Chipotle Mexican Grill, arguably one of the early successful pioneers in healthy fast food, has fallen on hard times as of late. But it's using an old-school method to court customers and encourage them to order more burrito bowls and tacos: customer loyalty programs.
Known as Chiptopia, Chipotle's customer loyalty program is a three-tier system (Mild, Medium and Hot, of course) that rewards customers for not how much they spend at any one of Chipotle's 2,000 stores, but by how many visits they make in a month. Customers reach a new level upon their 4th, 8th and 11th visit, which opens them to rewards such as multiple free entrees, Chipotle merchandise or catering for 20. Though the customer loyalty program is only for July through September, a press release about the launch hints at a possible "ongoing rewards program" that will be informed by Chiptopia.
Customer loyalty programs are a way to get return business for your company. Many companies large and small have one with varying incentives (I'm sure we all have at least one "Visit 10 times, get your 11th visit free!" cards in our wallets). While the timing of Chiptopia makes sense—Chipotle faced a double-digit drop in sales in Q1 this year after E. coli and norovirus scares—it also shines light on a well-known part of running a business: your most loyal customers are the ones you have to woo regularly.
Customers who are engaged with such [customer loyalty] programs become significantly more valuable to businesses in terms of longevity, visit frequency, average spend, average referral rate and much more.
—Ido Mart, chief operations officer, flok
I spoke to Ido Mart—chief operations officer at flok, a customer experience platform that connects over 100,000 business owners and their customers—to learn more about the benefits of customer loyalty programs and what small-business owners should know when trying to implement one for their own business.
How are customer loyalty programs beneficial to businesses?
The obvious and immediate benefit of an organized loyalty effort is a positive impact on foot traffic. It's been proven that businesses will achieve a higher ROI by generating repeat visits versus creating new ones. But there's much more to it. Customers who are engaged with such [customer loyalty] programs become significantly more valuable to businesses in terms of longevity, visit frequency, average spend, average referral rate and much more. There's also the social and reputation aspect, where repeat visitors are less reactive to sub-par experiences, and more proactive in broadcasting positive ones.
How do you create successful customer loyalty programs? What are some things to consider?
Today's consumers are digitally dependent, which is why the most successful engagement programs are mobile-first. In addition to trend and convenience, mobile presents powerful opportunities, some of which are absolutely critical to the success of the program. Prominent examples are higher engagement rates—up to 80 percent read rate compared to 15-25 percent in email and social; timely and contextual communication opportunities, based on foot traffic patterns, location and past activity in the program; and a higher degree of personalization—the phone is the most personal of digital interfaces.
What are some ways to measure how successful an existing or new loyalty program is?
Industry benchmarks are dangerous, and I would advise to avoid them. It's ideal to set foot traffic and engagement benchmarks based on your own history. In this case, you would be looking at not just incremental visits and incremental spend per visit, but also foot traffic patterns and referral rates. Most interestingly—and slightly more vaguely—how did your ability to influence the behavior of your client base change over time? If you don't have access to past data, then create new benchmarks and, to paraphrase [author of The Hitchhiker's Guide to the Galaxy] Douglas Adams, appreciate the whooshing noise they make as you fly past them.
What can small-business owners learn from Chipotle's loyalty program to re-endear themselves to customers?
Chipotle is overcoming some major issues over the past few months, and its new loyalty program is designed to get customers back in the door to experience what they loved about the brand in the first place. Additionally, with their status program, they're looking to motivate and activate their most loyal past customers the same way that airlines do. These initiatives are expensive and complicated to develop, which is why companies like flok exist in the first place, but the concepts behind them hold true for a business of any size. It is always your existing or past clientele—those who've already expressed their commitment to what you provide—that will be the backbone of your business, whether you're enjoying success or experiencing hardship. Business owners should never forget that.