Here’s How Chipotle Is Looking To Drive Customer Traffic By Its Advertising Campaign

by Trefis Team
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As it struggles to keep food safety concerns at bay, Chipotle Mexican Grill (NYSE: CMG) is increasing its focus on advertising campaigns to promote its new menu items. The company recently opened “Chipotle NEXT Kitchen” where it will be testing its innovative menu items. The company believes that these new items are suited for the 15 second advertising spots that make up the majority of its television advertising.  The company’s first wave of advertising in April this year with its “As Real as it Gets” campaign was not very effective in attracting new customers.  However, its updated advertisements in May got a more positive response and the company is certain that television advertising with the correct narrative has huge potential to drive new traffic to its restaurants. Chipotle is now working on another wave of television advertising for September this year with refined ads and believes that this should attract new and lapsed customers.  The focus of these advertisements will be its new menu item – queso, which has been in high demand for a long time.

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Attracting traffic to its stores is crucial for Chipotle as it struggles from a significant reputation loss after the infamous E. coli virus and the most recent isolated norovirus incident. We expect the new menu items to drive guest traffic at Chipotle’s stores and the average number of visits per restaurant per year to increase steadily at a rate of 1-1.5% over our forecast period.

However, if guest traffic stagnates at current levels, there can be a more than 10% downside to our price estimate. Driving guest traffic by enticing new and lapsed customers to its stores through an effective advertising campaign is crucial for Chipotle’s valuation. As it looks at interesting ways to engage customers and promote its products, the company recently launched a new traffic driving program called SAVOR.WAVS. This is an interactive customer experience where their order is translated into a musical and visual experience by SAVOR.WAVS and customers can see how each ingredient was paired with a musical sound. The company is looking to support SAVOR.WAVS with an advertising campaign through its social channel and paid promotions with Spotify. More than 2.5 million Chipotle customers have composed their order with SAVOR.WAVS and the company believes that this unique experience can engage customers better and drive customer growth.

The most crucial goal for Chipotle currently is to attract customers back to its stores after the significant reputation loss due to food safety concerns. The recent isolated norovirus incident has impacted its already fragile reputation. We expect traffic to return as the company introduces new menu items and the popular queso, however, our price estimate can have a downside of 10-15% if the traffic growth does not meet our expectations.

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