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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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SWOT Analysis

Chipotle Mexican Grill operates 2,250 restaurants both domestically and internationally with a mission to stay true to their values. The first major strength of Chipotle is their quality of ingredients for a simplistic menu. Chipotle believes that in order to do things right, they have to keep it simple, with high standards. In their 2016 Annual Report, Chipotle states “Serving high quality food while still charging reasonable prices is critical to our mission … Because our menu is so focused, we can concentrate on the sources of each ingredient…” (p.2). Another major strength is the company's steady growth over the last decade. Since Chipotle released their Initial Public Offering in 2006, they have seen an increase of 1500% in the value of their shares, (Lutz, 2015). A large factor of an increased stock price is thanks to steady growth of store locations through corporate ownership, (See Appendix A for store growth).

Chipotles admits to having many weaknesses. Nearly 16 pages of their 2016 Report are dedicated to addressing the company's shortcomings. One major weakness was an E. Coli outbreak in several Chipotle restaurants. In 2015, the Centers for Disease Control and Prevention (CDC) concluded, “A total of 55 people infected with the outbreak strain of STEC 026 were from 11 states…likely linked to eating at multiple Chipotle Mexican Grill locations,” (CDC, 2016). Another weakness is Chipotle's higher than average price. Because Chipotle commits to using fresh, high-quality ingredients, customers are paying more for their meal. In 2015, a Chipotle meal averaged $11, whereas a Taco Bell meal was only $5.13, (Lutz, 2015).

Chipotle recognizes its biggest opportunities lie in the expansion of their menu such as adding queso dip, and other vegetarian/vegan options. To ensure their steady growth, Chipotle also desires to continue in store expansion. They currently do not have a franchising aspect to store growth but are evaluating its ability to multiply locations across the US as well as dive further into international markets.

The largest threat facing Chipotle is the growing competition in the “fast-casual” eating space. Even with Chipotle's growth over the last 10 years, other restaurants like Moe's Southwest Grill, Penn Station East Coast Subs, and Smashburger, are all seeing growth in locations across the United States, causing Chipotle to no longer stand alone in the fast-casual category. A more recent threat for Chipotle is the diminishing brand reputation it once had. Due in large part to the E. Coli outbreak, Chipotle is seeing a negative trend in sales and customers in the year following the outbreak. CNN reported Chipotle sales down 22% from the same time the prior year, (Gillespie & Long, 2016) and YouGov, a customer-based ranking website, displayed a sever brand reputation drop off in November, 2015, threatening Chipotle's steady paced growth (See Appendix B for reputation index).

Campaign Briefing

In the summer of 2016 (July-September), Chipotle rolled out its rewards program “Chiptopia”. The campaign was designed to incentivize new and existing customers to make Chipotle their “must eat” spot for the summer. Chipotle has always prided themselves on customer experience and states in their 2016 Report “A great dining experience in our restaurants has always been our most powerful marketing. But there is still a need to introduce our brand to new customers and engage with existing ones…” (p.4). In order to attract reoccurring customers, Chipotle based the program around number of visits rather than dollars spent. Every day you purchased a meal at Chipotle ($6 or more), you would earn Chiptopia rewards that would accumulate to free food throughout the month. Of the three tiers for the program, Mild, Medium, and Hot, the goal was to reach “Hot” every month (equal to 11 meal purchases per month) and earn free Chipotle catering for up to 20 people.

Chipotle's main tactics for the campaign all had to do with incentivizing the mass populous. Free chips and guacamole if you register for the program in July; Every fourth burrito on the program is free; Win catering for 20: a $240 value. Quips like these were used constantly to get people on board with the program.

Outcome/Aftermath

Chipotle was hoping that they would see a spike in sales during this 3-month period with the anticipation of more customers, spending more money, more frequently than they had throughout the rest of the year. Chiptopia overall not only lacked to gain comparable sales, it loss several million dollars in giveaways. According to Chipotle's 2016 Report, the company saw a 21.9% decrease in comparable restaurant sales in the third quarter compared to 2015 (p.32). Along with direct revenue loss, it was estimated that Chipotle, “doled out about $20 million worth of free food as a result of the program…the company said ‘It's a small price to pay to get people back into the store,” (Fox News, 2016).

Comparing data using Google Trends, no clear spike occurred under the search term “Chipotle” during the time frame of the Chiptopia campaign. They failed to boost their online presence in a positive way during this time. The current number one ranked term associated with Chipotle is “E. Coli” with the number 4 ranked term being “Outbreak”.

Takeaways

While Chipotle had a clear goal in mind for their Chiptopia rewards, what is more compelling are their behind-the-scenes outcomes. A large, undisclosed, benefit of Chiptopia was customer data acquisition at minimal cost. Customers freely signed up for the program giving Chipotle their name, location and other basic info simply by registering for a Chiptopia card. Once a customer used the card in store, Chipotle was able to track what they bought, where they bought it, and if the customer was returning on a consistent basis. The campaign successfully gathered data for free that would generally have cost another company millions of dollars to collect.

It's arguable that is the only positive take away. From the negative perspective, the rewards program was too short. It did not allow for customers to become acquainted with the program. It's short time frame exposed its true design of “get customers quick”. Next, the program failed to generate any substantial positivity branding of the company. As discussed in the SWOT and Outcomes section, their tarnished brand name, as a result of an E. coli breakout, was dragging the whole company down, and Chipotle failed to disassociate themselves from their main weakness. On top of that, they suffered steady loss in sales and generated no real new customer base.

Overall, people who loved Chipotle and were regular customers were not swayed by the program; they still went. People who hated Chipotle or were on the fence felt no major incentive to go back. They had already made up their minds.

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