September 2015

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.

Mystery Shopping Uncovers Satisfaction Vs. Operational “Fails”

Mystery shopping evaluates the customer experience from an operational standpoint. Many questions shoppers answer revolve around the mechanics of customer service – did the employee suggest an additional item, did they mention the store’s return policy effectively, were they able to answer questions well. Often times, there are more subjective questions at the end that ask shoppers if, based on this experience, they would return to the store and/or recommend to friends and family.

It’s always interesting when a report reveals that many of the mechanics did not happen, yet the shopper indicated that overall their experience was positive and they would be very likely to return. On the surface, it doesn’t make sense, but let’s unpack it a bit….there is a lot more value to this “inconsistency” than may be realized.

It’s important to follow the “would you return” question with a “why or why not?” This will give you insight into the shopper’s perception, and what it was that made their experience positive – maybe the employees didn’t upsell or hit certain performance points, but remember – this is a company standard, and most customers don’t realize that a “good” experience, as viewed by the company, is when the employee hits the required performance standards.

The overall experience questions are great in that they give additional consumer insight into what it is that is good (or not so great) about your business, and what may be important from a customer perspective.

On the flip side, it’s important to remember that the performance standards are also very important, and need to be executed consistently in order to maintain sales, customer retention, and aspects related to that.

It’s also very important to find out what made an experience positive and compare it to the performance standards to look for inconsistencies. This may help identify areas in which customer service levels may hinder the overall experience without the customer realizing it. For example:

A mystery shopper reports that part of what made the experience positive is that the employee answered all of his/her questions well. However, in reading the narrative component, it’s noted that while the employee provided answers, they were not correct. This results in the shopper (or customer) thinking they have information, though it is not correct. The next time they visit a location, this may come up again, and they may get a different (read: correct) answer that is not consistent with what they were originally told. This may lead to a sense of distrust and decrease the chance for repeat business.

Customers don’t know what they don’t know: it’s interesting when employees should be mentioning certain points to customers during an interaction, whether it relates to upcoming events, special financing options, or something similar. This is not mentioned to the customer, yet a typical customer will not know it exists, so they think they’ve received the best service possible. However, internally the company will know that the customer was not fully educated about all of their options. If they make a purchase today and later find out that there were other options/better prices/features they were not offered, it will not bode well for the company.

We have seen instances in which shoppers, through the guidelines and questions they are required to report on, deem their experience as less positive than they would have given the fact that the employee did not do some of the required behaviors; knowing now that these are items that should be offered, they feel as though they were not assisted to the fullest potential. Interestingly, this happens less with questions that focus on cross selling or upsell, and more on items where employees should be mentioning promotions directly related to the items of interest.

Mystery shopping reports provide a wealth of information beyond the question responses and narrative detail; digging deeper into the content of the report and looking for correlations can give your program even more value than realized.

Move Over Coca Cola, Snickers Has Upped The Game

Coke drinkers have responded positively to the company’s “Share a Coke” campaign – pictures have been posted across social sites showing users with Coke bottles depicting their names, or sharing images with friends’ names. This has been an effective marketing tool, and other brands have taken notice.

Snicker’s recently launched a new campaign, and they are changing the packaging on their candy bars. It seems they are following Coca Cola’s lead, but making it even more fun.

With fun new packaging highlighting adjectives to describe people, Snickers is fleshing out its “Who are you when you’re hungry” messaging – customers can now share a Snickers in a fun, new way, much like Coca Cola did, but in a more generic, fun way.

Strong branding allows companies such as Snickers and Coca Cola to try these new tactics while still making it simple for consumers to define the brand.

Let’s see how well this campaign takes off, and if it’s more successful than “Share a Coke” is.

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