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On the heels of E. coli outbreaks earlier this year, which affected almost 60 people who ate at the massively popular burrito chain, Chipotle started July with a bang when it announced its first-ever loyalty rewards program dubbed Chiptopia.
The program rewards the chain’s most loyal customers, a segment that had caused the most damage by turning away from Chipotle amid the health scare. By purchasing a set number of burritos per month (Chiptopia runs from July through September), guests will earn free entrees, Chipotle merchandise, and, for the most fanatical burrito lovers, catering for up to 20 people.
During last week’s second-quarter financial results conference call (for the period ended June 30, 2016-one day before Chiptopia launched), Chipotle CEO Steve Els noted that revenue decreased nearly 17%, to $998.4 million while comparable restaurant sales sank 23.6%.
But Els said that fiscal matters took a positive turn early in the third quarter.
“Our most recent marketing efforts, led by our Chiptopia frequency program, are off to a nice start in the third quarter, as customers are embracing the program and nearly 30% of all transactions are engaged in Chiptopia,” Els said. “Our entire company is focused on restoring customer trust and re-establishing customer frequency, and rewarding our most loyal customers for visiting more often through Chiptopia is one way to do just that. While it has only been a few weeks since Chiptopia launched, we are pleased to see that July sales comp trends have already improved by 200 to 300 basis points, and transaction comp trends have improved by an even greater amount.”
So can Chiptopia begin to make substantial fiscal inroads and spark customer engagement at Chipotle?
Loyalty360 asked some customer loyalty experts for their thoughts on the issue.
“Chipotle’s ‘Chiptopia’ loyalty program may help to boost sales and collect customer data in the short term,” Carrie McIlveen, U.S. Director of Marketing, Metia, told Loyalty360. “However to build advocates, our Insights experts have found through research that collecting points and earning awards isn’t working – brands need to earn loyalty. When brands connect with customers emotionally, deliver highly personalized and contextually relevant experiences they create a level of loyalty that’s greater than any points system could ever achieve.”
Brad Marg, Chief Operating Officer, Clutch, believes that Chipotle has a great product and has built a fantastic brand over the past decade.
“Regardless of the recent food issues, Chiptopia will help them not only show increased value to their customers, but will allow them to better understand who their customers are, their expectations, their preferences, sentiment, etc.,” Marg told Loyalty360. “With 30% of sales being loyalty sales, I would expect that an even larger percentage of sales will be from their best customers and this increase will allow them to come closer to meeting the Q3 revenue projections. It will be interesting to see how the company leverages this program beyond just rewards.”
Jon Siegal, Vice President and General Manager of Client Relationships at Stellar Loyalty, said that launching the Chiptopia loyalty program was a move in the right direction for Chipotle.
“What the brand needs to do now is step back, think longer term and establish a system and a program that is capable of innovating quickly; one that not only rewards customers, but motivates them to become true brand advocates,” Siegal explained. “In our experience, trust in the food and restaurant industry is paramount and building trust involves authenticity−staying true to the brand’s personality, values, and character−as well as gaining validation from other customers. A loyalty program that engenders trust starts by putting the customer at the center and then continually finds new, better ways to address their needs and concerns.”
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