Why Chipotle brand will Rebound Quickly

Chipotle has been through no picnic recently, with two multi-state E-coli outbreaks, a separate norovirus issue, and widespread negative food safety publicity.   However, barring any other major food safety issue, Chipotle will recover quickly and thrive, for five major reasons.

  1. Consumers LOVE, not like, the brand – Chipotle has extremely high levels of brand awareness and brand esteem, well beyond their peers, which yields very high levels of brand equity, from which a setback can borrow.  Brand equity is like a bank account: continued positive experiences build brand equity; issues will erode.  Consumers have a very strong personal affinity, love and respect for the brand; it’s well beyond a fast-food choice they visit.  In fact, Chipotle scores 83 (out of 100) on the American Consumer Satisfaction Index (ACSI), nearly at the top of all fast food brands, which average 77, well beyond Wendy’s (73) and McDonald’s (67).
  2. Chipotle has been transparent in its communication and rigorously improved product safety – Once the second E coli incident occurred, Chipotle’s leadership has aggressively communicated taking responsibility for the problem, sought best-in-class system-wide food safety counsel and implementation, and has invested in redundant measures to ensure food safety.   In their most recent quarterly report, Steve Ells, founder, chairman and co-CEO of Chipotle said “We are pleased to have this behind us and can place our full energies to implementing our enhanced food safety plan that will establish Chipotle as an industry leader in food safety. Image result for chipotle loveWe are extremely focused on executing this program, which designs layers of redundancy and enhanced safety measures to reduce the food safety risk to a level as near to zero as is possible. By adding these programs to an already strong and proven food culture, we strongly believe that we can establish Chipotle as a leader in food safety just as we have become a leader in our quest for the very best ingredients we can find.”  This contrasts with several food companies who either hid or understated their food safety or recall issues and were quick to try to claim it was solved with a reactionary nominal manufacturing change.
  3. Favorable food safety and public relations are reassuring and reminding consumers to return – Yesterday, both the CDC (Center for Disease Control) and FDA (Food & Drug Administration) called Chipotle’s E. coli outbreaks over.  Chipotle will close its Image result for chipotle company wide meetingstores for several hours on February 8th to have a company-wide meeting reviewing new food safety measures.  Internal communication and execution of these improved processes are already in effect in their stores.  We also expect Chipotle to resume and increase its compelling advertising, in-store promotion, and couponing programs to welcome concerned consumers back to their stores and resume their unusually high frequency and loyalty of coming back to the stores.
  4. Chipotle will refine, but stay true to its compelling promise of Food With Integrity –2010_02_Chipotle
    Chipotle loyalists are drawn to their unique positioning as a higher quality fast food option, strong price/value, and great taste.  While their will be refinements in product sourcing and distribution, the product promise of Food With Integrity will remain intact, and strengthened. Consumers will continue to see the Chipotle brand as a superior fast food choice meriting their continued loyalty.
  5. Same-store-sales will rebound faster than industry averages – Since Chipotle has a stronger and more loyal customer base, traffic will improve more quickly than the industry’s typical 12-18 months to recover same-store-sales performance, as per Credit Suisse estimates. In addition, their marketing and promotional effectivenessChipotleand sophistication will also accelerate the pace of same-store-sales rebound.  We expect a recovery in 3-4 quarters, propelled by an even stronger in-store experience, product quality, favorable public relations, and consumer word-of-mouth.

Lessons learned:
1.  Give consumers a superior, differentiated product and a reason to love, not like, your brand.
2.  Beloved brands can, and do, recover from quality and public relations issues, if they are quick, contrite, and responsible.
3.  Be proactive and vigilant in your product quality processes, pre-prepare how you would mobilize to address a product quality issue.
4.  Incent post-crisis consumers to resume confidence in your brand and incent/reward them for their loyalty.

 

Annual Plan Checklist for a Killer 2016!

We hope your 2015 is exceeding expectations and you’ve created a strong plan for 2016 to grow faster.  As most of you are, or are approaching, completing your 2016 Plan, here’s a checklist to make sure you’re ready for a killer 2016!

2016 Annual Plan Checklist

1. Develop a Written, Market Based Growth Plan Carefully

  • Analyze and segment your customer and consumer base, prioritize by growth potential
  • Understand what your customers’ unmet needs and why they will choose your superior product or service
  • Build a strategy that leverages your business model: market opportunities, your core competencies and where you are most profitable

2. Widely Communicate Your Growth Strategy

  • Summarize your 3-5 Key Growth Strategies, based on factual analysis (e.g. channels, products/services)
  • Growth Priorities should be quantified and clearly communicated throughout your company and key constituents (e.g. suppliers) so everyone understands them and is aligned
  • Innovation should be among your top priorities; have clear parameters (fertile areas in which to innovate) to provide direction

3. Have, or Get, the Right Accountable Team

  • Have accountable talent who can lead and drive respective pieces of the growth strategy
  • Have strong and clear inter-department communication and processes
  • Have the right talent who can produce; commit to coach up, outsource for, or dismiss those who can’t

4. Execute with Cross-Functional Precision

  • Have clear leadership, accountability and measurement of top initiatives
  • Maintain ongoing cross-functional leadership and communication to keep key initiatives on track
  • Track key programs quantitatively and refine them based on in-market learnings

5. Deploy Effective and Efficient Marketing

  • Marketing should identify and drive consumer and marketing growth opportunities
  • Marketing should develop and lead a clear marketing strategy that directly ties to growth strategy Your brand positioning(s) should be clear, consistently communicated.
  • Your marketing communication and R&D efforts should consistently strengthen your superiority
  • All major programs should be on strategy, measurable, optimized across multiple media, and provide measurable return-on-investment

6. Drive Productivity… Everywhere

  • Set ambitious, achievable productivity goals (cost reduction/efficiency). $1 in productivity > $10 in new sales
  • Challenge each function to develop specific, measurable, cash-saving (not conceptual) programs; drive wide participation
  • Celebrate, publicize, and reward best programs. This creates a ripple effect for more productivity

Avoid Botching Exposure: No, we still don’t know BDO

BDO, a global accounting, business and financial consultancy, is wasting millions of dollars on its current advertising campaign, “People who know, know BDO.” In their advertising, they could tell you who they are, but they don’t. They could tell you what problems they solve for you, but they don’t.    They could tell their target audience when to contact them and why, but, alas, they don’t.  It’s painful to see such a great introductory opportunity go to waste.

Rather, they do tell you that the people who already are aware of them and know what they do (presumably anyone but the audience) are knowledgeable.     So they are talking only to people who already understand and use their services.     This is a great example of everything you don’t want to do in your advertising.

Sadly, they repeat the strategic vagueness on their website as well (At least the campaign is consistent).BDO

To avoid this, take these simple steps:

1.   Clarify your brand proposition – Who are you, what problem(s) do you solve, who is your target audience, and why are you superior and unique.
2.   Determine your advertising goal – Are you trying to attract new users?  (like BDO is attempting, but failing to do)  Convince current customers to buy/select/consume your brand more frequently?   Are you trying to improve your brand image?    If you are not clear about the purpose of your advertising (or any marketing investment), you can count on meandering advertising, unless your marketing partners are clairvoyant.
3.   Assess your advertising from the consumer’s perspective – What do they know about you now?  What do you want them to know about you after they have been exposed to your message?    Make sure you are giving them a persuasive message, in their language, based on what you know from your consumer research.     Again, BDO makes a common error of crafting advertising based on their internally focused, prideful self-assessment.     It’s a missed opportunity to tell potential customers of who they are, why they’re a superior service, and how they will solve the customer’s problems.
4.  Pre-test your advertising – There are several great advertising effectiveness evaluation methods, including MSW ARS and IPSOS ASI, that will give you unbiased, quantitative and credible feedback on if your advertising campaign is persuasive and has achieved your marketing goals.    These are small investments that can be done while the campaign is in the idea phase, prior to wasting money on producing or airing ads that do little to grow your business, or even may do harm.

4 Ways to Raise Pricing and Delight Customers

Most companies loathe or mismanage the harsh reality that pricing increases are often necessary to offset inflation, even with the most diligent cost control.     Often, this is a painful across the board price percentage increase on all units, on largely unchanged products and services.     Here are five great ways to drive price increases that consumers will willingly accept, and, even enhance loyalty to your company.tide_pods
1.   Innovate to improve the customer’s user experienceTide Pods is a brilliant innovation that makes washing clothes more convenient, portable, and less messy.    The idea is grounded in solving problems and consumer irritants in the category    Tide virtually reinvented laundry detergent from the customer’s perspective of easily, and properly doing a load of laundry.    Pricing impact:   +10-15% increase per load, plus a more space efficient configuration, which reduces distribution expenses.

2.  Resize to meet changing consumer preferences –   As consumers are trying to reduce their consumption of soft drinks and/or improve their portion control, Coke has come to their rescue with their new, appealing 7 1/2 ounce cans, ostensibly for consumers to choose versus 12 ounce cans.   150114_EM_PayMoreLessSoda And consumers are delighted; sales volume is up 9% according to the Wall Street Journal, while paying nearly double – yes double – the price per ounce for these cute cans.     Yes, this is an exaggerated, albeit successful example, but the bigger point is that Coke is re-evaluating serving sizes from a consumer perspective and looking at pricing on a price per ounce vs. price per unit basis.
3.   Innovate for new usage occasions –  Similarly, Crystal Light did this brilliantly by adding smaller On-The-Go packages, specifically designed to enhance the staple 8 oz.Crystal Light brand water bottle, again at a +100% price premium versus their traditional make a gallon at home package.    Lest you forget to buy these in the supermarket, they are brilliantly merchandised in convenience stores and gyms, right at your (now enhanced) water bottle point of purchase.

4.  Adjust product mix and package sizes –  Cereal and snack companies master the ability to change their product size mix and selectively reduce the amount of product in certain packages.     This can often mask direct comparisons versus the previous product line up and  pricing.    Further, you can strategically promote your more profitable package sizes more frequently, again, driving an effective price increase that is often invisible, and/or preferred by the consumer.

Lessons Learned:
1.   Think of pricing in broader terms than price per unit.     Price per ounce, price per pound, price per consumer usage occasion give you far more latitude for consumer-accepted price increases.
2.   Solve consumers’ most nagging problems in a product improvement or innovation and they’ll pay for that privilege.   Increasing convenience or reducing waste are among two widespread benefits that consumers will pay for.
3.   Build an expectation of gross margin enhancement into your innovation program and project selection criteria.

Food Mergers and Acquisitions that will shape 2014

Brilliant overview by Paul Conley/FoodDive: three expected trends in the food industry.

1.  Buying market share
2.  Dumping the non-core (refocusing on core)
3.  Buying younger (and more innovative) companies

“This week saw two more giant deals for the food industry in a year that has been filled with mergers, acquisitions and divestments. Sysco announced it would spend $3.5 billion to buy competitor U.S. Foods; meanwhile, WhiteWave announced it would spend $600 million to acquire Earthbound Farm.

Those deals, as different as they were, pointed to a series of business trends in food and beverages that dominated the headlines in 2013. These are hardly new concepts in the mergers and acquisitions world, but they did seem to take on a new urgency this year. And we see no reason why those trends won’t continue into 2014.

BUYING MARKET SHARE
There’s a change-management and business theory known as “corporate lifecycles” that we adore. Without spending a lot of time explaining what is a fairly complex approach, suffice it to say that the theory tracks the growth of companies at various stages of their existence.​

(Image credit: Flickr user karen_2873) One of those stages is called “aristocracy,” when a company tends to struggle to find growth, shies away from new markets, and focuses on short-term financial gains. Aristocratic companies often take to merging with other aristocratic companies in an effort to control market share.

The Sysco-U.S. Foods merger is a classic example of such a royal wedding. But it’s not the only one we’ve seen this year.

Dairy Farmers of America, although structured as a cooperative, has been acting the part of the aristocratic corporation in its mergers with Dairy Maid and other similar companies. Another approach common among aristocratic companies is to buy up smaller competitors in smaller markets. That’s the approach J&J Snack Foods seems to be taking as it buys up every other pretzel maker in North America.

DUMPING THE NON-CORE
When aristocrats age they often enter the stage called “early bureaucracy,” a time marked by corporate restructuring and blame placing. It’s also a time when a corporation will announce with great fanfare that it is shedding non-core assets, returning to its roots, and “doing what we do best.”

(Image credit: Wikimedia Commons

No company has better illustrated this trend in 2013 than Nestle. The world’s largest food company has suddenly taken to selling anything that doesn’t seem Nestle enough. Jenny Craig? Dump it. Givaudan? Who needs it?

Other companies in a similar position include Chiquita — which hired a new CEO in 2012 who plans to focus on the core” and “eliminate distractions ​— and Del Monte Foods, which has decided its core is actually pet food.

BUYING YOUNGER COMPANIES
Aging corporations often look to regain their youth by buying a much younger company that is presumed to have expertise in new markets. Examples this year include Coca-Cola, which is seeking shelter from the anti-soda movement and completed its takeover of coconut-water bottler Zico Beverages; Campbell Soup, which is seeking shelter from the declining market for canned soups by buying Silicon Valley darling Plum Organics; and Post Holdings, which is seeking shelter from the collapsing market for cold cereal by buying every company it can find that doesn’t make cold cereal.

(Image credit: Flickr user sfllaw)The corporate lifecycle approach to understanding businesses isn’t flawless, but it can be illuminating. And nearly every transaction we’ve seen this year fits into the model. (WhiteWave’s purchase of Earthbound Farm is a particularly wacky one. WhiteWave was spun off as non-core by Dean Foods just 14 months ago, and is buying Earthbound as it exits the “adolescent” stage, when company founders step aside.)

And if nothing else, corporate lifecycle theory is pretty good at predicting what a company is likely to do as growth slows. Which is a sort of long-winded way of saying we expect A-B InBev and SABMillerto merge in 2014 in one of the largest aristocratic marriages in food and beverage history.”

 

Samsung’s Strategic Apple Smackdown

Samsung continues to brilliantly challenge, and deposition, the Apple brand in its newest Galaxy S4 advertising campaign. Reminiscent of Apple‘s classic “I’m a Mac. I’m a PC” strategy, in which Apple strategically portrays IBM as inferior, old, and tired, Samsung contemporizes that idea by showing itself as the superior, younger, and cooler option. This continues Samsung’s successful strategy of demonstrating wins on brand performance and image vs. Apple that it has employed for several years.

It’s working beautifully, particularly at a time when Apple has finally shown some vulnerability. In fact, according to Interbrand‘s recent Best Global Brands report, Samsung was the biggest rising star in brand valuation – up 40% versus the prior year, now placing it as the world’s 9th most valuable brand. In addition, Samsung has grabbed the #1 market share position in smartphones, jumping ahead of Apple and Nokia. According to Ad Age, Samsung’s market share jumped to 30%, up 9 percentage points vs. the prior year, partly at Apple’s expense, who lost 2 share points. Beyond portraying Samsung’s users as far more savvy, bright, and aspirational, the campaign also persuasively communicates several of Samsung’s feature and performance advantages.

Samsung’s innovation and communication strategy beautifully position themselves as a leader, while strategically redefining the competitive brand as an inferior option.

Lessons learned:
1. Brand challengers can effectively surpass the leader by building brand performance and image superiority. The strategy works particularly well when you win on the primary benefits that drive brand selection and loyalty.
2. Exploit your competitors’ weaknesses and vulnerabilities. Even the most dominant brands have ‘chinks in the armor’ that you can exploit.
3. Innovate quickly and often. Market leaders often innovate and execute more slowly, deliberately, and have higher volume hurdles.