Luckin’s “Pirate” Survival Rules

Why are Luckin Coffee's joint ventures so popular? Is the growth momentum driven by price and operational means, or is it the brand's spiritual connotation? Luckin Coffee frequently pushes out promotions, but it is not annoying. How does it retain users?

A strange phenomenon happened to Luckin Coffee.

When the "Soy Sauce Latte" co-branded with Moutai occupied various social platforms, Luckin Coffee easily created another hit. And it is said that this cooperation was initiated by Moutai. With the support of the national hall-level liquor ace, Luckin Coffee's brand level was instantly raised.

But at the same time, we also heard other voices: In the context of cautious consumption, Luckin Coffee is becoming more and more the first choice for workers who rely on coffee to boost their energy every day. Sensitive people have found that after the hot summer, it is not easy to buy a cup of coffee for 9.9 yuan, and the prices of 18 yuan and 24 yuan are too unfriendly.

One company founder even said that unless he has a business appointment at Starbucks, he usually drinks at Luckin Coffee, and he has to be extra careful not to miss the coupons. This may be the voice of most people.

On the one hand, it is marrying with high-end sauce-flavored coffee, and on the other hand, it is taking on the consumption downgrade of 9.9 yuan, but the focus on this once controversial local coffee brand seems to be no violation and logically self-consistent. Because Luckin meets the consumption needs of the current era.

The explosive product strategy + traffic pool operation + low-price strategy is one of the reasons why Luckin Coffee is comparable to or even surpasses Starbucks in terms of the number of domestic stores and profit margins.

Of course, the most important thing is that Luckin, as a retail company, has found its own survival rules in the mobile Internet era - the combination of user operations and store operations. This is also where local brands including Kudi and Manner are trying to emulate.

Judging from various data dimensions, Luckin Coffee is a successful retailer. But is the growth momentum driven by price and operation methods, or the brand spirit?

If the answer is the former, Luckin Coffee may be replaced at any time. The answer is unlikely to be the latter, at least it is unlikely to be the case at present.

1. Push frequently without being annoying?

Xiaochen, who lives in Chengdu, drinks a cup of coffee every day.

Luckin Coffee has gradually become her daily staple. She can hardly explain why, but it seems to have slowly become a habit. At first, her favorite was the popular Raw Coconut Family, but now she loves the pure black coffee, especially Yirgacheffe Dirty and Yirgacheffe Oreo.

After working for three years, Xiaochen has always had the impression that Luckin’s stores are very close to her. After moving several times, Luckin’s stores are either downstairs from her home or across from her company. In short, she can always buy a cup of coffee within a ten-minute walk. “It’s like buying soy milk at the breakfast shop downstairs from my home.”

It is worth mentioning that service speed is an important part of Starbucks’ value concept. Because no one wants to wait in line to buy a latte, nor is anyone willing to walk a few blocks for coffee, Starbucks’ way to shorten customer waiting time is to open more stores.

In addition to opening more stores, Luckin is also educating users to order by themselves. Place an order through the mini program or APP, scan the code in the store, and take the coffee away without any complicated communication or long waiting. Even if you are in the store, you still need to order through the mini program yourself. The store is just a carrier for Luckin to fulfill its contract. It makes good coffee and is responsible for delivery.

This may make people feel that Luckin lacks service awareness, but it resonates with some young people who think that Luckin is a "social phobia welfare store" where they can complete a purchase without saying a word to others.

Xiaochen didn’t have the habit of drinking coffee at first. She started to use Luckin Coffee after being bombarded with coupons. There are discounts everywhere, including mini programs, apps, and assistants.

"I go out at nine o'clock every day. In the morning, Luckin Coffee will remind me of the coupons in the WeChat service notification at around 9:30. It's like this every day. I feel like I'm losing out if I don't buy it." Xiaochen told Xinmei Daybreak that she started drinking Luckin Coffee at 6 yuan a cup and has been drinking it all the time until now, at a fixed price of 16.8 yuan a cup, and the price increase has not affected her consumption habits.

Coupon push is the only way for Luckin to expand its user traffic pool and an important tool to stimulate consumers to repurchase. These operations are mainly completed based on the WeChat system, and they have achieved refined operations.

Temperature and weather are important factors in determining Luckin’s product push. An automated push rule is to push iced coffee at 30 degrees and warm coffee below 20 degrees. Push is divided into regions and user groups.

Therefore, when the weather in the north turns cold, users receive push notifications of warm coffee such as velvet latte. On rainy days, because it is inconvenient to pick up at the store, Luckin encourages everyone to group order. Because Xiaochen has noticed that the most common time for sharing coupons (coupons for buying multiple cups of coffee) is on rainy days, and sometimes the delivery fee is waived.

Luckin's marketing department pays close attention to the weather changes in each city every day. It has established an automatic weather group to push the weather conditions of each city at a fixed time every morning. Cities with abnormal weather are specially marked to provide decision-making assistance on whether to issue takeaway coupons and discount vouchers to users. Yang Fei, co-founder and chief growth officer of Luckin Coffee, said that automated on-duty robots are doing this.

In addition, different operation strategies are also applied at different times of the day. A consensus among coffee practitioners is that there is no afternoon for coffee, only morning and noon, and the peak will basically fall after 3 o'clock. Therefore, it is very important to push the right product at the right time.

Such a high density of push notifications is a risk in itself. In the current era of information explosion, being frequently interrupted may be a form of harassment. The incredible thing is that Xiaochen did not close or block all the communities and welfare assistants on WeChat.

An industry observer close to Luckin Coffee told NewBerry Daybreak that as of August last year, the rate of users blacklisting WeChat for Business was only 0.2% to 0.3%. Luckin Coffee now connects more than 30 million users.

2. Retention solves survival?

In April 2020, Luckin Coffee’s financial incident broke out. The company urgently needed to adjust its business model and its marketing budget was drastically cut. At this time, Luckin Coffee was faced with an urgent need to attract new customers and retain customers. It had two choices: live streaming or private domain. In the end, they chose the latter.

Luckin's Chief Growth Officer Yang Fei thought that the live streaming path did not fit in with Luckin's idea of ​​building a traffic pool at the time. At that time, the idea of ​​the traffic pool was to retain users first, but live streaming was still biased towards the public domain.

For Luckin Coffee at that time, survival was the key, and retention solved survival.

In May 2020, Luckin selected 200 stores from 4,000 stores for private domain testing. In more than three months, it attracted 1.8 million users and received 35,000 orders for private domain coffee every day. This gave Luckin a taste of success and also helped it start building its own online operation barriers.

The starting points of the private domain are one-to-one, community and circle of friends. The specific operating mechanism is: store service staff join the group and communicate with users in a "one-to-one" customer service manner. Community and circle of friends are more about general service notification and general product exposure.

At the same time, algorithms, automated tasks, and store personnel services work together to complete the task. For example, automated push notifications can not only reach users based on their personalized needs and avoid harassment, but also solve problems of manpower and efficiency.

Xiaochen joined several Luckin stores’ social groups. The push notifications are different every day and even at different times of the day. Sometimes it’s new product push notifications, or flash sales at noon, or big coupons at 51% off on Fridays. If you can’t grab them, you’ll feel like you’ve missed out. Sometimes there are also coffee and meal discount packages like “Exquisite Australian White” + “Mini Egg Yolk Lava Croissant”.

Whenever Xiaochen learns in advance through social platforms such as Xiaohongshu and Weibo that Luckin Coffee has a new product coming online, he will pay special attention to the notifications in the community, for fear of missing out. The latest TOM & JERRY co-branded product will be released on October 9, and Xiaochen even set up a mobile phone reminder the night before.

It was Monday morning, and in the community, the welfare officer released new co-branded product push notifications at 9, 11, and 12 o'clock. However, limited coupons were only available at 12 o'clock, and Xiaochen, who was skilled in the operation, used his hand speed to grab a coupon for Mascarpone Whipped Cheese Latte.

The ultimate private domain can be considered the secret of Luckin Coffee's comeback. Luckin Coffee also has its own understanding of private domain. Yang Fei defines private domain as three forms: large, medium and small.

The small private domain is the public's understanding of the private domain, namely corporate WeChat, Moments, and communities. This part of the private domain can bring a certain amount of user sedimentation and user repurchase, but if there is no data support from the large private domain, the communication between the small private domain and users can easily become an inefficient harassment, which is exactly what Luckin Coffee is trying hard to avoid.

The medium private domain refers to the public accounts, private accounts, enterprise accounts, and mini-programs in the entire WeChat ecosystem, which form some combined strategies to enrich private domain operations and increase conversion rates beyond the small private domain.

The big private domain is a larger user group formed based on the company's own APP and user data management platform. Of course, it can also be regarded as an enterprise's digital operation system.

It is with this system that the platform can truly understand users. Small private domains and medium private domains become tools for reaching users, but the real core is the understanding of the rules after user stratification formed by large private domains.

Luckin has replaced the term "private domain" with "traffic pool system" internally, and everyone only calls WeChat for Business the private domain. Based on the above in-depth understanding of the private domain, Luckin may be one of the few brands that uses WeChat for Business to the extreme, and is also one of the retailers that benefits the most from it.

In the context of budget reduction, they chose the latter between the expansion-oriented public domain approach and the retention-oriented private domain approach. However, when their performance improved, they quickly turned to live streaming.

In the second half of 2021, Luckin Coffee began selling coupons through live broadcasts, with sales of millions per show a piece of cake. This brought new growth to Luckin Coffee.

3. The Magic of Data

The watershed year for Luckin's transformation was 2020. This year, one of Luckin's important tasks was to connect marketing and user operations, and integrate the two to make the granularity of user operations more refined.

This is similar to the relationship between the left and right hands. The left side is product price and channel promotion, and the right side is attracting new customers, retaining existing customers, and increasing frequency and fission. How to make the traditional marketing model compatible with the Internet is an important task for Yang Fei after he became the Chief Growth Officer.

Because only in this way can a lot of marketing or operating costs be saved. In the past, the traditional marketing department was responsible for spending money, and the user operation department was responsible for making money. After the two were combined, the efficiency of brand marketing spending became higher, and the effect of the money spent could be visualized.

In addition, in the past, marketing was only responsible for increasing traffic, and user operations were only responsible for traffic conversion. This independent relationship cannot achieve a closed loop of overall traffic, and the traffic conversion efficiency is not high. After combining the two, marketing can truly provide guarantees for operations.

User operation is a series of actions that are more online and data-oriented, focusing on the accumulation of user data assets. Just like "The Pirate Law" which tells the secret of enterprise user growth, it aims to attract new users, retain existing users, and increase the frequency of fission.

With a focus on online, notifications of new product launches and incentives for user consumption can all be done online. Stores only need to focus on fulfilling contracts and providing good coffee and service. Customers who often go to stores to pick up meals know that even if you stand in front of the clerk, the clerk will remind you to scan the code to order. Behind this is Luckin's high pursuit of online operations.

Pursuing everything online can completely change the core of a consumer company’s business. For example, when it comes to location selection, most coffee brands must open stores in shopping malls with large traffic, but Luckin Coffee does the opposite, distributing its stores to remote corners of office buildings and schools.

Zhou Yue, who often visits Beijing Chaoyang Joy City, found that this shopping mall is home to Starbucks, Heytea and various boutique coffee shops, but if she wants to have a cup of Luckin Coffee, she can only cross the road and pick up the meal in the basement shop behind a wall opposite. At that time, she followed the navigation and made a circle before she found this remote location.

Online business feeds offline business, so Luckin Coffee is not so strict in pursuing store location. Others want the front, but Luckin Coffee wants the back. Others want the first floor, but Luckin Coffee wants the second floor. The rental cost is reduced.

Luckin's understanding of "place" is also more unique. For example, stores in different scenarios such as schools, office buildings, and shopping malls will form different consumption characteristics. After attribution analysis, it may be found that stores in some shopping malls are actually more in line with the consumption model of office buildings. Therefore, although this store is opened in a shopping mall, it is actually more suitable for office building stores.

Zhou Weiming, senior vice president of Luckin Coffee and head of its coffee product line, once said that Luckin Coffee does not believe in chance, but in data. Even the words "fragrant and sweet" to describe the taste have been changed to numbers, and later research and development uses numbers to find the corresponding raw materials.

This year, Luckin Coffee has surpassed Starbucks in terms of store count, but measuring the influence of a commercial organization solely from this dimension is still very simplistic.

Apart from the commercial value, the establishment of Starbucks is seen as a sign of a city’s maturity. What is the social significance of Luckin Coffee?

Author: Li Huan

Source public account: Xinmei daybreak (ID: new-daybreak), understand people and discover changes.