For a quite a while, Chipotle executives didn’t believe loyalty programs were for them. In fact, Mark Crumpacker, CCO/CDO of Chipotle, said in September 2015*, “We don’t believe the general supposition that loyalty will make less frequent customers more frequent.”
However, from the fourth quarter of 2015 into the early second quarter of 2016, Chipotle had a few health scares that contributed to its stock prices — and sales — to take a tumble.
In summer 2016, Chipotle was ready to rethink its stance on loyalty programs and launched its Chiptopia Summer Rewards, a three-month tiered loyalty program.
It’s reasonable to assume, based on the structure of the program (that we’ll cover next) and the business challenges they were experiencing, that
Chipotle’s motivation in creating its loyalty program was to increase visits.
Note: Before we go any further, we want to make it clear that Chipotle is not a client of Paytronix. This blog post is designed to analyze the Chiptopia program, share what worked and what didn’t, and help you think — or rethink — your own loyalty program.
The Chipotle Loyalty Program Structure: How It Worked
In case you missed it, there was a common theme among publicly held restaurant chains’ July earnings calls: Loyalty Programs. Multiple brand leaders spent a portion of their calls celebrating their loyalty programs, unequivocally stating that the programs are indeed impacting the value of the respective organizations, and that the programs are providing a competitive advantage.
Even Chipotle, a brand that has been a notorious, non-believer in loyalty programs, noted the value in the data they received from their short-term visit challenge promotion, Chiptopia. The promotion resembles the tip of the spear for a longer-term program. Below is a recap of the notable loyalty program mentions. But first, here’s an executive summary of the highlights:
Bloomin’ Brands expects a 1% – 2% lift in sales as a result of rolling out its rewards program system wide, per CEO Liz Smith.
Dominos on its loyalty program: “All of this outstanding brand momentum helped us grow diluted EPS by 21% over the prior year quarter. Our recently launched loyalty program contributed significantly to our traffic gains,” said CFO Jeff Lawrence
Starbucks’ Howard Shultz stated, “Our loyalty program is the cornerstone of our digital flywheel, noting that the program now has over 19 million Starbucks Reward members…”
Panera Bread’s president Andrew Madsen said, “Let’s talk about loyalty. Our MyPanera loyalty program now sits at 23 million members that represent nearly 50% of our transactions and the program is growing. In addition, MyPanera users are very loyal with double the visit frequency of our nonmember customers. We believe this is by far the largest loyalty program in the industry and a significant competitive advantage.”
Chipotle Mexican Grill is encouraged by the level of data being mined from the Chiptopia loyalty promotion and will use it to further understand the behavior of its most loyal guests before the promotion, during the promotion and post promotion.
Image Source: CNBC Interview with Ron Schaich
Bloomin’ Brands spoke about loyalty in its July 29, 2016 earnings call, praising the early success of its newly introduced Dine Rewards program. Bloomin’ Brands launched Dine Rewards as its first multi-brand loyalty program on July 19, and CEO Liz Smith spoke to the early success of the program, noting, “It has already received high marks for its simplicity and value relative to peer programs. Guests also appreciate the ability to enjoy the benefits across our portfolio of brands.”
Smith continued to say the program has been in test since 2013, proving to be an effective means to drive frequency and increase sales. “When it reaches maturity, we expect Dine Rewards to drive a 1% to 2% lift in sales consistent with what we have received in six test markets,” said Smith. “The program was just launched nationally 2 weeks ago and we now have over 800,000 members enrolled.” […]