Marketing Plan
The Company
When Chipotle Mexican Grill opened its first restaurant in 1993, their idea was to show that food served fast didn't have to be a "fast-food" experience. Today, they continue to offer a focused menu made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a unique atmosphere. Additionally, in 2004 Chipotle partner with Loomstate becoming the first non-GMO fast-food restaurant that cared for the environment. Since then, Chipotle has committed to find the best ingredients in the market. They source as many high-quality ingredients as they can from local and family farmers who are committed to sustainable agriculture. Because of Chipotle's success many restaurants are trying to recreate the same unique experience commonly referred to as "fast-casual." With more than 1500 restaurants, Chipotle has remained dedicated to their mission of "Food with Integrity."
Chipotle Mission Statement
Food With Integrity. Serving high quality food while still charging reasonable prices is critical to our vision to change the way people think about and eat fast food. As part of our Food With Integrity philosophy, we believe that purchasing fresh ingredients and preparing them by hand are not enough, so we spend time on farms and in the field to understand where our food comes from and how it is raised. Because our menu is so focused, we can concentrate on the sources of each ingredient, and this has become a cornerstone of our continuous effort to improve our food.
SWOT Analysis
As long as Chipotle stays true to their mission of Food With Integrity, the company will continue to be profitable. However by evaluating the strengths, weakness, opportunities, and threats to create a strong marketing campaign the company can continue to expand and grow.
Strengths
Chipotle is as strong as ever. Chipotle has been in business over 20 years and has improved its craft becoming an industry leader. The "Food with Integrity" mission is seen in everything Chipotle does and really it could be adapted to Chipotle as a whole, for instance being "Business with Integrity." Not only is the food fresh and of the highest quality, but the packaging, napkins, and bags are all made of recycled material, which helps to conserve the environment and fits into Chipotle's business model. One of the reasons that the experience at Chipotle is very consistent across the board is because the company owns all the stores. Franchising could help the company expand faster, however it would not be able to maintain control over all operations of individual locations. These inconsistencies in the dining experience that Chipotle wants to offer their current and potential customers could be affected. The fact that Chipotle owns all of their locations also benefits the employees, which in turn benefits the customers, and ultimately the company. This helps Chipotle hire employees that they feel fit into their culture. Also, they have implemented training and development programs for their employees, which have led to an impressive 97% of managers being promoted from hourly positions. Recently Chipotle has even been considering adding a tuition reimbursement program for their employees. By having a pro-employee culture, not only does the customer benefit from having a consistent experience, but also does the company. Happy employees are more likely to stay with a company than disgruntled employees.
Weaknesses
The internal weaknesses that affect Chipotle are higher priced items, limited menu options, quality employees, and brand recognition. Chipotle's dedication to "Food with Integrity" risks losing business due to higher priced menu items made of natural and organic ingredients. People will choose to eat somewhere else if they perceive the price is not worth the value. The limited menu options could cause customers who lack imagination to feel Chipotle doesn't offer them something they may want. The "Food with Integrity" dedication and limited menu options could cause a loss in sales, when stores have had to sell an item with GMOs. Chipotle's policy is to always place a warning on items that contain GMOs. In the 2014 Annual Report, Chipotle states, "Our business could be adversely affected by increased labor costs or difficulties in finding the right employees for our restaurants and the right field leaders". There are clear difficulties in finding employees that Chipotle feels fit the company image. Choosing between quality employees or enough employees to fill positions potentially puts Chipotle at risk of losing new and existing customs. Chipotle's brand recognition is primarily in the United States. With over 1700 stores and less than 20 internationally, Chipotle is not yet well known throughout the global market. Which means there are some opportunities that we can look at to see where we can improve.
Opportunities
The opportunities that Chipotle has are limited due to the nature of the business since the food industry is flooded by competition. However, competitors have a competitive advantage over Chipotle by offering desserts and "rewards" programs. Qdoba, a competitor of Chipotle, offers a rewards program that gives 100 points for every full entrée ordered. At 1000 points a customer receives a free entrée, it's basically buy ten get one free.Though this is perceived to be a great thing, it does not fit into Chipotle's ideology. If Chipotle were to copy this program they would have to pass these costs to the consumer, which would increase the price of meals. Not every customer that eats at a "fast-casual" restaurant is looking for a healthy alternative, some are there because the food taste good. For that reason competitors, such as Panera and Lime, are offering desserts. Qdoba only offers desserts as part of the catering option. Although desserts will not be the primary source of revenue, it might just be the thing a potential customer is looking for. An opportunity that exists but not necessarily in the "fast-casual" dining experience is serving alcohol beverages. Most authentic Mexican sit-down restaurants have always served alcohol beverages and fast food giant Taco Bell has recently decided to serve alcohol. Chipotle serves alcohol at some 900 restaurants and could create a unique experience offering alcohol beverage specials during happy hour to pull customers from sit down restaurants like Chili's and Applebee's. One opportunity that Chipotle has seized is diversifying their offerings. In 2011, Chipotle opened ShopHouse Southeast Asian Kitchen, they partnered and financially funded Pizzeria Locale. These two restaurants follow the Chipotle model, and offer new avenues for expansion and growth for Chipotle as a company. By growing those two brands, Chipotle as a company can continue to grow.
Threats
It is normal for all businesses to face threats. Although, Chipotle maintains its finest ingredients, it is still considered a "fast food" restaurant and many people care more about health and back away from anything that's considered "fast food." Chipotle may face competition from other Mexican themed restaurants like Taco Bell, Qdoba, and Lime. Not only can they face competition from Mexican themed restaurants but they are also facing competition from another "healthy" restaurant, Panera. Panera and Chipotle currently compete since they both claim to have fresh ingredients and are branding themselves as "fast casual". A reason why people might choose Panera over Chipotle is because Panera have a wider menu of food. Panera also serves a variety of bagels, pastries and drinks such as lattes, teas, coffee, which Chipotle has a limited menu. Chipotle is face with economic instability. The economy is unpredictable and during recessions people tend to try to save money and look for the cheaper alternatives like cooking at home or even going to McDonalds in order to prevent spending money. Meals at chipotle can cost between six to fifteen dollars, whereas McDonald's offers items for a dollar on the value menu. It is well known that consumers prefer change overtime and this is a threat Chipotle needs to be aware of. Many people may simply just get bored of Mexican food and move on to the next big thing. This will cause a drastic decrease in Chipotle's profit.
The strengths, weakness, opportunities, and threats should give us a better idea of where our company stands in the market, and what we can do to continue to be a leader and innovator. As well, through the analysis of the weaknesses and the threats facing the company, the company will be able to make the necessary adjustments to give it a competing edge over other companies. Ideally, without acknowledgement of the existing weaknesses, the company may not reach its full production level because the weakness will turn into hindrances coupled by the threats becoming a reality.
Objectives
Chipotle's goal is to deliver the highest quality food with the highest quality ingredients all while being environmentally friendly. Chipotle's objective states "We focus on trying to find the highest quality ingredients we can to make great tasting food; on recruiting and retaining top performing people to ensure that the restaurant experience we provide is exceptional; on building restaurants that are operationally efficient and aesthetically pleasing; and on doing all of this with increasing awareness and respect for the environment."
One of Chipotle's marketing objectives is to increase the sales of the Chipotle Salad. This is a great way for Chipotle to prove how healthy and natural it truly is. Today, more people are leaning towards healthy meals, but they are not aware of the fact that Chipotle serves a salad. Chipotle wants to make sure its customers are aware of the fact that they do actually serve healthy fresh salads.
Chipotle also has sales objectives. To increase profit, every year Chipotle holds a Halloween Costume Event where customers who come in a scary costume receive a $2 burrito or salad. This is a great way to get the community to participate in a holiday while at the same time increasing profits. This event only happens once a year, and Chipotle does not usually make sales, it keeps its price consistent.
Chipotle's media objective is to reach 80% of the target market through media. Chipotle never usually advertises its products but the Chief Marketing Officer believes that they should advertise in various types of media including outdoor posters and radio.
Target Market Strategy
Chipotle's primary target market is Millennials (Beyond the Burrito). Millennials, also known as Gen Y, are people born between 1979 and 1994 that spend more than $200 million annually. This is the largest group hit by the great recession from 2008 to 2009. This group spans from twenty something's just starting their career to mid-thirties already established in theirs. Millennials are the primary group that began the going green and eating healthy movement that is sweeping across America. With the help of going green and eating healthy sweeping across the country, the market can now be segmented across all generations. Chipotle will use this movement as their cultivation strategy. Food with Integrity may have started as our mission, however today it is a philosophy of cultivation. This philosophy is empowering Chipotle's vision to change the way people think about and eat fast food. Chipotle was the first to start offering a fast food environment with fresh and all natural ingredients being a heterogeneous market. However, over the last ten years competitors like Qdoba have emerged due to Chipotle's success. When looking purely at the food, it is becoming more homogeneous; nevertheless Chipotle has cultivated an experience that stands apart. The Cultivation strategy has two major parts that are being used to continue to draw potential customers and retain existing customers. First, through the Cultivate Festival, a series of outdoor festivals that draw up to 40,000 people, Chipotle is building and extending the community (Beyond the Burrito). This is building awareness of the way animals are treated as well as the methods used to grow food with the help of the Cultivation Foundation. This awareness is building the brand though a cultivated experience. Second, Cultivating Thought is used to draw potential customers and retain existing customers on a daily bases. The Cultivating Thoughts concept has teamed up with writers such as "Toni Morrison, Malcolm Gladwell and Sarah Silverman for thought-provoking, two-minute reads accompanied by illustrations from arrange of talented artists" (Beyond the Burrito). This concept is building brand recognition through the cultivated experience.
Marketing Mix
A great dining experience is the most powerful marketing tool Chipotle has to offer customers. Chipotle strives for customers to walk away feeling the cultivated experience. But Chipotle wants to introduce the brand to customers in other ways. This is to help customers understand what makes Chipotle different than other restaurants. Chipotle always uses the Food with Integrity mission to connect with like-minded individuals and organizations, through multiple traditional outlets.
Product
Chipotle offers a variety of products. In their menu they offer burritos, bowls, salads, soft flour tacos, soft corn tacos, and crispy corn tacos. They additionally have a kid's menu as well. Their menu is simple, but with the options they offer, customers can make different combinations, giving them different options in their choice of meal. You can choose to have meat or organic tofu; rice, beans, and fajita veggies; and you can choose certain toppings as well. Additionally, you can also add a side and drink. The sides they offer are chips and guacamole or chips and salsa. The drink menu includes margaritas, bottled drinks, soft drinks, and beer. Currently desserts are not offered; therefore this is an opportunity for expanding the product line. Chipotle offers a secret menu that includes quesadillas, quesaritos, taco salads, and nachos.
Throughout all the food Chipotle offers the ingredients are non-GMO. They offer simple, fresh food without artificial flavors. Their sources for food are farms rather than factories. They prepare their food in the kitchen using classic cooking techniques. The great food isn't the only product Chipotle has to offer.
Chipotle offers great customer service. Customers are satisfied with the attention they receive in chipotle, since they interact with a lot of employees in order to get a meal. Chipotle cares about their customer relationship and the environment. Two factors help Chipotle maintain this relationship with customers. First, Chipotle owns all of their stores and second, time and dedication is put into every employee hired.
Place
Chipotle has mastered effective transportation by storing their products near the restaurants. The restaurants are located within 350 miles of the source. Effective transportation such as airline transport can be adopted to reduce the rate of product spoilage and maintain the quality of the products when less than 350 miles cannot be met. Chipotle has placed their restaurants in shopping malls, airports, shopping centers, and downtown city centers to attract customers through convenience. The restaurants are positioned in such a way to ensure that the products satisfy the customer's needs. Chipotle's desire to continue to meet the customer's needs fueled their decision to offer delivery service. Distribution partners allow the customers to get deliveries from Chipotle at costs as low as $4.
Promotion
Chipotle's main goal is to offer the finest ingredients to its customers. Chipotle uses the philosophy of James Farely, which states "You can't say it, you have to get people to say it to each other." When people have a good experience at Chipotle they tend to recommend the restaurant to their friends because Chipotle always carries the finest ingredients, which is why Chipotle strives to get the finest ingredients out there. Chipotle gains a lot of attention since it offers non-GMO foods, such as natural meats. This attracts a lot of consumers now since many people want to eat healthy. Chipotle is using several marketing techniques to their mission of Food with Integrity.
Chipotle uses Twitter, Facebook, and Instagram in order to promote their fine ingredients and fresh foods. On Twitter, replies are often to customer's complaints about quality. This is to maintain the brand image of high quality, healthy food. Chipotle engages very well on social media with its customers. They contribute positively to the firm's image because Chipotle is committed to using local farm products to encourage local businesses.
Chipotle also invests in critical resources into local economy while promoting environmental sustainability. This has been done through short films such as "The Scarecrow" and "Back to the Start." These videos are sculpting a culture that is already focused on going green and eating healthy. Customers are beginning to identify with Chipotle and will continue to for generations to come.
Chipotle treats everyone equally because every customer is important. The employee's are well mannered and sweet. Chipotle strives to hire the best people to give customers a cultivated experience on every visit. Chipotle does not offer discounts in their stores, however Chipotle randomly does "buy one get one free" offers on special days that could potentially be extended into a rewards program.
Price
Chipotle has been profitable the last few years. They are the leader in the casual dining, Mexican restaurant market, and are also beating out Fast-Food giants such as McDonald's and Burger King, . The pricing strategy for Chipotle has been very important, and quite aggressive when compared to all of its competitors. Chipotle by fast-food standards is considered to be expensive, with a local, average, base price of over $6.80, it is a far cry from your McDonalds or Burger Kings, especially when you consider the competition also has value menus, which can bring the cost of a meal down significantly. Though that may seem high, it still is not as high as Qdoba, which has a local, average, base price of $8.10. Qdoba does include drink and chips in their price, where Chipotle charges for them separately. Do keep in mind, these prices are representative of locations in the Tampa area, different areas, regions, and markets around the country will definitely have different prices. The price differentiations around the country would be in response to price elasticity, as depending on the region/market the demand could be more elastic, compared to other areas where it may be more inelastic. Now, by pricing products lower than its closest competitors, Chipotle is able to price some of its add-ons, such as drinks and chips, at a higher price.
Add-ons are a big way that companies can earn additional revenue, and no matter the industry, add-ons are always proposed, whether it be a warranty when purchasing electronics, or adding extra ingredients to a meal. One article during our research compared Chipotle's add-ons to the "freemium" model of most mobile games. One of the ways it works with games, you can download and play the game for free, but there will be ads that popup on the screen, every so often. If you do not want to deal with the ads, they will offer an option where you pay a certain amount, once, and it get rid of the ads forever. When this happens you get upgraded to a "Premium" member, which sometimes has additional perks. Well with Chipotle you pay for the meat of your choice, and you can add different things such as: rice, beans, lettuce, salsa, cheese, sour cream, vinaigrettes at no extra cost, which are your free upgrades, and then they have Premium upgrades. The premium upgrades include: Guacamole, fajitas, extra meat, and chips and salsa/guacamole. Unlike a McDonalds, that charges for everything. The chart, below, can help better visualize, the way this works. These options allow customer to build their meal exactly the way they want. Which allows customers to feel great about their meal, and very much cater it to their own tastes. This also helps with price sensitivity within any given market that a store finds itself in.
In recent years, Chipotle has raised prices in pretty much all markets. Now some say that these price increases have been a strategy used purely to offset costs, and while that may be true, others argue the Chipotle's pricing strategy is based on Supply, Demand and Strategy. We feel that their pricing strategy is a result of all four. In recent years, they have had to raise prices in reaction to rising commodities prices, but that also has not stopped them from raising prices strategically, to increase revenue. Even when faced with rising commodities prices, such as the price of beef, and other ingredients, the prices have only gone up by small amounts, 3 to 5% at a time. Though the price has increased in the last five years, the demand has not gone down. The medium income of a Chipotle customer is about $70,000 a year, hence an increase of $0.35 will not prevent them from dining out.
Chipotle has amazed the marketing world by keeping a relatively small marketing budget in comparison to other fast food rivals, like McDonald's. For example, in 2011 Chipotle only spent $5.8 Million, about 1% of revenue, on advertising. By keeping their marketing budget small this helps keep prices down. Another reason why Chipotle's pricing works is because they appeal to a wide audience of conscientious eaters. This demographic of conscientious eaters covers a wide range of ages, but a big portion is made up of Millennials, who prefer fresh healthy foods. This demographic is willing to spend more for quality, rather than quantity. Because of this mentality, this segment of the population tends more inelastic, in terms of price, than others. By coming in at a lower price point than their direct competition, and offering a reasonably priced, higher quality, product than the traditional fast food establishment, Chipotle has established itself as one of the leaders of the restaurant industry.
Recommendation
As the competition increases and intensifies, companies have to find new ways to stay competitive and relevant in the markets they compete in. It is even harder, and more important for a company to do this when they are a segment leader, like Chipotle. Chipotle has been dedicated to their slogan "Food with Integrity" and this has permeated the whole culture of the company. So, with that in mind, we need to look at ways to continue to maintain and improve market share in the future.
One of the ways Chipotle can continue to improve is by adding to the menu. The menu at Chipotle is small, which helps to keep the quality of the food high. Expansion of the menu does not have to be drastic, just adding a couple of options would be sufficient. Recently, Chipotle added tofu to the menu, which helped bring in a whole new clientele of vegetarians and vegans. Additions to the menu, like the recent Tofu addition, can help drive business, and continue to keep the menu simple, and focused. So let us take a look at those options.
One addition to the menu that Chipotle could use is a seafood option. A seafood option could help drive more business, by bringing in pescatarians. Pescatarians do not eat land based animals or birds, but do consume seafood. Seafood is a very broad term, so to specify, that option could be shrimp. The addition of shrimp to the menu would continue to keep it very simple and focused, while adding a completely different flavor. This option is not currently offered by Qdoba, and would be a great way to stay ahead of the competition.
Chipotle can join the competition by adding a dessert option to the menu and offering a rewards program. Desserts can be a great way to generate more revenue, and to push customers to spend more per visit. A simple, Mexican-themed, dessert option that could be added to the menu is the Churro. The Churro is simple, and the cook at corporate could figure out how to make a high quality, and tasty treat for customer to enjoy after their meals. A rewards program would show the already loyal customers, that Chipotle does appreciate their continued service. Chipotle could differentiate from Qdoba by offering free chips and a drink after the fifth purchase and a free burrito after the eighth.
Our last suggestion would be for Chipotle to spend a bit more on marketing than they have in the past. Yes, a huge marketing budget can make the cost of food go up. They could offset costs, but continuing to keep it simple, by advertising sparingly here and there can help to drive the "Food with Integrity" message and philosophy to more people. Using Social media can help spread the message wider and faster, but they should not discount traditional advertising. TV is usually the most expensive form of advertising, so they could do that less often, but newspapers, and billboards can reach a wide array people who may not use social media, and do not fall under Chipotle's regular target market. Which can help grow the customer base and increase revenue.