Problem Statement
Chipotle organization has grown incredibly over the last 17 years of its existence. The firm has enlarged its business through an attempt to establish itself as the best ultimate fast casual restaurant for alternate traditional fast foods. This has seen the organization experience a tremendous progress despite the partial nature of conventional marketing, advertising strategies and budget applied. The reason behind the organization’s success is its aptitude to identify a variety of the population’s market segments.
Chipotle organization provides Mexican style foods for clients who disregard McDonald’s products at considerably lower prices aimed at attracting more customers. The organization offer friendly services in a traditional bucking thereby capturing consumer loyalty, for instance, students who are bust and have a low income capacity.
The organization has been sensitive to environmental sustainability in its effort to source for products. Poultry and meat products all come from natural animate sources. The organization has made quite a commendable progress in its environmental sustainability campaign to a level of appearing before the congress as a promoter for the injunction of antibiotics in meat products.
The underlying problem within the organization is the fact that most of its consumers are unaware of all the efforts and social campaign Chipotle is making. There are current clients who are insensitive about the social responsibility the organization is undertaking other than seeing it as a cheap firm providing products and services at low prices. Furthermore, the organizations supply chain has encountered numerous challenges like availability of sourced foods. This has made the organization to lay down strategies aimed at improving sourcing goals making it a priority in their marketing policy.
Chipotle Analysis
History of Chipotle
Chipotle Mexican Grill is a chain of fast restaurants that offer services in more than 1000 localities found in the United States, United Kingdom and Canada. The products provided by the organization include chicken, pork, steak, guacamole, vegetables mixed in different salads, which use same natural ingredients. Chipotle mission is “Food with Integrity” an aspect incorporated in the firm through combining fast services and quality food in a relatively low pricing.
The origin of the organization is traced back in 1993. Its founder Steve Ells realized that Mexican tacos concept was very prevalent in San Francisco. He therefore went back to his home in Colorado and opened the first restaurant in Denver. The restaurant grew very fast which triggered him to open another chain in Colorado and several others spread in different states. The organization operates all its chain restaurants without using conventions. The organization grew rapidly and by 2006, it was listed on the NYSE with a total of 26,500 employees across the globe. Its annual revenues amounts to $ 1.8 billion as per the records in 2001.One of the earliest investors in the organization was McDonalds which citing best interests for both parties divested in 2006 and withdrew all its shares from the organization.
The founder of the organization Steve Ells decided to make some alterations in the firm’s supply chain. This meant that all pork served in the firm was naturally raised up in 2000 and chicken in 2002. There was also a zero trans-fat oil policy incorporated in the “Food with Integrity” program that devoted the organization to using natural and organic constituents. The organization has always strived to make good food enhancing its primacy which made it testify before the congress in 2009 in the indulgence of doing away with antibiotics in product rearing.
Stakeholders
Employees
The employment policies were criticized in its initial stages of establishment and accused of fraudulently hiring employees. To counter these accusations, the organization has tried to be transparent. In fact, the firm is contemplating on changing its name in the company’s website to read ‘We provide real opportunities for advancement and fun exciting working environment.” In terms of service delivery, the firm has been commended for fast and speedy services that are all translated to employees’ efforts. The rate of turnover by talented employees has been one challenge facing Chipotle. However, several steps have been made to curb these issues, for instance, incorporating learning programs to help build the gap between employees from different settings.
Farmers and Breeders
One of the main initiatives Chipotle undertook beginning 1999 was to change and build its brand image. These changes were witnessed in their supply chains and served as a bait to attract products from local and organic farms. These efforts built farmers confidence in the organizations which saw them supply their products to the firm. The organic farming community expanded their farming because of the readily available market thereby increasing their social welfare through improved income and employment opportunities.
Government
The founder of the organization Steve Ells has had a close contact with the government. In 2009, he appeared before the congress to testify in favor of all efforts to eradicate the use of antibiotics in ranching. This action despite improving the organizations cause also played a crucial role in creating awareness and value of the brand.
Investors
Chipotle growth and development was quite tremendous. This was triggered by its adoption of Food with Integrity inventiveness that provided an extra value for the shareholders. One of the initial investors in the organization was McDonald. It played a significant role in the early growth and expansion of Chipotle. The investment provided funds that drove the organization establishments in 500 chain stores from the original 16 locations in the years of investments. In 2000, for instance, the organization went public in the New York stock exchange market whereby its stock rose by 100%, the best ever in a six year period.
Target Market and Audiences
In 2009, the organization grew by 3.1 % reaching a market value of $ 201.1 billion. To justify this tremendous growth, North America accounted for 47 % in Chipotle market value. In current times however, there is a slowing decrease its products spending as a result of economic imbalances and raising of prices due to increased costs of components. The decrease in the product spending has also been triggered by the need for healthier food options within the public because of health the cognizant publics especially in America.
Statistically, 4 % of consumers confessed to eat at the fast food restaurants only once per week. This has increased as the years go by. Consumer’s insight of the food products has also stretched. Most consumers are preferring flavor, quality ambiance as compared to the fast served burger. The consumers have also changed the notion of fast foods by including fast casual restaurants. People who go out searching for fat and healthy food find satisfaction in the organization products. Its founder described the organization as a pioneer concept in fast casual restaurant industry. He went ahead to explain the concept by saying that fast food can be served without going through a typical fast food experience. The organization goal is aiming a demographic of 18-34 years old specifically students.
Competitors and Collaborators
Chipotle is a forerunner organization in fast casual Mexican food thereby an important pillar in this category of restaurants. The organization faces direct competition for other organizations such as Qdoba Mexican Grill, Moe’s Southwest Grill, Rubio’s Fresh Mexican Grill, and Baja Fresh. There are also locally owned restaurants that have proved to be competitive to the organization in the provision of services. A good number of these competing firms have been in operation for some time thus having a strong brand name and financial capability than Chipotle. The competitive advantage Chipotle initiated to stand out was incorporating a variety of fresh ingredients and adhering to its food with integrity policy. The organization need to focus on making advantage of its cordial relationship with farmers to establish a solid marketing message to be able to stand out from its competitors.
Market Objectives
As indicated earlier, the organizations strategy for food sourcing is referred to as food with integrity. The underlying meaning in this statement is three dimensional segmented into food, people and animals. In the animals segment, there is a further classification of the products which are beef, pork, dairy cattle and chicken. Under people, several aspects are incorporated. These includes the labor culture in the organization especially employees, farmers and suppliers. The environment aspect concentrates on organic and locally farmed foods giving special consideration to vegetables. The organization’s food with integrity strategy is defined in a thusly way.
“It means serving the very best sustainably raised food possible with an eye to great taste, great nutrition and great value. It means that we support and sustain family farmers who respect the land and the animals in their care. It means that whenever possible we use meat from animals raised without the use of antibiotics or added hormones. And it means that we source organic and local produce when practical. And that we use dairy from cows raised without the use of synthetic hormones. Food with Integrity is a journey that started more than a decade ago and one that will never end.”
This was further explained by a blogger as, “Chipotle is pretty unique in the mass fast food space; they are openly committed to delivering sustainable ‘Food with Integrity’ menu items. As they grow, they likely want to ensure they are continuing to stay authentic in the sustainability space, while also communicating their key product benefits (fresh burrito taste).’’ Finding a balance here is not easy and Chipotle seems to be frustrated with standard approaches to the problem
The main goal of Chipotle organization marketing design should be to ensure consumers are aware of the organization and its importance beyond basic serving food. The organization does not only concentrate in serving food but also incorporated aspects of environmental conservation sustainability and consciousness. The organization should focus on putting up campaigns to shift this consumer perception and diversify its brand. Coupled with the fact that its products are relatively affordable, it will be easier to sell the products and services to a wide range of consumers with different income levels. This initiative will also increase the confidence of the existing consumers thereby increasing their demand. The campaigns are also important in stealing a share from other competing organizations.
Marketing Efforts
Chipotle marketing strategy has relied on word of mouth advertising. Additional advertising mediums are word billboards, radio frequencies, and print media. The strategy had positive outcomes over the years that mainly concentrated on the quality taste of their foods. It brand image is not reflected in the advertising campaigns. In 2007, for instance, its total advertising costs was compared to what McDonalds use to advertise in 48 hours. The organization advertising was not given so much consideration. The company resorted to in-house advertising in 2010. Print and billboards ads began focusing on the sources of food in their advertising campaigns thereafter. A good example is one ad on the billboard that read, “Meat, no prescription needed. No added hormones or antibiotics. “This brought in a better aspect that the organization was not using to touch the hearts of consumers.
Market Segmentation
Chipotle organization concentrates on five important segments for possible consumer base. The first cluster includes the fat food converts who are McDonald’s former clients or occasional consumers. This category can be further classified based on their motivation for converting. These could be because of convenience like when the organization is near their reach. The second classification is because of taste and preference and the last category is need for natural foods. The second target segment is Mexican restaurant connoisseurs. These are individuals who take the company’s products because they enjoy their natural and homemade food made style. The third segment includes health food, natural food and food sourcing connoisseurs who are attracted with the organization sources of foods. Students specifically in college present another category of potential consumers due to the cost friendly costs. The last category of targeted consumers is the low income individuals who are easily attracted by the reduced price points.
Market Targeting
Having identified the potential customers, the target is further classified into three categories which are primary, secondary, and tertiary. Primary targets involve health food, natural food and food sourcing connoisseurs who are in all job categories and understand the dangers of consuming industrial fast foods. They appreciate the foods and further motivated by the sustainability aspect of the organizational goal and are always willing to pay for them.
Secondary targets are fast food converts who switch to the foods so as to check their health situation. Their main cause is a motivation to alter their eating habits. Despite a need to change their diet, they may as well need to be involved in environmental sustainability efforts which they are not actively involved. The organizational products could trigger them into buying the services even more.
Tertiary targets are basically potential consumers with low income. This could also be as a result of one restaurant being close to them. In as much as they may not other differences between Chipotle and other organizations in terms of sustainability and quality, their driving motivation are the lower prices.
Strategic Alternatives
The organization should give much weight on the tastiness of food and keep up the sustainability promotion together with limited external advertising. This basically is an extension of the current business situation but to higher notch higher. Consumers who show an interest should be able to get very essential information to them. In the organizations website and budget, elements of sustainable sourcing practices and annual budget are not entailed. Consumers should be triggered to search for the information. There are several people who eat in restaurants but are ignorant of this fact. The ones who do not eat at Chipotle are unaware which makes this option not given the much-needed focus.
Chipotle should also come up with a national campaign comprising of TV adverts and PR events. In as much as this campaign will have considerably effect, it might have a second impact with regards to the direction the organization will be taking. Deep marketing for the company as compared with other competing firms like McDonald’s will make the organization lose its competitive advantage. The organization does not hold to traditional advertising and this method might not be applicable. The company has admitted severally that it does not apply 100% commitment due to sourcing shortages and at times, it suspends its services because of the same. Due to this fact, exposing the organization to national campaign through external advertisement may cause its objectives to fade away as a result of scrutiny cross-national scrutiny.
Preferred Alternative
The organization should come up with passive campaigns giving special attention to billboards, radio and magazine advertisements. This is the most recommendable strategy Chipotle need to pursue. In as much as the organization has some billboard adverts currently, their scale are still low. Many people are still unaware of the firm’s commitment to sustainability. This awareness can be increased or enhanced by strategically situating the billboards and other forms of print adverts together with efficient public relations campaigns. There are several other organizations providing same products and services as Chipotle. To this effect, the organization should focus on the aspect that the other firms are not offering and capitalizing on it. This will increase the primary target market than secondary and tertiary. Looking at the company’s face book page, for instance, it shows several images ads in Boston where sourcing practices are superficially described. Other features seen are all about its enormous burritos. To add value on this aspect, the idea should stick to the firms brand at the same time creating awareness the organization put in during sourcing of its products.
According to Chipotles report in 2009, there reads a statement “Our marketing has historically been based on the belief that the best and most recognizable brands aren’t built through advertising or promotional campaigns alone, but rather through all of the ways people experience the brand.”
This an important aspect but the organization is not doing enough to its vision to the public awareness. It therefore implies that if the organization makes people aware of its advantageous sourcing philosophy, it can generate a lot of income and have a major impact in the society.
Action Plan
Proposed Marketing Mix
Product
The organization has incorporated a marketing plan, which emphasizes on food with integrity. As an organization, this vision must be made clear in an eloquent manner which concentrates on serving the very best raised food possible translating to good taste ,nutrition and value which must be enhanced every time.
Price
The organization financial statements indicate that the organization received $ 10.50 as consumer spending in 2009.This was due to increased price menu as a result of high ingredient prices. This should not be case with the organization to alter their consumer prices in case there is a new marketing strategy.
Place
On average the organization opens up between 100-120 new restaurants per annum approximately taking us to 489 in 2005 and to 956 in 2009. The organization managed to enter the European Market by opening its first restaurant in London. It is reported that it is pursuing to open additional sites in other European countries like France and Germany. The organization ought to explore further marketing sites with regards to its mission statement Food Wit Integrity.
Promotion
The organization has dwelt on word of mouth promotion campaign as a marketing plan in addition to free giveaways and a You Tube campaign in 2006. In addition to that, social media has also plays an important role in their marketing and advertising. The organization should focus more on in house advertising and targeting their ultimate consumers.
Proposed Actions and Implementation
In the preceding 6 months, the organization came up with indirect signs in subway places, for instance, series of unclear signs in Boston. The organization should come up with straight forward advertising messages. The social media provides the best platform for the organization to interact with the public outlining their values and how they support sustainable farming practices which goes beyond their website use. During local events especially dealing with farming, the firm should set up booths, which feature on local farming practices to enable the public and communities around to digest their vision and mission.
Consumer knowledge is another important factor that all organizations need to be aware of. In this respect, Chipotle organization need to set a u budgetary allocation to conduct a market research in order to establish the specific needs and requirements of the customers. This information will also give them ideas on how other competing firms are doing and what to counter their dominance. Market research should focus on the target consumers and non-customers in order to understand what they need and how they perceive the organization. In cases where there is little information about the ingredient policies of the organization, the firm must come up with ways making sure both the customers and potential customers are well informed. Newer information about the sourcing ingredients should also be provided to primary consumers with an aim of establishing brand loyalty.
The organization should also expand cognizance across the prevailing clients for all the target markets. This will not only help build the brand name but will also make the customers feel being part of the great initiative to supporting and sustaining the environment. This will involve incorporating aspects like attaching images of local farms supported or short end notes about the same which will be very appropriate. This will have a positive impact on building customers confidence. When the customers are fully aware of the organizational vision and objectives, they will further market they organization by word of mouth to other potential customers thereby increasing consumer base.
Another aspect that the organization needs to take consideration is to work in partnership with other organizations or unions that have the same viewpoints that provide opportunities for further marketing.
Conclusion
Chipotle organization has a great vision and opportunity to expand further in terms of its market base. Keeping in mind the strategies and their implementation will provide the firm with a solid agenda to get into many market setting and have a high competitive advantage.