Loyalty can be a powerful strategy for digital engagement. By tying rewards to membership and integrating programs within mobile experiences, consumer brands can quickly and effectively boost their digital user base. In the quick-service restaurant (QSR) world, digital engagement has historically been lacking, but once the pandemic set in, innovation was no longer an option.
Seemingly overnight, order-ahead and seamless digital experiences became a baseline expectation. A focus on safety and speed resulted in the biggest chains in the world highlighting the power and convenience of their apps. And for the most part, it worked—McDonald’s, the most recognizable QSR brand in the world, saw around 20% of its sales come through digital channels in 2020. But even the top dogs were late to loyalty, which has proved to be a key difference-maker.
Chipotle unveiled Chipotle Rewards in 2019. It was this head-start that enabled the burrito chain to seamlessly shift to a digital-first model. At the height of the pandemic in July 2020, 60% of all Chipotle sales came through its app or other digital channels, and each Chipotle location averaged $1.1 million in digital sales for all of 2020. According to Jason Scoggins, director of loyalty for Chipotle, that was no accident.
“We were in a really good position when the pandemic hit due to our digital focus,” he says. “We saw that shift in behavior from customers who traditionally dine-in as they switched over to digital, and we were ready for them.”
The rapid growth of Chipotle Rewards
From the onset of the pandemic in early March 2020 until the publishing of this article, McDonald’s stock has grown roughly 7%. Restaurant Brands International (parent of Burger King and Popeyes) has grown 13%, while Yum! Brands (parent of KFC and Taco Bell) grew about 18%.
Chipotle, on the other hand, saw its stock price surge over 100%, and it’s not a stretch to attribute that jump to the brand’s early investments in its digital channels.
“We saw that shift in behavior from customers who traditionally dine-in as they switched to digital, and we were ready for them.”Jason Scoggins, director of loyalty, Chipotle.
Growth in Chipotle’s loyalty program came quickly. Scoggins notes that in the first week, Chipotle Rewards “started with a bang” and signed up one million members, and that rapid progress has continued throughout, even once the initial wave of signups from the brand’s “superfans” subsided.
“To be honest, [Chipotle Rewards’] growth this year was really influenced by our customers’ shift to digital channels during the pandemic,” says Scoggins. “We know that if we get more digital customers, we’re going to get more people into the loyalty program. And then as we get more people in the program, they will drive that digital business.”
In February 2020, one year after launch, and one month before the pandemic hit North America, Chipotle Rewards had 8.5 million members. Just over a year later, Chipotle Rewards now boasts over 20 million members. To contrast that incredible growth, the only other comparable QSR loyalty program—Starbucks Rewards—debuted in its earliest version in 2009 and only recently topped 20 million members.
“We thought we had ambitious goals in the first year, and we blew those out of the water,” laughs Scoggins. “Then we thought we had even more aggressive goals for 2020. And again, we were completely surprised at the success.”
Although Scoggins and the digital team at Chipotle may have been taken aback by the initial love shown to Chipotle Rewards, they were not surprised by the company’s ability to adapt. The roadmap for Chipotle’s digital presence only wavered slightly during the pandemic, all because the company had already made significant progress on its digital roadmap.
“For the most part, we were ready for the pandemic, whether we knew it or not,” says Scoggins. “Luckily, the wheels were already in motion a year or two ahead of the pandemic.”
The advantage of digital loyalty
Rewards programs have become the necessary hook to normalize order-ahead during the pandemic, and it’s not just Chipotle—McDonald’s, Wendy’s, and Burger King have all poured serious investments into new digital loyalty programs over the past year.
While rewards programs in the QSR world may be similar in appearance to retail counterparts, the outcomes differ slightly. A shopper won’t buy multiple winter coats from Old Navy in the same month, but they may eat Chipotle twice a week, so the value propositions of each company’s rewards programs are unique. Loyalty, when embedded within a QSR chain’s digital platform, becomes a major driving factor for customers to order their food ahead and engage through mobile and web channels.
Complimenting this whole experience for Chipotle is its continued investments towards digital optimization. The chain has been adding separate back-end stations to prepare app orders, and rapidly converting locations to add Chipotlanes, which are drive-thru (or walk-through) pick-up lanes for digital orders. The success of Chipotle Rewards—and thus, order-ahead—meant these digital investments are paying off faster than expected.
Chipotle Rewards can also be used during in-store physical ordering—a critical and often overlooked feature. This omnichannel approach to loyalty is another key factor in how Chipotle found itself well-prepared for the digital shift.
“When we launched Chipotle Rewards, we saw our app usage grow considerably as customers began using the program when ordering in-restaurant,” says Scoggins. “So when the pandemic came and we had to shift those customers from restaurant to digital, we already had the app on their phones, and it definitely made that transition easier to get them to the next step.”
“We were ready for the pandemic, whether we knew it or not.”Jason Scoggins
With this knowledge, Chipotle began experimenting with several different CRM platforms to manage the influx of digital users. Similar to other loyalty programs, Chipotle built different journeys for customers based on their purchase habits. But what Chipotle was able to do differently was create incentives within those journeys to more easily move a customer from in-restaurant ordering to mobile order-ahead.
“Rewards members were the first to really dive in and adopt order ahead as a preferred method of purchasing. It’s the easiest way to get someone to move from in-restaurant to digital,” says Scoggins.
“If we see some indications in someone’s behavior that match another customer who is ordering digitally, we’ll help steer them down that path. We can use the data that we’ve got to certainly open that door and help them discover a digital order-ahead experience.”
Scoggins also notes that Chipotle invested in new messaging showcasing how the digital experience could be the same as the physical one—order “a little bit of rice” or “extra sour cream,” just like in a real restaurant.
“We were advantaged by the fact that all those customers already had the app on their phones and had been using it from a rewards perspective,” says Scoggins. “And now they just had to use it from an ordering perspective.”
The hidden perks of loyalty
Another factor that differentiates fast-food loyalty from traditional retail loyalty is the ability to reach customers with purpose-driven messaging. Think about how many clothing/homeware/furniture mailing lists you may be on, then think about the fast-food ones you are on. The former likely outweighs the latter. As Chipotle scales its loyalty program, it opens up another avenue for engaged fans to absorb new forms of brand messaging.
Prior to 2018, Chipotle had a fairly robust SMS messaging campaign, but it was limited to deals and promotions. The chain would text out coupons for free guacamole or 2-for-1 entrees. Now, with 20 million+ members signed up for free rewards, there is a massive built-in audience open to new mediums of storytelling. As Chipotle Rewards grew, the CRM strategy shifted to email.
“This new platform helped us bring that brand story and purpose home to guests in a very digestible way,” says Scoggins. “Because we are very purpose-driven, our customers expect that and want that from us.”
Scoggins talks about new forms of outreach Chipotle has been able to achieve thanks to the built-in loyalty audience. For example, Chipotle can distribute a promotion for free chips and guacamole but also use that as a chance to tell the story of its sustainable avocado farming practices, all within the same email message. This blended brand storytelling has actually resulted in Chipotle’s purpose-driven messaging receiving more engagement than its normal baseline messaging. That, in turn, drives higher satisfaction and brand awareness—all thanks to a digital audience that did not exist just two years prior.
The race to catch up
With Chipotle’s current digital sales representing around 50% of the company’s revenue, it makes sense that any expansion plans will be tailored around digital engagement and order-ahead. This includes the opening of digital-only storefronts as well as more Chipotlanes.
Another perk of a robust digital loyalty program means Chipotle can gather valuable data on where its most loyal app users reside, then make digitally-minded expansion plans based on that information. Although Scoggins does not explicitly state that the rewards program itself has a hand in these decisions (“there’s a lot of different factors that go into that kind of thing”), he does note that the data Chipotle gathers from customers using the app to access rewards could “absolutely be one of the inputs for a decision.” This is one more data-driven advantage that other fast-food giants are still clamoring to access.
Chipotle Rewards is a case study in how loyalty programs almost always create more value than originally planned. Consider airline rewards, originally created to offer special fare discounts to frequent fliers, some airline rewards programs like United’s MileagePlus are now valued at upwards of $22 billion.
Although not directly comparable to airlines, the fast-food sector is in the early stages of the race to monetize loyalty. The biggest chains in the world are chasing Chipotle and Starbucks so they can cash in on unparalleled access to data, stronger direct messaging, and smoother transitions to digital ordering.
Looking back to February 2020, Chipotle CFO Jack Hartung told CNBC, regarding loyalty, “The best thing though … we haven’t really monetized [it].” When asked how monetization is going now, 11.5 million new members later, Scoggins said things are still only looking up from here.
“With that additional 12 months worth of data and 12 months of observing the customer, it’s certainly given us a view of the program that is much more grounded in data and reality,” he says. “There are a lot more eyes on the program now and we can start to make those assumptions about monetization.”
“The worst thing that can happen for a loyalty program is to have to fight for a seat at the table.”