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Chipotle says mobile payments, not loyalty, will drive customer insights

While a number of food and beverage chains have embraced mobile loyalty, a Chipotle executive said this week that the company will buck the trend and lean on mobile payments – not loyalty – as a way to gather meaningful insights about its customers.

During a conference call with analysts on Tuesday to discuss Chipotle’s second quarter results, the executive responded to a question about the chain’s plans in mobile loyalty by saying that internal research has shown loyalty does not drive frequency. However, not wanting to miss out on an opportunity to learn more about its customers, Chipotle is taking a closer look at how to leverage mobile payments.

“With regard to loyalty, that’s a tricky subject,” said Mark Crumpacker, chief creative and development officer at Chipotle, during the call with analysts. “We’ve studied this in-depth, and we don’t believe the general supposition that loyalty will make less frequent customers more frequent.

“However, what you said is true, in that you learn a tremendous amount of information about your customers,” he said. “And so we’re planning on doing that, but not through a traditional loyalty program but rather through mobile payment.

“So we will provide our customers at some time various options through which they can pay for their food and we will capture data from them, whether that’s through a third party or through the ability to use our own gift cards. And that will give us a tremendous amount of data about those customers. So, I can’t tell you right now when those things are going to be complete, but we’re investigating and pursuing all of them.”

Mobile loyalty takes off
Chipotle has been active in the mobile space, with a strategy that include ordering and SMS offers. While there are very few details about what Chipotle’s is planning in mobile payments, the statements by the executive showcase some of the issues and questions surrounding mobile payments and loyalty this year.

The list of food-and-beverage chains either testing or having deployed mobile loyalty is impressive and includes McDonald’s, Taco Bell, Subway, Denny’s, Starbucks, Dunkin’ Donuts and TGI Friday’s.

However, some have taken a cookie-cutter approach that threatens to turn mobile loyalty into little more than a digital update of the plastic loyalty cards that sit unused in a consumer’s wallet because the value is unclear. This is highlighted by recent research from Bond Loyalty showing that only 12 percent of consumers have downloaded a mobile loyalty program – double the rate from a year earlier – and 61 percent of smartphones owners who are also loyalty program participants are not even aware if the loyalty programs they are enrolled in offer an app.

Mobile wallets
At the same time, mobile payments are beginning to grow and some see an opportunity for a less resource-intensive way to leverage mobile by enabling consumers to save a digital loyalty card to a mobile wallet (see story).

While merchants are likely to find the promise of not having to invest in developing and maintain a loyalty app appealing, this strategy can limit marketers’ access to customer data since Apple or whomever owns the relationship. If Chipotle’s goal is to gain customer insight, then this may not be the best strategy forward.

Additionally, this approach would provide fewer levers for driving customers back into stores.

It is possible Chipotle is considering a hybrid approach that pairs payments with some loyalty mechanisms, a strategy that Starbucks has found to be very successful. It is the ease of use provided by mobile payments coupled with the value of mobile offers that is helping Starbucks to continue to build its business.

Like Starbucks, Chipotle, with its commitment to sustainable food sourcing, already boasts a large cadre of brand enthusiasts. This could be one reason the brand is questioning the need for a formal loyalty program.

Performance metrics
However, even for a brand such as Chipotle, loyalty can drive key performance metrics. Mobile loyalty can be an important way to harness the emotional aspects of the relationship between consumers and brands, as Starbucks has done so successfully. While Chipotle may not see the need for this now – when its business is healthy and growing – it is vital to the success of loyalty that a program be put in place when a brand is at a highpoint and before customers start leaving.

“I found it surprising that [Chipotle is] only going to look to the monetary aspect,” said Sean Claessen, executive vice president of strategy and executive creative director at Bond Brand Loyalty. “It ignores the emotional side, the signals around those behaviors that can be so valuable.

“We don’t believe it to be true that loyalty does not drive greater frequency,” he said. “I think we’d be out of business if that were true.

“We have no less than a dozen and a half loyalty programs that we operate, and day after day, we are beholden to show incrementality, how baskets are larger, how they come in more frequently, how they refer new customers in.”

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York