The past year has been tough for Chipotle Mexican Grill.
After multi-state E. coli outbreaks infected dozens of customers, the high-flying American fast food chain fell back to earth and has been struggling to heal its brand and encourage consumers to stay loyal.
That hasn’t proven easy. As Warren Buffett once observed…
It takes 20 years to build a reputation and five minutes to ruin it.
Chipotle ostensibly doesn’t have 20 years to rebuild its reputation, so it’s turning to something it once shunned in an effort to win back customers: a loyalty scheme.
And it’s being incredibly generous with that loyalty scheme.
In fact, according to Peter Saleh, an analyst at financial services firm BTIG, Chipotle’s new scheme, dubbed Chiptopia, is one of the most generous offered by a restaurant.
Under Chiptopia, customers earn free entrées after their fourth, eighth and eleventh visits each month, and receive free chips and guacamole when they join and make their first purchase.
Customers who visit 11 times in three consecutive months earn “Hot” status and are rewarded with free catering for a party of 20.
Will it work?
While loyalty schemes are virtually ubiquitous today, their efficacy is subject to debate.
Research conducted by The Logic Group and Ipsos MORI found that loyalty schemes don’t do a very good job at driving loyalty, at least as far as supermarkets are concerned.
Loyalty schemes can also be tricky to change. Starbucks learned that the hard way when it updated its Starbucks Rewards scheme earlier this year.
Previously, Starbucks rewarded customers based on the frequency of their visits, but like companies in other markets, such as the airline industry, the company realized that rewarding customers based on dollars spent made more financial sense.
Not surprisingly, tying rewards to spend instead of purchase frequency was not beneficial for many loyalty scheme participants, and Starbucks’ change was thus met with criticism.
Chipotle is clearly trying to avoid a similar backlash by putting a huge asterisk next to Chiptopia: the scheme is not permanent. Instead, it will run for only three months.
If the company has its way, Chiptopia’s generous rewards will lure customers back into its stores over that three-month period, and those that had been avoiding Chipotle following the E. coli outbreaks will soon forget the past.
But there’s no guarantee Chipotle will have its way.
After all, it’s not clear that customers who have come to question Chipotle’s quality will be enticed by a loyalty scheme that offers free food they don’t trust.
At the same time, it’s possible that Chiptopia will primarily appeal to the customers who have stuck with Chipotle despite the outbreaks, doing little to solve the chain’s real problem.
Despite the possibility that Chiptopia won’t have the intended effect, Chipotle is in a difficult position.
It needs to regain customer trust, and it can’t do that unless it gets customers through the doors.
Short of giving away food – something the company has tried – a generous, time-limited loyalty scheme is probably worth a shot.