Loyalty: It’s more than free burritos
Through a special arrangement, presented here for discussion is a summary of a current article from the rDialogue blog, authored by Ashley Tway.
Chipotle’s current win-back strategy seems as if it can be summed up in two words: free burritos. Following a February company-wide closure in response to a series of E. coli and norovirus outbreaks, free entrées were offered to anyone who texted “RAINCHECK” and subsequently provided their zip code. Deciding that they hadn’t given away enough free product, management then announced they would send out at least 21 million direct mail coupons for free burritos over the course of the next few months.
After announcing a quarterly loss in late April, Chipotle management seemed to realize they needed to change course and declared they would launch an elusive loyalty program. There were no details about the program, except that it would only be rolled-out for a limited time. I hope Chipotle proves my skepticism wrong and actually uses the loyalty program to deliver a relevant, targeted experience to its customers, but given the company’s response thus far, it seems like this program could be an attempt to push more free and discounted offers to drive customers into the store and calling it “loyalty.”
Don’t get me wrong, I enjoy free food as much as the next person (maybe even more) and have already redeemed both of my free burritos, so Chipotle has succeeded in getting me back into the store. But has it succeeded in winning me back as a loyal customer in the way that I once was?
Not yet.
The product is still good enough, but it’s not as “cool” as it once was. Instead of looks of jealousy among co-workers when I go to Chipotle during lunch, I detect looks of judgment and scrutiny about my meal choice. Without the promise and assurance of the very best ingredients, Chipotle – like the freshman frat star who’s decked out in brand name pastels – looks like it’s trying too hard to be something it’s not.
Chipotle has never been in the game of competing on price. And if the company continues to prioritize pushing free and discounted products, it’s going to be a lot harder to build the brand back to pre-outbreak levels of loyalty and trust.
- Loyalty: it’s more than free burritos – rDialogue
- Chipotle Mexican Grill, Inc. Announces First Quarter 2016 Results – Chipotle
Photo: Chipotle
Discussion Questions
DISCUSSION QUESTIONS: What are the benefits and drawbacks of using freebies as traffic drivers? To what degree does Chipotle need freebies and discounts to win back customers?
Poll
BrainTrust
Bob Amster
Principal, Retail Technology Group
Brian Numainville
Principal, The Feedback Group
Freebies are not good in the long term. In the case of Chipotle, where they have to do something to win back customers, I think it’s a good idea. As a long-term strategy, I am against it. Loyalty is about many other things, like being made to feel special. It’s about belonging to some VIP club, being entered into a sweepstakes to win something more desirable than a burrito and which costs the company less overall. It is not necessarily about deliberately eroding your own margins with giveaways.
Chipotle finds itself needing to get folks back through the doors. Given the negative nature of the issue necessitating this effort, this won’t be easy. Kind of like all of the cruise ship sicknesses — makes one wonder whether it is worth the risk. And with a plethora of other food choices, many consumers may find themselves thinking the same thing here. So the use of freebies here may be one of the only ways to get people to try Chipotle again and, if they can get people past trying it again and they don’t get sick, it might serve to reestablish some level of trust.
Freebies, or any marketing spend, are designed to get someone across the store threshold to the in-store/in-restaurant experience. If you go to all that expense and effort and then don’t deliver some special experience then it’s a lot of money for little reward. Maybe a “come in for a free burrito and try us again, (we won’t poison you this time)” and “remember what you’ve been missing” is enough to get the engine running at Chipotle, but I would have thought they would also have something new and interesting for a returning/new customer to experience once the customer took the hook of the offer to come into the store.
Chipotle is not the first chain with a health crisis. Taco Bell and Jack in the Box had their own missteps. They recovered by knowing their customers and getting creative.
Taco Bell rebounded from Hepatitis A, Salmonella, and E. coli crises last decade. Its customers like novelty. One tactic has been regularly refreshing its menu. Consider the Crunchwrap Supreme — so popular it became permanent in 2006.
Jack in the Box rebounded from food poisoning in 1993. Its customers are contrarian. It blew up its boardroom in a heavy advertising campaign, rebranded its mascot, and offered free antenna balls (a very clever viral freebie).
Chipotle customers are different than Jack’s and Taco Bell’s. They strongly prefer quality over price. Giveaways clash with this deep belief. To regain loyalty, Chipotle must reconnect with its customers in its own unique way. It has been creative in the past, such as its Framed and Dangerous mini-documentary about modern agriculture. It can get its spice back.
I agree with Ms. Tway that this seems like the “wrong” approach, since people are already familiar with the brand — indeed they’re all too familiar — and whatever concerns they had/have aren’t likely to be assuaged by giveaways, but I’m not sure what the “right” approach is.
Chipotle needs to regain trust, and in a way that doesn’t keep reminding people of past problems, but how to do that when what is needed is the absence of problems, i.e. how do you show problems AREN’T there?
The sad reality (for Chipotle’s shareholders) is that the chain may never regain the position it once had. It was already likely reaching the limits of a fad curve, and an overvalued stock signaled unreasonable expectations … and what was reasonable then may be too high now.
I just met with one of the largest CPGs this morning, and one of the major shopper marketing agencies. We had access to a new dataset from grocers that combines data from print coupons with the retailers transaction logs to see what really happens at an anonymized shopper level. Many of the coupon redemptions we looked at were for “Free” goods, and not just BOGO. And it was quite evident from all parties that “free” drives a lot of fraud, cashier mistakes, and our sense was in looking at the shoppers’ baskets, we didn’t sense much brand shifting for trial or other indications that the free offers really moved the needle for either the brand or the retailer.
I can never believe it when big, supposedly established companies, with lots of supposed dollars for PR and marketing, have so much trouble with their PR and marketing, and their attempts come out feeble and scattered, as in “…given the company’s response thus far, it seems like this program could be an attempt to push more free and discounted offers to drive customers into the store and calling it “loyalty.”
You’re right: That’s not a loyalty program, nor a way to win back long-term, dedicated customers or new customers.
Freebies tend to attract price-sensitive customers and conditions them to expect more free/cheap items. Chipotle is in a tough spot and I understand why they did it, but is that enough? I agree with Dan @G2 that they need to get more creative beyond freebies and loyalty programs.
This isn’t about giving away free product. It’s about winning back customers — and gaining new ones.
Chipotle had a big issue. They were proactive in putting the customer first. They closed stores and took a major revenue hit. Now they are standing up, dusting themselves off and saying, “We want you!” And, once they get the customer through those doors, they will hopefully deliver a strong customer experience (both great food and great service) that makes those customers want to come back, and ideally, evangelize the Chipotle experience.