Luckin Coffee, the Chinese retailer that has found stratospheric growth with its physically-light, convenient delivery platform for urban consumers, advocates a strategy of heavily pursuing a core group of users.
Luckin Coffee launched towards the end of 2017 and was taken to an IPO 17 months later with a valuation of $4.2 billion. The company was born not out of a love of coffee but from a keen understanding of data – its name was chosen at random by a lawyer in a rush to register a company.
“We’re not doing product marketing, we’re doing user marketing,” Viveca Chan, founder of WE Marketing Group, explained at the IPA’s annual EffWorks conference: “identify who your core users are, see if they really are your core users and then really, really market them.” (For more, read WARC’s in-depth report: Why Luckin Coffee focuses on ‘user marketing’)
This core group is identified as white-collar, young and upwardly mobile people who enjoy a decentralised urban lifestyle and value the convenience of having things delivered to their door.
Its rapid growth (Luckin now has 3,680 stores according to Reuters) places the brand just behind Starbucks, which has grown to 4,125 stores over two decades. Luckin’s positioning is keenly tailored to the flaws of its rival. First, it aims to make better coffee, priced cheaper, and delivered to the customer. Its promise, that of “any moment” stands in contrast to Starbucks’ “third place”, meaning that Luckin saves on physical real estate and overheads, paving the way for growth.
Given the target audience lifestyle, Chan explained, “you should not go to the coffee, the coffee should come to you.”
The mobile phone is, of course, central to making Luckin Coffee work. Users download the app, which they use to order and pay, even if they are in one of the few stores the brand operates. It also informs marketing: “We know where you are, we know your time, we can give you the right scenario, the right moment, create the right message occasion.”
But the most important aspect of promotion, said Chan, is using consumers themselves to do the advertising. “We offer you a coupon if you drink some coffee. If you send these coupons to your friends and if your friends download the app and they order, they get a free cup – but you get a free cup too.”
Though it has been costly – with the company still burning $130m a year when it filed its IPO – it’s story of how a Chinese brand has “completely disrupted the brand leader in the business they’ve been in for many years,” Chan said, “And I think the key learning is you have to understand what is your core competence.”
Sourced from WARC, Reuters