Yuanfudao, China's First K12 Unicorn [2/2]

Consumer Discretionary Author: Qasim Khan Editor: Luke Sheehan Sep 21, 2020 09:59 AM (GMT+8)

The core business of Yuanfudao is 'one-to-many' classes. In this part of the article we analyze the indicators to determine the company's revenue growth.

Image credit: Kelly Sikkema/unsplash

Core business analysis

Increase in the number of users

What actions did Yuanfudao take in terms of increasing the number of users?

1. As of 2020, Yuanfudao became a partner of China Railway Jixun, the operator of CCTV 'Chinese Poetry Conference' and China Railways official app. From online TV programs to offline transportation, all-round advertising has increased the firm’s brand awareness.

2. In terms of word-of-mouth, Yuanfudao aims at improving the user experience of parents. Parents can receive class reports and check class performance after their children have finished the live class. After the exam is over, parents can receive the exam report and check the performance asap so that they have a comprehensive understanding of student learning. This is incomparable to either a tutoring class or an offline training organization.

Improve conversion rate

It is evident from the front page of the app that Yuanfudao provides users with free and low-cost experience courses. 

The fee for the most important and difficult special subjects at senior high school is only CNY 1, the famous 'thought enlightening' lesson is free to watch and there are a couple of other free or very low-priced courses. The free/low prices allow students to take trial courses and relieve users from worrying about the quality of the courses and their learning effects. This is critical to enhancing trust.

On the other hand, the method of setting up coupons for newcomers and inviting friends to register to receive ape coins encourages users to spend and improves users' platform participation and enthusiasm.

Finally, before users purchase core special courses, they can listen to them for free, which is very helpful to improve users' willingness to buy. In addition, Yuanfudao supports the behavior of dissatisfied withdrawing once the course is purchased. After the user listens to the first class, if they are not satisfied, they can withdraw before the second class. 

Pricing strategy

In terms of pricing, Yuanfudao first introduced a large number of low-price courses worth CNY 1 to attract users and increase users' trust. Hence reducing the risk cost of the user's first payment and paving the way for them to pay for the second time.

As we know Yuanfudao mainly promotes large-class double-teacher courses, consisting of 30 lessons. The price of group lessons ranges from a few hundred yuan to more than CNY 1000. On average each lesson costs CNY 15-30, which isn’t very high if the teaching quality is high, especially compared to offline tuitions which may cost thousands of yuan. 

It can be said that Yuanfudao has performed rather well in the three points mentioned above which is also evident by the increasing revenues year-on-year. 

Industry chain

Consumers of k12 online education products, that is the parents of the students, are generally mainly those born in the 80s and 90s. This group of parents is, firstly more educated, secondly, they accept the importance of online education and are ready to spend invest in their children's education. 

Many parents do not register for offline tutoring classes and rely on the school’s traditional classroom teaching because they feel that their children have to complete homework when they come back from school and extra classes would be an extra burden. The problem is that in this way, the teacher can only take care of a number of students in the classroom, and others keep fail to keep up so they can only find another way. The traditional class model also has the problem of long class time and low efficiency. If they do decide to sign up for offline training institutions, the level of teachers in training institutions varies, good teachers are not guaranteed and top of that the fee is also very high. Some parents choose one-on-one offline tutoring. Comparatively, this method is safe and efficient. However, the current group of tutors is mainly college students and part-time teachers, lack of teaching experience and limited level is a problem.

It can be seen that satisfying the parents' demand is a huge hurdle.



At the elementary school level, students’ learning autonomy is relatively poor, and it’s often the case that students are eager to play and run away easily in class. At this time, someone needs to supervise the learning and cultivate children to develop correct learning concepts and good learning habits.

Junior high:

Junior high school students begin to enter adolescence and rebellious period and become physically and psychologically sensitive. During this period, facing increasing academic pressure, students need to have study habits and learning methods that suit them. Otherwise, it is easy for them to get tired of being taught. 

High school:

At this stage, students have heavy academic work and face the pressure of the college entrance examination, that is, they need correct learning methods and a lot of exam training. Different students have different understanding and learning levels. Teach students in accordance with their aptitude and efficient special counseling is what they need.


In 2015, the state issued regulations banning off-campus tuition fees for primary and secondary school teachers. At the same time, It has also issued a series of policies to encourage the development of online education.

For some teachers, it is another source of income, but the workload due to the traditional school education system in China leaves teachers with no time or energy to give after school online classes. That’s why online education firms opt for part-time teachers with little to no teaching experience.

However, it is not easy to find suitable methods to solve these common problems.

Based on the above facts, it can be seen that parents, students, and teachers have their own demands and they have not been solved well at this stage. 

To sum up the article, it is safe to say that:

- The combined influence of policies, economy, social culture, technology, COVID-19 and other factors has promoted the rapid development of the k12 online education industry and will continue to maintain a relatively high growth rate in the next few years.

- Yuanfudao, Zuoyebang, and Xueersi Online are the market leaders of the k12 online education industry. Each company has its own differentiated competitive advantage, but so far, there has not been a single company occupying most of the market share. The businesses of these three companies overlap and differ. In the next few years, the competition between them will become more intense. How to attract and how to retain users will be the focus of these companies. 

- Yuanfudao's marketing strategy such as using a combination of online and offline marketing, a large number of advertisements on media and public transportation to has been its competitive advantage against the other two. Other than that, a series of operating methods such as free trial listening and newcomer coupons have played a large role in increasing paid users. 

To find more about Yuanfudao click to check part 1 of this article.