Thousands of comments flooded social forums like Reddit in the days following Taco Bell’s nationwide release of a “Taco Lover’s Pass” in January 2022. But the move, which piloted the previous September, was far from just a marketing stunt. Taco Bell, allowing signees to choose a taco per day from seven options via its app, watched as customers who purchased the pass tripled their visitation. It also bumped app rewards membership 20 percent for a program that was nearly two years old at the time. The platform also pushed a 16 percent renewal rate for users opting into a second month.
So on its surface, it was hardly surprising to see Taco Bell evolve the program in November with a “Nacho Fries Lover’s Pass.” Starting November 14, rewards members signed up and, still for $10, lined up for the ability to purchase one of the chain’s most-iconic LTOs every day for 30 consecutive days.
Pulling to a broader theme, Dane Mathews, Taco Bell’s chief digital officer, says the promotion spoke to a “culture of experimentation” being stoked at one of the fastest-growing chains in quick service (Taco Bell was No. 5 last year, at a net of 196 restaurants domestically).
“We take our innovative spirit, we combine it with customer data, and we start to experiment,” Mathews says. “And we experiment quickly.”
Taco Bell delivered 11 percent system sales growth this past quarter—Q3—led by 8 percent same-store sales and 5 percent unit expansion. Yum! Brands CEO David Gibbs credited the chain’s “magic formula,” which is an amalgam of commercial strategies, including building brand buzz, “unparalleled value, mass occasions, and digital initiatives to grow transactions,” Gibbs explained. One example being the return of a $5 box that provided value architecture at a price point few live within these days. Value purchases, even with the promotion, remained within range of Taco Bell’s intended 10 percent mix target. That, combined with marketing attention, helped Taco Bell push industry-fronting margins of 24 percent. Breaking down Taco Bell stores in the U.S. by income demographic, Yum! reported consistent 2–3 percent transaction growth across all income levels last period.
With “mass occasions,” which tie into the recent subscription, Taco Bell has longed worked toward building fresh category entry points (lunch has been mentioned as a big whitespace area). Chicken, for one, is on the verge of growth, with plans to expand a “Cantina menu” in 2024.
The Taco Bell loyalty customer spends 40 percent more per year. And, Gibbs said, feedback indicates the chain can do more at creating obvious and “exciting ways” to earn and redeem.
This coming New Year, Taco Bell promised loyalty program enhancements designed to provide access across channels and erase barriers to redemption. Additionally, members will find more exclusive experiences, early access to new products, and loyalty-enabled activations, Gibbs said. In time, Taco Bell’s loyalty program will integrate with digital menuboards to create deeper, more personalized experiences as well.
You can see Taco Bell’s evolution rolling in real time with its latest small-box design, “Go Mobile 2.0,” a format that leverages digital to create more touchpoints and streamline order and pickup. Debuted in El Paso, Texas, it features an outdoor pickup window, grab-and-go shelves, dedicated parking for mobile and delivery orders, and no indoor dining area. Of course, there’s also the category busting, two-story, four-lane, contactless experience of Defy.
Kiosks, while in nearly 40 percent of KFC stores outside of China, are in all U.S. Taco Bells excluding licensed units, too.
Circling back to subscriptions, the success of the Taco Lover’s Pass enabled the broader notion to become a real, visible target for the brand, Mathews says. Customers seeking consistent value have gravitated toward them throughout fast food, from Panera’s Unlimited Sip Club to Subway, which launched a Footlong Pass in 2022 and sold out 10,000 offers within six hours. Subway bumped the number available in 2023 to 250,000.
“We’re always on the hunt for how do we take our best innovations and how do we continue to refine and optimize them?” Mathews says. “And so we always knew there was a placeholder for the next iteration.”
Fries made sense on a few levels. Mathews says fries in quick service—not just Taco Bell—are naturally a staple companion item. So there’s no real quandary of whether a guest in this space wants them, or whether they’ll be likely to add-on other products. In some ways, it’s not unlike how Panera’s Sip program helped boost food attachment in early dayparts from customers redeeming and then looking around for, say, a bagel to go with their coffee.
Nacho Fries was Taco Bell’s most successful product launch in brand history when it first landed in 2018. They stayed on the menu until April and have returned every year since. The product, from January of Year 1 to mid-March. sold more than 53 million orders. Nacho Fries appeared in more than a third of all Taco Bell orders.
While the popularity of the product has remained the stuff of lore, this year’s subscription version came at a rather different time in history. In December 2018, Taco Bell told investors it would launch 20 menu items priced at $1 in test markets and nationwide. Nacho Fries was the first of 2018. The chain noted then $1 menu items garnered more than $500 million in sales in 2017. The aforementioned $5 boxes collected an additional $1 billion in sales.
The parameters of value, however, have readjusted. Mathews says the Taco Bell customer is an innovative one who not only expects variety and deals of this ilk, but they want to be challenged, he says. And they want to be part of the conversation.
“So I think it hits the Taco Bell fans in terms of their expectations from the brand to be new and novel, deliver unique experiences,” he says. “And that just goes back to the brand’s heritage. But I will say, it also delivers something else more broadly, and actually delivers more squarely on what is the 21st century’s approach to value. We all know that value is a big part of the [quick-service] equation in terms of growth, in terms of you need to represent value to consumers so that they can the most of what they want for the price that they want to pay.”
Taco Bell unveiled the subscription pass alongside Grilled Cheese Nacho Fries, an iteration topped with a grilled blend of mozzarella, Monterey pepper jack, and cheddar cheeses. They’re crowned with marinated and grilled steak, and finished off with Taco Bell’s signature Nacho Cheese and Chipotle sauces. A spicy version, with added jalapeños, was also available. The version launched at $4.99. The regular Nacho Fries option ran roughly $2.19.
In sum, how “modern value” manifests, as Mathews says, is more about what a guest wants to pay and what they think they should get, versus simply racing to the bottom.
“It used to show up as a price-point box with a certain amount of food inside of it,” he says. “But [subscriptions] are the next version of that. It’s, ‘hey, listen, there are things you know and love about the brand. And now, how can you get those things, as much of those things as you want, for a specific price?”
The winning equation breaks down as this, Mathews continues: The innovative spirit of Taco Bell and what fans expect, delivered at an age-old point of view for consumers, which isn’t all that complicated. Diners still want to get the most value for their money. “And it’s value for my money in a repackaged, innovative product,” Mathews says. “That’s why it’s resonated so well, because it’s delivered value in a new and novel way.”
The Nacho Fries subscription wasn’t the first rerun for subscriptions. In honor of National Taco Day in October, Taco Bell returned the Taco Lover’s Pass where rewards members could sign up during a two-day period to unlock 30 days of tacos for $10. Once a user did so, a hidden category on the app menu appeared that unrolled eight options, from the Doritos Locos Taco to Crunchy Taco Supreme, as well as new Toasted Breakfast Tacos.
Mathews reiterates a culture of experimentation led to Taco Bell’s subscriptions solidifying as a key cog in the innovation cycle and how the chain drives brand growth. It might evolve toward different food items or even services. Can the “all-you-can-eat” structure find its way into retail? Mathews says he can’t divulge too much of the brand’s current thinking, but there’s no question there’s growth to chase.
“How do we represent the subscription, the passes, how do we really hero them, how do we showcase them to more and more consumers?” Mathews says. “But then also, how do we expand subscription offerings beyond just food products into other things that we think customers may find valuable?”
The wider runway of loyalty, he adds, is “probably the most exciting part” of what these passes uncovered. What it means to be part of Taco Bell’s circle continues to layer in new options, from voting on future menu items to early sneak peeks. “Subscriptions allow consumers to today, get the food, and get it at a value and a good price,” Mathews says. “Get the food they want at a good value and a good price. But the next level of that, we think, is really based on not just food but experiences.”
Another “experiment” of late are Taco Drops, which have fostered a growing community on Reddit, too. These Tuesday (Taco Tuesday) launches have a landing page in the app where the latest Taco Lover’s Pass showed up for free for 100 people in October. Mexican Pizza once pulsed for $1, for one hour. It’s been a place for the brand to try options like food, but also entertainment-focused elements, such as merchandise and concert tickets. The Taco Bell x Crocs Mellow Slides, complete with an ombre-like fade with “Live” and “Más” imprinted separately in white within each footbed, were introduced for loyalty customers and sold out in minutes, Mathews says.
“We see Taco Tuesday Drops as the part of the platform that starts to extend beyond just food, but really more cultural experiences that allow Taco Bell members to get more of what they want, with Taco Bell as a cultural ambassador,” he says. “If we’ve got our finger on the pulse of culture and what culture matters, Taco Tuesday Drops give loyalty customers a chance to participate in culture. What’s new and novel in terms of merchandising and entertainment. Or merch and swag. We think loyalty will start to open up that experience for customers so they can participate, too.”
The tidal of data that has come through the system during this digital rush (Yum!’s entire digital business in Q3 grew 20 percent year-over-year and exceeded 45 percent globally in mix to more than $7 billion in sales; the company is on track to reach roughly $30 billion in digital sales by the end of the year, up from $12 billion four years ago), Mathews says, enabled Taco Bell to better understand its base and what they’re seeking. “It brings us closer to our customers,” Mathews says. “It develops our empathy and our own insight into what’s important to consumers and what they like and what they want. That allows us to design better things.”
But the vital lever remains harnessing that data and injecting it into a system that’s encouraged to experiment and see what happens.
“That takes our innovative spirit, which has always been a part of who we are, applies data, and technology in a 21st century way, to really allow us to accelerate our growth,” Mathews says. “And internally, it’s a really exciting place and a really exciting role for digital to help harness our innovative sprit and bring data and custom centricity to the center.”
