Thursday, January 21, 2016

Chipotle: Better Safe Than Sorry


The brand that started the “fresh movement,” is hoping for a fresh start.

It took Chipotle twenty-two years to transform itself from a burrito stand to a $23 billion quality brand. They did it by meeting customer expectations regarding the values of fresh, locally sourced, customizable food at a fair price. Oh, and it was generally agreed the brand had integrity. And they did all this long before the phrase “genetically modified,” was ever uttered in competitive brands’ boardrooms, and in consumer-value time, light years before competitors tried to re-position their offerings as “fresh.” Or “customizable.” At the time, competitors were busy focusing on their Dollar Menus.

Anyway, Chipotle showed up on our Customer Loyalty Engagement Index a decade ago – in 2006 – once there were enough locations nationally for reasonable levels of customer incidence. And over the next five years the brand moved up the Fast Casual restaurant loyalty list to the number one spot. By then everyone in the category was chasing them. For being fresh, for being additive-free, for being customizable. They seemed unstoppable.

It only took seven months after one – then six more – outbreaks of E. coli bacterium and salmonella-related illnesses, to dramatically effect customer loyalty for Chipotle. Chipotle same-store sales, which had reached a brand and category-best of +20%, dipped almost 15% last Quarter. Yikes! So it came as no surprise that in our 2016 Customer Loyalty Engagement Index, Chipotle dropped to the number 6 spot (of 21 brands on this year’s list, five of which were new). Again, yikes! Why the drop? And why didn’t the brand fall further down the list?

Well, the drop itself was self-evident and inevitable. You can’t feed consumers “quality,” “fresh” food, and have them get sick without expecting some repercussions! But sick as they might have been, when it comes to loyalty, customers are six times more likely to give the brand the benefit of the doubt in adverse circumstances – like the original outbreak.

But with the epidemic of illnesses that followed, that fount of customer forgiveness is drying up, and it’s now showing up in how consumers “see” the brand meeting their expectations. In this case for the value of quality, but mostly for the value of “safe food preparation,” which has always been a value-component in the category, but has had generally lower expectations surrounding it. Fast casual consumers don’t expect to get sick from the fresh food on offer. But that said, last week Chipotle received a grand jury subpoena related to an outbreak in California, an indication that the Justice Department and the FDA might be considering a criminal case. Zowie!

In the meantime Chipotle is doing what it can. Conceding that they may be more vulnerable than other fast food and fast casual restaurants because of their fresh ingredients and fresh preparation, they’ve put food safety controls into place that experts say should reduce the risk of food contamination to virtually zero. So huzzah! And it is closing down the entire chain for a few hours next month for a system-wide food-safely meeting just to make sure that everybody is on the same safety page. When it comes to food safety, you can’t be too careful.

Will this help improve the brand’s loyalty and engagement efforts and assessments? Well, like they say about colds and chicken soup, “It couldn’t hurt!” But given their previous loyalty levels, customers are also six times more likely to see the actions being taken as responsible and believe the Chipotle brand can cure these ills.

Because when it comes to loyalty, 21st century consumers question all their beliefs. Except the ones they really believe, and those they never question!



Find out more about what makes customer loyalty happen and how Brand Keys metrics is able to predict future consumer behavior: brandkeys.com. Visit our YouTube channel to learn more about Brand Keys methodology, applications and case studies.

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