Do Loyalty Programs Work? Chipotle Says No…

 

What is the goal for your company’s loyalty program – is it to simply reward those who frequent your business most often, or to gain new customers/increase customer visits? If it’s the latter, you may want to rethink your strategy.

Loyalty programs face stiff competition these days – customers can be pretty selective, and they aren’t as quick to add another card or key ring tag to their already full arsenal. This is likely reserved for businesses they visit most often.

Sure, a great program may entice some infrequent customers to visit a bit more often, but does your data show this to be true?

Recently, Chipotle was making the internet rounds after sharing information about why they don’t use a loyalty program. Jack Hartung, Chipotle’s Chief Financial Officer recently shared that about half of the company’s customers only visit on an infrequent basis, maybe two or three times a year.

In the past, the company believed, like so many do, that if some of the infrequent customers visited a bit more as a result of the loyalty program, it would generate enough to justify the cost of the program. However, in looking at it more closely, the company realized that this rarely happens to the extent where this is true, and, when taking in consideration the cost of ALL customers using the loyalty program, including the extremely loyal customers, there is actually a negative ROI in many cases.

So what is Chipotle’s answer to this?

    • Realizing that loyal customers serve as great word of mouth and referrals, the company strives to do its best every time. According to Hartung, “The vast majority of our attention goes to doing what we do, but doing it better than ever.”

 

    • Get the word out, in a fun way: one of the company’s goals is to educate the public on their products and why Chioptle is a good choice. One method they’ve recently rolled out is education through gamification – Friend or Faux is a site that allows customers to learn more about how Chipotle’s menu items stack up against fast food options. It also rewards players with a “buy one get one” mobile offer.

 

    • The company knows the value of big data, and is considering the launch of mobile payments. Realizing that they will miss out on this piece by not incorporating a loyalty program, they are considering other alternatives. Mark Crumpacker, Chipotle’s chief creative and development officer shared that they are considering mobile payments, perhaps through ApplePay, as a means to collect data from their customers. He states, “We will provide our customers, at some point, various options through which they can pay for their food and we will capture data from them, whether that’s through a third party or through the ability to use our own gift cards.” While this not be as comprehensive as data that could be obtained through loyalty programs, Crumpacker feels that “it’s enough, the way we envision it, that it will do the trick.”

 

Chipotle is one company that is thinking of the overall big picture in maintaining loyal customers while increasing the visits of infrequent customers or even those who have never visited a restaurant. Rethinking the goal of your loyalty program and looking at the data will tell you if you’re meeting the objectives, or if it’s time to take a page from Chipotle’s playbook.

FacebookLinkedInTwitterGoogle+RedditStumbleUponDeliciousTumblrPinterestShare

Comments are closed.