Consumer

Shelly Banjo is a Bloomberg Gadfly columnist covering retail and consumer goods. She previously was a reporter at Quartz and the Wall Street Journal.

When it comes to pleasing fickle consumers, easy often beats good. 

Thus when Chipotle announced its new loyalty rewards program Monday, the scheme's complexity seemed a bit out of character. Unlike other restaurant chains that constantly churn through new concoctions like waffle tacos, hot-dog-stuffed-crust pizza, and pork donuts, Chipotle is known for stubborn simplicity. Besides adding tofu sofritas back in 2014, its menu has barely changed since it began serving up burritos and tacos in the early 1990s.

Chipping Away At Chipotle
Shares in Chipotle are down 35% in the past year, compared to a 5% drop in the S&P 500
Source: Bloomberg

Now, however, it seems the company is straying from that strategy. 

In a bid to stem steep traffic losses after a debilitating food-safety crisis, Chipotle plans to run a three-month perks program, beginning on July 1, aimed at rewarding customers who make repeat visits to the chain. The problem is, reading through the program's description is like trying to decipher the fine print in a car-insurance contract. 

chipotle graphic

The program's rewards reset at the start of every month and have three levels. Customers who buy a meal costing more than $6 at least four times in one calendar month reach the "mild" level, which gets you one free burrito. Eight visits in one month unlocks the "medium" level and a prize of two free burritos. Eleven visits in a month gets you to "hot" status and three free burritos. Free entrees earned can count as qualifying purchases.

Then there are bonus rewards for achieving status in all three months of the program. Three consecutive "mild" months earns you one more free entree. "Medium" status in all three months gets you $20 in Chipotle swag. "Hot" status in all three months earns a catered meal for 20 of your closest friends. As if that weren't complex enough, you can get a rewards card at a restaurant, but you have to register online to redeem the rewards. 

Try explaining all of that to hungry customers in line during a lunchtime rush. 

Chances are, if someone is willing to eat lunch at Chipotle three times a week, then they probably didn't need the incentive of a rewards program in the first place. Investors in Chili's learned this lesson all too well, when a failed rewards program led to sales declines -- the offers mainly rewarded loyal customers, who would have eaten at the chain without the added discounts. Chili's jettisoned the program. 

Chipotle deserves some credit for trying new ways to recover traffic. But its double-digit comparable-store sales drops should have taught it by now that just giving away free burritos doesn't lead to a sustained jump in sales and isn't a long-term strategy for winning back customers for good.

Burrito Boom and Bust
Change in the percentage of the U.S. population visiting Chipotle from a year ago
Source: Placed

Chipotle might be better off sticking with simplicity. It could start by taking some of the extra marketing money it wants to spend on free burritos and use it to explain simply why its food is safe to eat. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in New York at sbanjo@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net