Chipotle Still on Mend Despite Rewards Program
Bad financials continue, even in light of some minor success with its temporary rewards program
Chipotle's recent earnings report found that sales are still sluggish despite introduction of new menu items and a well-promoted rewards program.
Third-quarter revenue decreased almost 15% to $1.04B, below industry expectations of $1.09B. Single-store sales decreased worse than industry projections as well. The company's stock is down 36% in 2016.
Chipotle ended its three-month long Chiptopia Summer Rewards program on September 30, and it looks like the quick-service Mexican restaurant is paying a hefty price tag to win back the customers it lost after a series of norovirus, salmonella, and E. coli outbreaks last year.
Chiptopia Summer Rewards was broken down into three reward level statues: Mild, Medium, and Hot based on the number of $6 or more purchases they bought in a given month. Customers earned rewards for reaching any status on a given month, and could earn additional awards for reaching those levels three months in a row. The lowest prize was a free entree, if you earned Hot status three months in a row, you got a catered meal for 20 people.
According to an article by CNBC, 85,000 people reached the program's Hot Status - the highest reward tier - for all three months—signifying that they paid for, at minimum, nine $6 entrees every month (most Chipotle menu items are more expensive than $6).
Customers who achieved Hot status for all three months earned catering for 20 people—a $240 value. This means that Chipotle is spending $20.4 million to reward these customers for their patronage.
Although customers are no longer able to earn rewards, participants have until December 31, 2016 to claim Mild or Medium bonus rewards and until March 31, 2017 to claim Hot bonus rewards.
In the earnings call, the company singled out the rewards program as a positive step and discussed other customer retention and acquisition strategies, including dessert testing, a vague new way to order on mobile (which will not require an app), and new restaurant design.