After years of rotten sales growth caused by food safety scares, Chipotle defied expectations and increased quarterly earnings 8% to $1.3B.
Driven by increased app usage, Chipotle’s success shows that catering to buying behaviors can be as important as catering to palate preferences.
A big turnaround after Chipotle stock almost went rancid
Debuting in a 2006 IPO that the WSJ described as “spicier than a three-alarm hot sauce,” Chipotle’s share price soared from an IPO price of $22 to more than $758.49 at its high point in 2015.
But a pesky little bacterium named E. coli caused Chipotle’s stock to spoil, dropping as low as $251 per share.
After struggling to rebound for years, the company hired a new CEO named Brian Niccol — a famous fast-food fixer who favorably flipped financial fortunes at Taco Bell.
Is the turnaround working? App-solutely.
Chipotle’s app launched in 2009, but it was an afterthought until last year when the company invested millions in a digital ‘turnaround.’
But after Chipotle made improvements ranging from an easier user-flow to a second digital-only burrito assembly line in stores, the number of app users has increased 65% since this time last year.
Most importantly, the ‘rito rollers managed to increase the popularity of their app without subsidizing in-app orders.
Calling a burrito restaurant a lifestyle brand may sound ridiculous…
But Chipotle’s success suggests otherwise. Chipotle’s CMO recently announced plans “to make Chipotle not just a food brand but a purpose-driven lifestyle brand.”
While skeptics balked — focusing on the uncertain long-term benefits of “‘lifestyle’ marketing ploys” — lifestyle branding like Chipotle’s also benefits businesses in the short term.
Thanks to the recent revamp, 10% of Chipotle’s sales are made in-app, just slightly lower than Starbucks (13%). But while Starbucks lures customers to its app with discounts, Chipotle attracts them organically.
So by building a lifestyle brand that encourages natural engagement without relying on perks, Chipotle reduced both the cost of recruiting customers to its app and the cost of keeping them there.
UPDATE: The good news didn’t last long…
Just hours later, local news outlets reported that at least 368 people had gotten sick after eating at a Chipotle in Ohio.
Then, the company’s app crashed in the middle of a guac giveaway on National Avocado Day, prompting an apology as Chipotle scrambled to fix it.
Either way, we doubt a streamlined app will matter to the hundreds of people with the runs…