Luckin Coffee’s private domain, if you can’t learn it, don’t learn it

Explore how Luckin Coffee achieves efficient customer acquisition and management through private domain operations. This article deeply analyzes its successful strategy and provides valuable experience for private domain marketers. It is suitable for brand operators and marketing professionals to read.

The real benefit of Luckin Private Domain lies in its deep integration with operations to improve operational efficiency.

1. High efficiency of front-end customer acquisition

There are only four ways to acquire customers in physical stores

1. Natural flow of stores
2. Ground promotion and diversion
3. Public Domain Platform
4. Private Domain Repurchase

Needless to say, the first two types of platforms cannot match the opening rate of WeChat on any public platform. In the private domain, they are all old customers. Luckin can achieve batch customer acquisition online (on WeChat) with just one coupon. If it were you, could you acquire customers by issuing coupons online?

2. Mini Programs are highly efficient in ordering food

Compared with offline ordering in stores, ordering through mini programs is more efficient, and the experience is better without queuing offline. Secondly, it can reduce the store's labor costs to a certain extent. In addition, customer information can be obtained, including but not limited to user gender, time of opening the mini program, browsing path, browsing time, total amount of consumption, consumption frequency, last consumption time, social relationships, etc. Through data analysis, targeted operation strategies can be designed (such as refined coupon issuance under algorithms), and even feedback can be given to public domain delivery and product development.

3. Reduce dine-in service in stores and improve operating efficiency

Most Luckin stores do not have dine-in service, and customers can either take away or order food. This has the advantage of reducing store operating costs (small area, less manpower), so that its price still has a gross profit of more than 66% after coupons. Compared with Starbucks, Luckin can do business in an area of ​​20 square meters, while Starbucks usually needs an area of ​​more than 100 square meters. From the data, Luckin can open at 20% of Starbucks' cost and operate 40% of the latter's business scale, with a lower threshold for opening a store and a shorter payback period. The more efficient single-store model enables Luckin to occupy a larger market faster.

(Source: Ping An Securities Research Institute)

Finally, on June 5, 2023, Luckin Coffee will have more than 10,000 stores, making it China's first coffee brand with 10,000 stores. With the combined factors of brand power, sufficient profit support, refined operations, product attributes, and customer tone, Luckin only needs to issue coupons and must issue coupons. Imagine, if Luckin's coffee also sells for about 30 yuan a cup, would you buy it often? Probably not, because there are too many other coffees that can be replaced. In summary, it is not difficult to see that Luckin's success in the private domain is actually a strategic success, a natural integration of private domain and business.

Because of strategic success, brand success, business success, and product characteristics (low customer orders, high repurchase), the tactics in the private domain can be extremely simple and crude: "add people, pull groups, and issue coupons." In addition to Luckin Coffee, some leading brands directly adopt the violent "add people, pull groups, and issue coupons." For example, McDonald's and KFC. When a category is monopolized by a few brands, consumers need this brand more than the brand needs consumers. Brands are not afraid of "offending" consumers, and consumers are more tolerant of them. So the question is, do you dare to offend? Will anyone buy your coupons? Is the profit from issuing coupons sufficient to support it?

4. Why doesn’t Starbucks follow Luckin’s example and enter the private domain?

An interesting question: If Luckin Coffee is doing well in private domain, why doesn’t Starbucks do it? According to the above analysis, Starbucks is fully qualified to issue coupons and do private domain. Is it because Starbucks has no vision? Or is it incompetent? Or can’t afford to hire a service provider? It’s not that Starbucks doesn’t learn from Luckin Coffee to do private domain. There are essentially three unacceptable reasons.

1. Reduce brand power
2. Reduce gross profit margin
3. User ordering habits are irreversible

First, Starbucks has very high user value. If Starbucks uses coupons with small profits to convert (wash) them in the private domain, it is equivalent to treating users as fools. Not only will it offend those users who are extremely loyal to the brand, but it will also not bring any business growth. This is also the irreversible sequelae of most catering brands issuing coupons in the private domain. Secondly, with Starbucks' global brand image and influence, it is unacceptable to operate users as roughly as Luckin Coffee and consume brand power in the private domain.

If we analyze it in depth, we will find that there are actually two hidden costs behind it:

First, opportunity cost. Is it better to convert all users in the private domain? Is it possible that the conversion effect will be better if users are transferred to the public domain or other channels?

Second, there is the cost of silence. Once consumers cancel their WeChat friendship with a brand, it is difficult to add them back. However, when we add a friend, we have already paid a certain amount of traffic-generating cost.

Let's take a look at Starbucks' strategy. For the core super users , they use a strong membership system to reach them, which is often referred to as the stars. For potential super users , the store staff actively adds them to the familiar customer group, and there is a high probability that super users are also in it. The difficulty of group operation is suddenly reduced a lot. For wool users , the discounts are placed on Dianping.com, and they are enriched in the form of single products, packages, and cards. Starbucks' restraint has prevented them from taking the detours that many restaurant owners have taken in the private domain. Looking back at your own brand, can you also tolerate the three things mentioned above?

5. Final words

How can you learn Luckin's private domain? Learning from Luckin's desperate efforts to build groups and issue coupons often means tactical diligence and strategic laziness. If you are going in the wrong direction, you can't learn the strategy, and if you can't learn the tactics, what can you learn? The only thing you can learn and the only thing you should learn is to integrate the private domain with business operations to improve the efficiency of business operations. But the question is how do you do it? Don't count on the service providers who use Luckin as a case study. In their world, the success of Luckin's private domain is issuing coupons, so they will also teach you to issue coupons. If you do this, you will lose valuable users in the process of issuing coupons and changing service providers.

Author: John Dajiangwu; Source public account: John Dajiangwu (ID: 833244)