It’s all fueling rewards growth. Frequency continues to increase among users, Niccol said.
And it remains an early innings process for Chipotle. The chain’s rewards program went national in March 2019. It followed the much-maligned Chiptopia story in July 2016. In that case, Chipotle ditched the standard points-based platform in favor of a three-tiered, summer-focused, three-month promotion tied to the number of times customers visited. By the end of the first 30 days of Chiptopia, there were more than 3.6 million participants who accounted for 30 percent of transactions. As September rolled around, Chipotle said more than 3.1 million people registered and had used Chiptopia cards. About 1.2 million users signed up that August alone.
While that sounds promising, it got dicey.
The program was structured where guests earned free meals after their fourth, eighth, and 11th visits each month. So if they bought 12 burritos over three months (four a month), they were eligible for four free burritos. That 33 percent return rate was far from a long-term strategy for Chipotle. Additionally, the company ended up forking out roughly $20 million to more than 85,000 Chiptopia members who qualified for the top draw—a catering package for 10 worth about $240.
The issue was this—Chiptopia gave out burritos, but it didn’t truly inspire loyalty. And Chiptopia did little to serve as a perception tool during a time when the brand was still battling back from food-safety woes.
The program was also complicated for average customers and generated most of its interest among loyal users. Unlike today’s version, what it didn’t seem to do was inspire new guests. Morgan Stanley wrote a research note at the time that said Chiptopia helped convince core customers to resume prior frequency. It did not, though, impact the more casual diner—those who made up 75 percent of Chipotle’s base (to Niccol’s earlier point of awareness runway). While Chipotle’s most loyal diners accounted for 60–70 percent of its visits then, the brand needed to recapture average consumers if it wanted to cross the canyon created by its E. coli crisis. And when the program ended in September, some feared it could potentially alienate customers just as they were getting accustomed to the rewards.
It wasn’t the gift that kept on giving, in other terms. Not for guests, and not for Chipotle.
The present version outlines a far different aim. Once more, closer to what Starbucks tries to accomplish versus any kind of virtual punch card. Consistent purchasing trends that Chipotle can work with, and build upon.
“We would love to get even more people into the program,” Niccol said. “One thing I will tell you is, we’re becoming a lot better at using that data, wanting to gain insights on where we need to be better, where we have opportunities, but then also the insights to really engage correctly with the various cohorts and the journeys that we’re creating. And we’re seeing that play out in people’s shopping behavior and we think we’re gaining share as a result of it.”
Chipotle’s program works through two main tenets. Guests who order get 10 points per $1 spent. Every time they hit 1,250 points, they receive a free entrée.
But importantly, Chipotle can also incentivize lapsed users and look at past behavior to try to lure users back.
Communications are individually tailored so specific customer activities prompt targeted responses. “Each digital message can vary along the customer buying journey such as the latest promotional offer on a new menu item or a more targeted offer to entice a customer that has not visited our restaurant for a certain period of time,” Niccol said earlier.
This is where Chipotle has whitespace to chase. Recently, when it launched its long-awaited quesadilla, customers received communication featuring their favorite protein based on their ordering history.
That simply wasn’t a lever Chipotle could pull in the past.
Niccol said a bevy of new users come to the business through the quesadilla proposition. And then existing customers used it as part of a new eating occasion.
The result was Chipotle’s highest penetration of new customers in March. A testament, Niccol said, to people coming back to dining rooms and, also, meaningful innovation around quesadillas.
Not to be undervalued, either—Chipotle’s ability to market a digital-exclusive product.
Come late April, the brand’s digital business maintained an 80–85 percent run rate. It credited a growing ecosystem that includes rewards, menu news (quesadilla), and the ability to meet growing off-premises demand with the same speed and quality as dine-in service.
Chipotle’s second make-line efforts ahead of 2020 proved invaluable. By the time the pandemic was in full-tilt, those make-lines alone generated sales that annualized to $1.1 million AUVs, or more than a Dunkin’ in 2019 ($968,000).