Last Friday, beleaguered fast food chain Chipotle launched its first loyalty program, a three-month promotion called Chiptopia Summer Rewards. Food safety problems during the end of 2015 and beginning of this year caused a huge drop in revenue for the popular company, and now it’s stepping up its efforts to win back customers. However, we’re a little doubtful that a Chipotle loyalty program can accomplish that.
First of all, let’s take a look at the structure of the Chipotle loyalty program, which is currently a three-month summer pilot.
- Customers can sign up at any Chipotle location, and get free guacamole and chips with their first qualifying purchase of $6 or more.
- If a customer buys four $6 or more meals in one month, they reach “mild” status and get a free entree.
- If a customer buys three more $6+ meals in the same month, they get “medium” status and another free entree.
- If that customer buys two more $6+ meals in the same month, they qualify as “hot” and get another free entree.
Only one visit per day counts, so buying multiple meals in the same day won’t give a customer more rewards. Furthermore, all points and rewards reset at the end of the month. If a customer gets “mild” status for all three months, they get an extra entree. Customers achieving “medium” every month get $20 in Chipotle merchandise. Those who get “hot” every month will win catering for a group of 20 people. Hungry and rushed customers might find all these rules a bit hard to understand, and the short time frame doesn’t do most any favors.
However, this is an unambiguously good deal for customers who are already eating at Chipotle frequently. If they eat there once a week, they get a free meal. As the business’s chief creative officer, Mark Crumpacker, said in a press release, “We created Chiptopia to reward our most loyal customers who continue to support our efforts to cultivate a better world.” It seems like they’re certainly doing that, and collecting valuable customer data along the way! In this sense, the Chipotle loyalty program represents a step up from just mailing out coupons.
However, the Chipotle loyalty program could be doing even more with these already-loyal customers: turning them into advocates. The brand is in desperate need of positive press, and these are the people to give it to them. They should use their rewards to incentivize social sharing and other forms of positive word of mouth. Happy customers spreading the word about their enjoyment of Chipotle would increase trust in the chain and undoubtedly grow sales.
But let’s forget about the already-loyal customers for a moment, and focus on the problem of bringing new customers and hesitant old customers through the door. Generally speaking, the end goal of loyalty programs is to turn one-time or sometimes customers into repeat shoppers. While loyalty programs can aid customer acquisition, they’re usually not designed to. If a customer isn’t sure about purchasing from your brand, telling them that they’ll get a free burrito if they come back three more times in one month probably won’t sway them much.
Chipotle is trying to address this acquisition problem through loyalty by giving first-time loyalty members free guacamole and chips, but this doesn’t seem like the most effective solution. It could help if it’s promoted extremely well, but customers who are hesitant due to food safety concerns won’t be won over by a freebie like this.
Once again, Chipotle’s team should look towards advocacy instead. Now that they’ve instituted more stringent food safety standards and are retaining certain regular customers, they need to combine these two factors to boost trust in their brand. After all, consumers are four times as likely to make a purchase when referred by a friend. Looping in word of mouth marketing with their loyalty program could enable Chipotle to see higher numbers of new or reactivated customers at a much lower cost.