1. The annual growth rate of coffee consumption in China is 15-20%, while the global growth rate is 2%. This shows that the market is growing rapidly, and China has become the most promising coffee market. The popularization of coffee culture and accelerated urbanization are the driving forces for its growth.
2. The global coffee market is worth 12 trillion RMB, of which the United States is worth 3 trillion and China is worth 700 trillion. Structurally, freshly ground coffee accounts for 87% of the world's total, while instant coffee accounts for less than 13%. In China, instant coffee accounts for 84% and freshly ground coffee accounts for only 16%.

It is concluded that in China, with consumption upgrading, the growth rate of freshly ground milk is much greater than the overall growth rate. The irrationality of the existing market structure contains infinite potential for consumption upgrades.

With such market potential, except for Starbucks, the growth of other coffee brands in the entire market has stagnated or even shrunk. The growth of European and American coffee brands (including Costa Coffee and Pacific Coffee) has slowed down, and Taiwanese and Korean coffee brands (including Shangdao Coffee and Coffee With You) have even closed their offline stores one after another.

Qian Zhiya thinks that "it cannot be just Starbucks", which actually means that Starbucks occupies a single oligopoly position and other brands are much smaller in scale. But according to the "binary law", similar phenomena exist in most fields: leading brands and second brands that are opposed to leading brands, such as Coca-Cola and Pepsi; McDonald's and KFC; Taobao and JD.com, etc.

What is the best outcome? So, how big are Luckin's chances?

In public reports, Qian Zhiya gave her quick way to judge the scale of the opportunity: Starbucks' market value is US$81.5 billion, far exceeding many industries, which shows that this market segment is attractive enough and the Chinese market space is huge.

If Luckin Coffee has the opportunity to achieve half of Starbucks' market share and profits, and a quarter of Starbucks' brand value, it would be about 20 billion US dollars. Well, this number is very attractive, and it is enough for the Internet team to fight for it.

Are the conditions ripe to seize the opportunity?

The two major bottlenecks of customer coffee consumption (analysis from public data and annual reports):

• The price is too expensive: The average price of a cup of coffee is currently 30 yuan, compared with other drinks. High prices: In developed countries in Europe and America, a cup of Starbucks accounts for one thousandth of the monthly income, but in China it may account for one percent of the monthly income - high prices hinder high-frequency consumption
• Inconvenient to purchase: Truly healthy coffee is freshly ground, but freshly ground coffee is not as common as it is in foreign countries. Taiwan has a population of 23.5 million but over 5,000 City Cafes. Beijing has a population of 29 million but less than 300 Starbucks. The average purchase distance to a professional coffee shop is about 30 minutes’ walk - this inconvenience has deterred high-frequency consumption.

Starbucks' growth rate in the Chinese market: Starbucks' main growth occurred in China, which shows that the Chinese market is likely to become a new growth point for the coffee industry. Conversely, the Chinese coffee market has great potential and may explode in the near future.

Capital verifies idea maturity: Startups generally have close ties with the capital circle and are more familiar to the capital circle. Large-scale and intensive coffee mergers and acquisitions or investment layouts within the capital circle further verify the maturity of ideas:

• In July 2017, Starbucks announced that it would acquire the remaining 50% stake in its joint venture with Uni-President in East China for US$1.3 billion, thus realizing direct operation in the mainland market.
• Costa's parent company, the British Whitebread Group, announced that it would acquire the remaining 49% of Costa (Shanghai) Catering for RMB 100 million, fully occupying the southern Chinese market;
• Nestlé acquired a 68% stake in specialty coffee maker Blue Bottle and last year also acquired cold-brew coffee brand Chameleon Cold-Brew;
• Peet's, a long-established American coffee brand, has officially entered China, with its first store opening in Shanghai.

Before Luckin Coffee’s brand strategy launch, Starbucks announced that it would sell the permanent rights to sell Starbucks retail and catering products outside of coffee shops to Nestlé for US$7.15 billion.

Luckin Coffee’s core assumption: Changing the bottleneck of high prices and inconvenience in the coffee market can lead to an explosion in coffee consumption. Of course, this assumption requires a professional research organization to conduct research and provide feedback on Luckin Coffee’s market response and user profile.

However, Luckin Coffee has actually already given an answer to the understanding of the above hypothesis - "crazy" store openings, and only by establishing the most basic network density in first-tier cities, can the hypothesis that "cheap + convenience can induce coffee consumption" be verified.

In addition, many people have reported problems with the taste of Luckin Coffee, but in fact, Luckin Coffee’s target customers are not real coffee lovers and people who really understand coffee. This is actually a new consumer group that Luckin Coffee can attract after solving the problems of “price and convenience” - that is, it later positioned itself as “commercial coffee”.

For Luckin Coffee, how to manage customer word-of-mouth and word-of-mouth feedback and improve system operations based on the customer's perspective is an urgent problem to be solved.

Keyword 2: Internet

Most people think that Luckin Coffee is a product of capital, but I think it is actually a product of the Internet.

Many people say that Luckin Coffee’s business model is the Shenzhou model. It’s better to think about it the other way around: why is Luckin making coffee? In fact, this examines the "matching degree of opportunities and capabilities" in the Internet era.

In Qian Zhiya's words: Many traditional industries are worth doing again with the Internet's approach. If Luckin Coffee is made with the Internet's thinking and speed, the market will soon feel the pressure of change in rhythm and competition.

What is the difference between the Internet and traditional methods: Different capital models: Internet companies can obtain sufficient or even continuous funds at the beginning, and these funds can directly challenge the brand. Different development logic: Traditional companies need to verify the profit model on a small scale, and then replicate and expand based on the profit template.

Internet companies often skip the profit model and use the user or customer growth model (pursuing GMV or total transaction volume) as their development model. They first attract users to a certain scale, and then use scale advantages or business model innovation to achieve profitability based on this massive user base. But now there is also a term called "lean entrepreneurship", which means no longer pursuing GMV unilaterally, but focusing on building a profit model to prevent the risk of capital turning around.

Marketing and operational effectiveness are different: traditional enterprises manage based on portals, activities, etc., while Internet enterprises set up user portraits based on APPs and big data screening.

Based on the above, the second biggest question the outside world has about Luckin Coffee is its profitability. But the message released by Luckin Coffee is that it is "prepared for long-term losses" - which means "I'm not short of money."

Luckin Coffee’s current user base of 1.3 million is the asset it has created by “burning money”.

But there is another perspective that believes that with a customer acquisition cost of 20 yuan per cup, Luckin Coffee has a structural cost advantage compared to the hundreds of yuan customer acquisition costs of Internet companies. Snowball the user base to quickly complete a new round of financing and feed back the capital advantage.

Keyword three: APP

Luckin APP - a traffic tool

Normally, when we eat at a restaurant or buy things at a supermarket, we use credit cards directly via WeChat. Many users refuse to use apps because that means their consumption behavior path becomes complicated. It also means that after you change your phone, you have to start over with a new one, which will result in churn. It also means that the workload and cost of APP development, model configuration, operation upgrades, hosting, and data security are much higher than WeChat mini-programs.

Then why does Luckin Coffee still insist that users must place orders using the APP?

Answer: This is a necessary condition for the establishment of a business model.

For a business valued at tens of billions, customer data will never be stored on WeChat, just like the logical thinking that opened its own Get APP after signing up with WeChat fans. This is inevitable for capitalization and scale. Only if the number of registered customers, DAU (daily active users), and APRU (average monthly business revenue contributed by each user) based on its own APP can continue to snowball, Luckin will have a steady supply of capital ammunition.

Furthermore, the sharing of a large number of inducing actions such as user fission and black account growth promoted by Luckin Coffee is prohibited within the WeChat platform and there is a risk of account suspension. Then, the process of ordering based on WeChat mini-programs, geographic location matching, and takeaway checkout is not only not smooth, but there will also be positioning deviations that affect customer experience. And these technical barriers can be overcome by APP.

Finally, and most importantly, Luckin’s own DMP (user management database), information flow, and capital flow all need to be realized through mobile informatization.

For example: With the help of first-hand and accurate user purchase data, Luckin can obtain highly accurate solutions to problems commonly faced by the industry, such as supply chain, store location, and repurchase rate.

For example, user behavior Internet data can be used to analyze user data and create a profile of user consumption behavior through purchase records and storage. Since the first day of its launch, Luckin Coffee has set more than 60 labels for user behavior, and now there are more than 100 sets of labels - from the most basic population, demographic characteristics, consumption frequency, consumption location, taste preferences, etc., making Luckin Coffee's iteration speed and accuracy far exceed the traditional model.

Is WeChat mini program okay? Obviously not, only the APP can do that.

Keyword 4: Traffic pool

Traffic pool thinking:

I specially bought Yang Fei's book "Traffic Pool" because his speech happened to be on Chaos University.

Simply put:

The traffic pool thinking is to obtain traffic and then obtain more traffic through storage, operation and discovery.

Traffic pool is actually a kind of thinking. Traffic pool thinking is to use various means to obtain traffic, and then obtain more traffic through the continued operation of traffic, and so on, over and over again. Traffic pool is an effective way of thinking, emphasizing that any brand communication requires effect conversion.

In the map of traffic pool thinking, seven water entry points are listed: brand, fission, WeChat, events, digital advertising, live broadcast, and BD. This is an integrated way of acquiring traffic. The popularity of Luckin Coffee is the result of the combined effect of multiple water inlets.

In his speech, Yang Fei summarized the accumulation of Luckin Coffee’s brand traffic pool as follows:

(1) Positioning Internet coffee

If traditional coffee is sold in coffee shops, what is sold is an offline experience and offline space, which is a limited scene and space.

But Luckin Coffee is positioned as Internet coffee, returning to coffee itself, using data, logistics, social methods and APP to meet users' coffee needs. They are trying to create a differentiation.

(2) Create a “symbol system” with visual impact

The deer head logo was chosen as the logo, breaking the conventional visual norms, and each store uses a packaging form.

Blue is chosen as it is the shortest wavelength of the three primary colors. It has a strong impact on the naked eye and can quickly form an eye-catching visual hammer, which makes the luckin coffee brand and the image of the "little blue cup" form a strong association in the minds of the audience, greatly reducing the memory cost.

In addition, it forms a sharp contrast with the "Starbucks green" that is familiar to the public, and also matches the "boutique blue" trend of the world's third coffee wave, firmly creating a new symbol in the coffee market.

Who doesn't love this cup?

(3) Auditory symbol: Who wouldn’t love this cup?

Luckin Coffee’s slogan “Who doesn’t love this cup?” is actually a provocative slogan, because many users will immediately react by saying “I don’t love it,” and at this time, they will feel a sense of trepidation.

(4) Introducing the “third space” to redefine coffee

The founder of Starbucks believes that home is the first space, office is the second space, and people need a third space for socializing. Socializing shouldn't happen at home or in the office, but in a cafe. This is an important business foundation theory that enabled coffee shops to quickly spread around the world.

But in the Internet age, social interaction is timely. Luckin Coffee believes that this is an "infinite scene" (Any moment). The traffic of infinite scenes has greatly broadened the traffic of the third space.

It’s not coffee that finds people, but people that find coffee.

In other words, instead of relying on fixed stores to bundle traffic, free traffic is directed through social platforms, without having to pay rent and labor costs to obtain expensive offline traffic.

This theory is considered by people to be Luckin Coffee’s second weapon to challenge Starbucks besides price.

Then, Starbucks was forced to go online.

anymoment

Keyword 5: fission marketing

My understanding of fission marketing is actually word-of-mouth marketing that has been instrumentalized.

Let’s first review Luckin’s fission methods and promotion methods:

• First order free: Download the app and get a free drink.
• Give TA a free coffee: When friends download the APP by sharing the link, each of them will get a free drink.
• 50% off every week: Follow the official WeChat account and receive 50% off coupons through IP implantation every week
• Light Meal Storm: Enjoy all light meals at 50% off.
• Coffee Wallet: Buy drink coupons, recharge two and get one free, recharge five and get five free
• Place an order and get a coupon: Purchase any product and you will get one of 20 coupons. The discount depends on your luck, and the rest can be shared with friends.

In fact, there are three tricks: the first order is free, sharing will get you gifts, and coffee will be treated to you.

The last two minutes are the main forms of fission. I think the highlight is the gift for sharing, because users need to use gamification methods (slot machines, try their luck) to get random discount coupons. Although the threshold is high, it is quite interesting. Limited to 20 people, also suitable for sharing in WeChat groups.

If you study it carefully, you will find that there are more entrances to send T coffee, and the coupons for placing an order will only be displayed after the order is placed, which shows that Luckin Coffee actually hopes to achieve user growth through mature social relationships.

The ultimate goal of fission is to retain customers, and continuous orders can generate growth. Therefore, 50% off per week, light meal storm and coffee wallet are the main means of monetization.

In addition, I happen to be a credit card user of Pudong Development Bank, and I was told that Luckin Coffee has launched a co-branded credit card with Pudong Development Bank. New users can enjoy up to 150 cups of benefits throughout the year, and preferential measures related to card application have been introduced.

This just proves the classic saying of "traffic pool thinking" - use existing traffic to find incremental traffic, and use high frequency to drive high frequency.

Keyword 6: Opponent

Perhaps it is because Luckin Coffee openly challenged Starbucks. As mentioned earlier, Starbucks has also launched a series of actions in recent days. So everyone naturally defines Luckin Coffee’s competitor as StarBag.

Qian Zhiya did tell reporters:

“I want to make better coffee than Starbucks”

"Luckin Coffee wants to make a cup of high-quality coffee and become a model of new retail through the Internet. Our goal is to beat Starbucks."

Yang Fei called this "opposite positioning" in "Flow Pool" -

The logic of this positioning must have a competitor that can be benchmarked, preferably the largest and most well-known competitor in the industry. This way, your opposition will have value, will be immediately felt by users, and will help you break out of homogeneous competition.

—— P 39 "Traffic Pool" Chapter 2

From the current perspective, Luckin Coffee has been successful in attracting traffic and has made differentiated efforts - price, coffee products (Aracapi beans), store distribution, and delivery time.

The first difference is price. Starbucks sells for 30 yuan, while Luckin Coffee products are priced at 21-27 yuan. Indeed, Starbucks is a benchmark, but I personally believe that Luckin Coffee’s biggest competitor is itself.

opponent:

First, Luckin Coffee has set itself a traffic pool technology of 500 stores, which directs online and offline traffic to drive continuous growth in overall customer traffic while maintaining convenience.

At present, Luckin Coffee has achieved this goal and is far ahead of similar takeaway coffee brands. It can even compete with Starbucks. Therefore, if anyone wants to challenge it, the starting threshold is 500 stores and 1 billion yuan.

Therefore, 500 stores are regarded as both a threshold for testing the business model and a barrier for Luckin to occupy this track and defend against competition.

Image source: Wu Junyu | "Double-tailed Siren" Starbucks in 2018

The picture above shows that celebrity dads are not just there to eat and do nothing. Starting from August 2018, Starbucks very smartly and promptly started cooperating with Alibaba. The cooperation with Alibaba quickly reversed Starbucks' decline in the Chinese market in a short period of time.

Joining hands with Alibaba, Starbucks' future expansion space in new retail is worth imagining——

• In terms of logistics and home delivery, Ele.me and Hema have enabled Starbucks to expand its service boundaries, which has brought visible and tangible service improvements to the C-end, and also brought Starbucks obvious business data improvements.
• In terms of retail technology upgrades, Mao, Taobao, and Alipay can provide Starbucks with more digitalization and supply chain optimization, helping Starbucks improve efficiency and reduce costs.

Starbucks is even connecting the Alibaba ecosystem horizontally, managing multiple digital consumer operation platforms, and achieving interconnection of member benefits. This can also help Starbucks manage users digitally and further improve user stickiness.

There is no doubt that Luckin Coffee is rich, but how to maintain stability at this scale and adjust and match capital, products, services, team, and supply chain to ensure that it does not trip itself up while running at high speed. After all, its current counterpart, StarBaba, is no longer alone.

At the same time, Luckin Coffee’s positioning is not very clear.

Qian Zhiya’s positioning is: high-quality commercial coffee for Chinese people. But Luckin’s first elevator advertisement was for Master Coffee.

Among its many materials, products, takeaway coffee bags and cups is - Specialty Coffee Fresh Style.

High quality commercial coffee from the Chinese? Coffee is an imported product, not a Chinese patent. Is Luckin Coffee more suitable for the Chinese physique? Or is it that Chinese coffee is better? According to this logic, should Starbucks be defined as American coffee? At this point, there is a lack of cognitive resources

Master Coffee? Even Star Dad doesn’t dare to say that, is it just because you used the WBC champion?

But in fact, this set can be replicated in any coffee brand. So in terms of positioning, if Luckin Coffee wants to benchmark itself against Starbucks, it should first solve three problems in terms of positioning: Who am I? What's the difference? What is trustworthy?

Let’s change it to a name that is easier to remember and more like coffee.

Secondly, as a start-up brand, Luckin Coffee has strong capital support and can expand its business to its heart's content: flagship stores, leisure stores, cache stores, takeaway kitchen stores, covering all scenario models, and launching a full-scale attack. Although different store types may not seem to be much different, there are significant differences in store location, leasing, team recruitment, and personnel training.

Operational focus, or “one store, one policy” as some say in local dialect, is also worth considering, as it helps to form an interlocking matching system with core items.

Capital can burn out scale, but it cannot burn out management.

Capital is an amplifier. The inherent good or bad of a team will only be infinitely magnified and will not be changed.

Just like poor OFO.

Conclusion

Luckin Coffee's sophisticated and sharp Internet strategies, its fierce and effective traffic pool and user fission, and its precision and efficiency based on APP and data analysis are worth learning; its vague and effective core positioning of its brand strategy is worth thinking about; and its later performance in operations and management is worth looking forward to.

Source: Alice Two or Three Things