Chipotle's Recipe for Customer Loyalty

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Customer Loyalty
Customer Experience
Customer loyalty is increasingly important across industries as it gets tougher to differentiate between products and services that offer similar price points and features. But what drives customer loyalty?

Customer loyalty is increasingly important across industries as it gets tougher to differentiate between products and services that offer similar price points and features. But what drives customer loyalty? Research firm Brand Keys analyzed this topic in its latest Customer Loyalty Engagement Index.Based on a survey of more than 36,000 consumers in the U.S., distinguishable branding and the ability to emotionally engage consumers emerged as important factors for driving customer loyalty. These factors, for example, differentiate companies in the fast food industry.

The menu items and price points at fast food restaurants are generally the same. You can easily find meals that include beef, chicken, and potatoes at a McDonald's, Burger King, or Chipotle Mexican Grill. However, Chipotle took first place in the casual/fast casual dining category
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Founded in 1993, the made-to-order burrito chain uses terms like "naturally raised animals" and "local" to describe its food. It also engages its customers. For example, last year the company rolled out its "Cultivating Thought" initiative in which brief messages from writers like Toni Morrison and Malcolm Gladwell appear on the company's cups. This initiative came about because a customer told Chipotle that he wished he had something to read while he was at their restaurants.

And even though the average Chipotle order isn't much healthier than other fast food meals, the company's coffers are growing. For the fourth quarter of 2014, revenue increased 26.7 percent to $1.1 billion and total revenue for the year rose 27.8 percent to $4.1 billion.

"Consumer trends are changing, which we believe is a great result of people becoming more discerning about where their food comes from, how it was raised, and how their meal was prepared," says Steve Ells, chairman and co-CEO of Chipotle, in a statement. The continued loyalty we see from our customers, as well as third party research, and the growing number of concepts imitating Chipotle, all point to the relevance of our vision and the impact we are having on food culture."

Meanwhile, McDonald's is struggling to keep up with its competitors. The fast food giant reported a decline in earnings and sales for its fourth quarter last month and has not posted U.S. growth since October 2013. The company is taking action with a number of changes. Chief Executive Officer Don Thompson recently stepped down and the company is testing "create your taste" programs in a few locations.

It remains to be seen whether McDonald's can turn its brand around, however. Fostering brand experiences that emotionally resonate with customers is critical, agrees Forrester Research analyst Michael Gazala. "Our latest research shows that emotion has a bigger impact on customer loyalty than either ease or effectiveness," Gazala wrote in a blog post.

Other brands that took first place in their respective categories in Brand Keys' Loyalty Index include Apple, Amazon, Travelocity, J.Crew, and Air Canada. While not every company can develop the cult-like followings of brands like Amazon and Apple, meeting consumer's emotional expectations is an important first step, notes Brand Keys President Robert Passikoff. "Brands able to meet consumers' emotional expectations always have higher engagement power, more loyal customers and, axiomatically, greater sales and profits," Passikoff comments in a statement. "The difficult part is accurately measuring this gap and determining what emotional values can help a brand successfully fill it."

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