Lessons learned from Chipotle’s human-centric approach to digital transformation
The fast-food industry’s customer base is predominantly young, which means, simply, that key players can either go digital or die. That’s it, there’s just no way around it. However, Chipotle Mexican Grill, Inc. took going digital to a whole new level through its successful digital transformation, driven by a true willingness to understand its consumers and meet their needs.
Why did Chipotle embark on its digital transformation?
Though Chipotle’s always been popular for its tasty food, high-quality ingredients, and great customer service, the chain was struggling to keep up with its own pace of growth (adding approximately 200 restaurants per year) and the strain on hiring and training staff was becoming a burden.
Chipotle was also dealing with additional challenges, including issues related to alleged E.coli and salmonella outbreaks in several of its branches. In short, the fast-food chain was struggling, and the board realized that without a significant shift in strategy, they’d only be facing more trouble. At the end of 2017, Chipotle announced they were looking for new leadership to inject serious improvements into their operations, marketing, and overall digital strategy.
The new leadership - CEO Brian Niccol and CMO Chris Brandt - came on board in 2018 and immediately got to work, completely overhauling the company’s goals:
- Grow revenue
- Focus harder on maintaining a great culinary culture - real, fresh food, classic cooking techniques, locally sourced produce
- Separate in-restaurant and online orders kitchens to improve customer experience
- Improve and evolve marketing, aligning it with business goals and company values
- Harness the power of digital - evolve the online and mobile apps + expand into new digital channels to capture younger consumers
How did Chipotle do it?
In 2018 Chipotle made the smart decision to prioritize digital engagement, taking advantage of their new leadership’s previous experience in transforming companies’ digital presence and prioritizing digital innovation.
They took a human-centric, digitally-driven approach to modernize and invigorate the Chipotle brand, placing the focus on stories about the fresh ingredients, where they came from, and the people who prepared them. These stories, told through digital media, were the start of Chipotle’s digital transformation success story.
But the core of their digital approach was this:
[.emph]Provide a simple, seamless experience to customers. [.emph]
Expansion of its digital marketing
The Chipotle brand has always been linked to authentic, fresh ingredients, but as competitors began to trickle into this trend, Chipotle decided to take a novel approach with its Behind the Foil campaign - documentary-style TV and digital spots featuring employees. These stories, brought to target audiences via digital and TV channels, served as proof of Chipotle’s human-centered approach - on one hand, the people preparing the food, on the other the people consuming it.
Virtual Farmer’s Market
In June 2020, Chipotle launched the Virtual Farmer’s Market. Partnering with Shopify, Chipotle gave its suppliers an online channel to sell their products, such as cheese and meat, directly to consumers. All the ingredients used in Chipotle’s restaurants are clearly highlighted, giving consumers easy and quick access to their favorites. By supporting suppliers and helping them boost their own online presence and sales channels, Chipotle not only tapped a new revenue stream but also helped build these suppliers’ resilience during a tough economical time.
Mobile orders and Chipotlanes
Chipotle was offering the “order from your mobile, pick up in the store” model as far back as 2008, almost a decade before its competitors. In 2019, they shifted to an ongoing innovation approach, further upgrading their mobile model as well as their entire strategy regarding digital products. They further supported this approach by opening drive-thru windows exclusively dedicated to online order pickups, a.k.a. Chipotlanes.
So it comes as no surprise that between 2019 and 2020 their mobile revenue doubled, and that out of 44 newly introduced locations in Q3 of 2020, 26 included a Chipotlane.
Uber Eats partnership
In early 2020 (just as the Covid pandemic hit) Chipotle partnered with Uber Eats, waiving delivery fees on orders exceeding $10 through May, making it easy for delivery drivers to quickly pick up orders and customers to get their orders cheaper.
Streamlining digital orders
In order to further improve their consumer experience, Chipotle built dedicated kitchens to exclusively prepare digital orders, integrating those kitchens with their app and delivery drivers to ensure a seamless order experience. In this way, delivery orders don’t interrupt the flow of the line in the restaurant, and Chipotle can deliver on its promise that online/mobile orders will be delivered to customers (or be available for pickup) within some of the fastest times in the fast-food industry.
With the brand’s evolution and digital transformation came a loyalty program that focused on the needs of Chipotle’s younger audiences (Millennials and Gen Z). Chipotle partnered with Venmo to deliver points for digital engagement, earning consumers free chips and guacamole as well as other online rewards for each dollar spent via the website or mobile app.
Environmental concerns and sustainability tracking
Connecting with young consumers means tapping into the environmental aspect and impact of the food industry. These days, offering locally sourced and organic produce is a must, but Chipotle went a step further - they pledged to divert 50% of their waste from landfills during 2020, and started recycling used plastic gloves into waste bags used in their restaurants.
Their digital transformation strategy included Real Foodprint - a sustainability tracker built into Chipotle’s mobile app that tracks and reports how much water you’ve saved, how much antibiotics you’ve avoided, how much land you’ve supported, and more. Chipotle even went a step further, hiring Bill Nye to star in their media announcement on TikTok.
What were the results of Chipotle’s digital transformation?
By focusing on increasing orders through customer loyalty and engagement, then streamlining the order process as well as delivery, Chipotle doubled its revenue.
Starting in 2018, Chipotle innovated both its brick-and-mortar serving line and online sales, resulting in digital sales rising by 100% in the first quarter of 2019.
In 2020 Chipotle’s digital sales were at $776.4 million - a 202.5% increase - as a direct result of the company’s focus on in-app innovation, online order-only drive-thrus, and customer-centered marketing.
According to their digital sales report from Q3 2020, Chipotle’s “revenue increased 14.1 percent to $1.6 billion”, and by end of 2021, the chain surpassed $2 billion.
Three years into Chipotle’s digital transformation journey, it’s joined the Fortune 500, grown its digital sales, launched a loyalty program that has 24 million members, raised its average minimum wage to $15 an hour, and opened 200 new restaurants.
They’ve also seen an 8% increase in transactions, as well as more than a 5% increase in the average transaction amount, meaning that customers are coming back more frequently and ordering more.
Chipotle, however, isn’t resting on its laurels - more than 80% of its unit growth is expected to come from its Chipotlane model. Chipotle has also announced plans to more than double its restaurant footprint, while continuing to invest in all the different ways its customers want to receive their products, including the app and marketplace.
What can we learn from this example of digital transformation?
Chipotle is an excellent example of how a company can drive growth with a customer-centric approach.
While many companies talk a good game about understanding their customers’ needs, Chipotle took it to the next level. Determined to identify and meet the needs of their young base, Chipotle used engagement, loyalty, and sales, supported by technology, to create an exponential growth cycle. While many players in the food industry took a hit due to COVID-19, Chipotle’s digital enhancements are proof that a bold digital approach and a willingness to really understand what customers want is the best strategy for disaster-proofing a business. And as its patrons demand more and more digital access to its products, Chipotle’s ongoing innovation approach helps future-proof the chain.
[.emph]The lesson here is clear: To thrive in such a dynamic, unpredictable environment, companies should seriously consider taking a holistic approach that includes marketing, sales, and delivery (with robust supporting technology), creating a customer experience that seamlessly blends both digital and physical. [.emph]