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Chipotle's Marketing Menu for 2017: Biggest Campaign Ever, Fewer Promos

By Published on .

From Chipotle's 'A Love Story'
From Chipotle's 'A Love Story' Credit: Courtesy of Chipotle
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Chipotle Mexican Grill's marketing plans for 2017 include a TV series for kids and its biggest campaign to date, set to launch in April, as it tries to move past promotional offers to woo diners.

The once high-flying chain is still recovering from more than a year of sluggish sales after food safety concerns surfaced when people became ill after eating at some of its restaurants.

Chipotle beefed up its marketing and promotional push throughout 2016, the year Founder, Chairman and CEO Steve Ells describes as "the most challenging we've ever faced."

The chain used everything from free entrees and buy one, get one offers to a summer loyalty program and an animated short film to remind people why they loved Chipotle before they stopped visiting or came in less often. Chipotle even ran a TV commercial in a limited number of markets.

"The food safety incidents replaced our carefully crafted brand narrative with negative stories and we're working hard to rebuild our brand story," Chief Marketing and Development Officer Mark Crumpacker said Tuesday during the company's presentation at the ICR Conference.

During 2016, Chipotle also began working with Pile and Company to explore whether it will hire a new agency or agencies, a decision it has not yet announced.

Quarterly sales at longstanding locations have begun improving but are not back to pre-crisis levels. On Tuesday, Chipotle said fourth-quarter same-store sales fell 4.8%, a steeper decline than industry analysts anticipated. Same-store sales fell 20.2% in October and 1.4% in November, followed by an increase of 14.7% in December.

While the December gains sound lofty, it is worth noting that same-store sales in December 2015 were down 30%. So the year-over-year growth is off of a very low base.

Now, Chipotle said it is working on improvements including everything from updating the complex and timely manner in which it used to interview job candidates to replacing napkin dispensers that led to millions of dollars in waste.

On the marketing front, Mr. Crumpacker said Chipotle's priorities are to attract new and lapsed customers, build brand affinity, promote its digital ordering and catering capabilities and explore new menu items.

The company also hopes to rely more on its brand message and less on deals.

"Heavy promo spending has run its course," said Chief Financial Officer John "Jack" Hartung. "We don't think we need to do as much of it in 2017."

Chipotle said it would advertise more consistently throughout the year, instead of focusing on spring and fall pushes as it has done in the past.

Chipotle said it spent 4.7% of sales on marketing and promotions in the fourth quarter, roughly in line with the 4.8% it spent in the third quarter. Looking ahead, Mr. Hartung said spending should begin to move into a 3% of sales range, though not as low as its pre-crisis levels of 2% to 2.5%. He also said Chipotle reserves the right to invest more in marketing.

In April, Chipotle plans to launch the largest campaign in its history, focused on taste and ingredients, Mr. Crumpacker said. TV commercials are likely to be part of the next campaign, after the company was pleased with the results from its TV test, he said. Its plans also include a new scripted TV series for kids, Mr. Crumpacker said.

Chipotle can now target more than 60 million customers who visit very infrequently or are lapsed, meaning they haven't been into a restaurant in at least six months, Mr. Crumpacker said. The company plans to use ads and other offers to try to entice them throughout the first quarter, he said.

Chipotle is also increasing the number of fundraisers it runs. Forty percent of those who come in for a fundraiser haven't been to Chipotle in six months. After those lapsed patrons visit for a fundraiser, 20% return for a second time in the next month, Mr. Hartung said.

Mr. Crumpacker briefly mentioned that a new dessert item, one that requires only one additional ingredient not already found in its restaurants, may debut this spring after a recent test and current tweaking. But the company is still trying to maintain its simplified menu rather than taking the route of adding more and more new items to try to juice sales.

"We don't view new menu items as significant drivers of our business," Mr. Crumpacker said.