Faced with a major health crisis, Chipotle responded by promising that it was improving its safety standards and assuring customers that they could feel confident that their burritos contained no traces of E. coli. But such promises have not succeeded sufficiently in encouraging people to return to the stores, so the chain also started sending out coupons, and lots of them, for free meals.

In both electronic and traditional direct mail channels, Chipotle provided the coupons to current, lapsed, and potential customers. Over the course of a few months, it sent approximately 21 million coupons, prompting people to revisit and re-experience the restaurant concept. Furthermore, it asserted that it was using the promotion to develop its customer loyalty program. Observers note though that the loyalty program thus far has not appeared to do anything other than send out those 21 million coupons, and that effort was not particularly tailored to appeal to loyal or potentially loyal customers.

Instead, it might be mistaking store visits for loyalty. But if the only reason customers visit the store is to redeem free coupons, the restaurant chain has several serious challenges. First, it cannot make sufficient profits in the long term based on promoted items. Second, even if customers return, Chipotle may have trained them to expect something for free every time they come back.

Chipotle’s competitive advantage historically has been based on its healthy and better ingredients, not its low price. Yet today, it faces allegations of unsafe food practices and promises cheap, or even free, food. Can it maintain customers’ loyalty when it takes such a different tact?

Discussion Questions: 

1. What is Chipotle doing to get back its loyal customers?
2. Do you believe its plan is working? Why or why not?

Source: Ashley Tway, Retail Wire, May 18, 2016