For years, Chipotle promised its loyal fans a meal of high-quality, locally sourced, mostly organic ingredients. It was quick, reasonably priced, and delicious. But as it endured a simmering scandal over food-borne illness, its sales plummeted. All of a sudden, Chipotle’s locally sourced organic food didn’t seem so healthy and pushed fans away.
Now, despite launching a rewards program called Chiptopia, and offering free sodas to some consumers, Chipotle’s revenue still hasn’t reversed its slide.
What happens when a company endures events that run counter to the central promise of its brand? And more importantly, can Chipotle ever win back the trust of its customers?
In short, yes. Successful brands are effective at two things: customer acquisition and customer retention. Chipotle has already shown the world that, absent doubts over food safety, it can provide excellent customer experience that generates repeat business. Now it needs to focus on re-acquiring lapsed customers. But that could take a while, due in part to one major missing piece in Chipotle’s strategy: data.
Customer acquisition starts with getting to know them
Chipotle’s success – until the food safety scare – was remarkable for what it didn’t do. The company rarely advertised, almost never discounted, and made few attempts to engage its customers or track them using loyalty programs. It, therefore, had little customer data or experience using promotions.
The product was addicting. A stock price topping $700 was enough.
As it recovers, the drawbacks of Chipotle’s inattention to consumer data are becoming apparent. The company doesn’t know if current customers are new or returning. Chiptopia is, essentially offering free burritos to people who might have paid for them anyway.
Chipotle’s current promotions still don’t appear to gather much customer data. Chiptopia did not require users to submit an email address until they redeemed rewards, and the program was only temporary. And because Chipotle’s customers were not the most price-sensitive of consumers, it’s unclear whether a free soda is much of a motivator – because Chipotle doesn’t have the data to track this.
If Chipotle had a loyalty program before the crisis, it would be able to identify its lapsed customers and those who had returned since the scare, allowing it to more strategically reach out to bring its fans back on board.
How to keep customers coming back
Chipotle’s future depends on capturing information from customers who still visit its stores. The hallmarks of the loyalty playbook involve gathering data, establishing baseline behaviors, and identifying and motivating the best customers so they become “brand evangelists.” A customer who advocates for your brand is valuable indeed.
The company should work to analyze the behaviors of customers who returned, in order to learn how it can convert lapsed customers who have stayed away.
Since it has little customer data, Chipotle’s management team has no choice but to start from scratch.
This is a long process, and Chipotle might not rebound in the next quarter, or the quarter after that. The company will also have to take interim steps to reconnect with customers. Donating food to community events, passing out gift cards, and running “free lunch for your office” promotions will also help Chipotle engage with its local community and ultimately re-introduce the product in contexts that people feel is safe. These initiatives should also help support data gathering efforts – simply by asking people to offer an email at these events.
The good news for Chipotle is that the road to redemption isn’t steep. The product is good, and it continues to attract a base of loyal customers. The task ahead isn’t so much about changing the business plan, but about continuing to reinforce the brand values that had made it successful in the past. Chipotle, however, would be in much better shape if it had collected customer data from the beginning.