About 8 months after a damaging food safety scare shook the brand image at Chipotle, the company rolled out a nationwide launch of Chipotle Rewards in the first quarter of 2019.
It is widely acknowledged that one purpose of a customer loyalty program is to reinforce and amplify the core brand message and customer promise. At a time when Chipotle needed to remind people of their best attributes, tasty food and fun environment, the launch of Chipotle Rewards was welcome news. The program was immediately popular among guests and It didn’t take long for the membership to top 1 million people as this news release explains.
In case you’re not familiar with the program, here are the terms and conditions. In short, Members earn 10 points per dollar and when the point total reaches 1,250, an award is added to a member’s account within the next 48 hours. Reaching a reward means “free Chipotle” for the Member, and each reward is good for 60 days from time of issuance. The effective rebate is between 5-7% depending on how you value the “free Chipotle”, a fair value among the competitive set in casual dining. Occasional bonuses spice up the rewards as the recently ended “Guac Mode” promotion offered free guac and extra bonuses for those who enrolled by February 20th.
The program is mobile-centric, with download of the mobile app required for enrollment. Everything about the program seems solid, save for one odd statement in the terms and conditions: “In no event will Chipotle award points to any Chipotle Rewards account for more than (a) two purchases on one transaction date; (b) two purchases within one calendar week; or (c) four purchases within one calendar month.”
What? We thought loyalty programs were designed to encourage frequent visits and higher purchase volumes. This program rule seems to squash those Chipotle fanatics who would eat there every day if they could. We imagine the rule is designed to prevent fraudulent activity, but c’mon Chipotle, there’s got to be a better way.
Well don’t get bogged down by our minor critiques of the program, because Brian Niccol, CEO Chipotle, cited the important contributions of the program throughout the company’s 4th Quarter and Full year 2019 Results. You can read the transcript of the call here, but we wanted to share several highlights that mattered.
First off, Chipotle is returning strong financial results. Mr. Niccol shared that “Q4 marks the eighth consecutive quarter of accelerating comparable sales.” Interestingly, and much to his credit, Niccol said that “running great restaurants with the right leaders and the right culture delivers outstanding performance”. Kudos to Niccol for shouting out the importance of leadership and culture in creating a high performing enterprise.
Five key areas of strategy were mentioned as primary contributors to the recent success. One of these was “engaging with customers through our loyalty program.” The loyalty program made contributions in several areas. We list a few of these here (all verbatim from the earnings call transcript):
- We saw healthy transaction growth in 2019 without relying on short-term promotions.
- Our digital platform designed to reduce friction while increasing convenient access.
- 2020 will be about using them more efficiently and really leveraging our rewards program, which currently has more than 8.5 million enrolled members and is one of the fastest-growing restaurant loyalty programs in history.
- While in 2019, we focused on member growth.
- In 2020, we will not only further increase enrollment, but more importantly look to optimize the use of database marketing to incent behaviors as we build out our CRM capabilities.
- Personalization and engagement are the cornerstones of our evolving loyalty strategy.
- We are encouraged by the early signs of transaction increases across all frequency bands.
As we see the marketing discipline of building Customer Strategy encompassing a wider range of corporate stakeholders, we see more recognition of the importance of culture and employee satisfaction and engagement to the overall success of customer-facing marketing programs, e.g. a loyalty program.
Chipotle made clear its holistic approach to building a solid business and stronger customer loyalty by saying, “the most foundational ingredient of having a successful restaurant company – operational excellence, which comes from great leaders building great teams who create equally great guest experiences”. Think about that; leaders, teams, and guest experiences, mentioned all in one sentence!
Operating a business with high employee turnover in a tight labor market means that more attention to culture is warranted. We were glad to see the emphasis on the importance of human capital in the Chipotle business with these comments:
- “Nowadays, employees want more than just wages from a potential employer. They are seeking the right culture and the right skills to help them grow, both professionally and personally.”
- “Within our restaurants, we believe the general manager is the most important position to improving operational health and ensuring a great customer experience.”
- During 2019, this emphasis on our general managers resulted in exceptional food that is being prepared more consistently, better stability with turnover being reduced by around 35% and nearly a 10% improvement in our max 15 minute throughput KPI, aided by training and a laser focus on the five pillars of throughput.”
Chipotle is taking an enterprise approach to building customer loyalty. The strategy seems to include operations, people, marketing, and technology. Maybe the final statement by Mr. Niccol in the transcript said it all: “Staying focused on our priorities and executing flawlessly, while providing customers with the unique Chipotle experience, I'm confident we will be successful for many years to come.”