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Will Chipotle’s Free Food Giveaway Win Back Customers?

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The pros and cons of brands doling out freebies as a mea culpa

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Within this decade, everyone from Taco Bell to McDonald's has endured food crises that heavily damaged their brands' reputations and sales. And in just the past 10 months, Chipotle, Jeni's Splendid Ice Creams, and Mast Brothers all struggled with public relations nightmares. Jeni's battled two cases of listeria, a bacteria strain that causes sepsis and meningitis, in its production facility; an ongoing E. coli scare has plagued fast-casual hegemon Chipotle since November 2015 (though recently, the Centers for Disease Control stated Chipotle was clear of the bacteria after a random sampling of 2,500 products); and Mast Brothers was outed by Scott Craig of Dallasfood.org for allegedly misleading consumers by labeling themselves as 100-percent "bean-to-bar" chocolatiers.

All three have attempted to bounce back from the scandals in various ways, hoping to undo the damage inflicted on their brands. But the most publicized and discussed strategy in the past few weeks has been Chipotle's use of "free food" to maintain customer support.

On February 8, Chipotle announced its "Raincheck campaign" online and through social media, allowing customers to text "raincheck" to 888-222 until 6 p.m. to receive a coupon redeemable for a (hopefully E. coli-free) meal on the house. Ostensibly, the "raincheck" offer was due to the day's country-wide, four-hour-long store closure, during which branch employees discussed new safety protocols that would help prevent the possibility of further disease development. If the temporary closure "messed up your lunch plans," Chipotle announced, the free burrito would allow the chain to "make it up to you."

Chipotle

Earlier this month, Chipotle fans/smartphone owners could text to receive a coupon code for a free burrito.

According to a CNBC report, in January, Chipotle co-CEO Monty Moran told attendees of the restaurant-industry ICR conference that the chain would double the amount of free food stores would be allowed to give away, although the report did not specify how long the budget increase would last. The free food, according to the report, would help curb fallout by allowing owners to "increase their giveaways and reward customers" for their patronage.

It may seem counterintuitive that the same product that scared customers away could be the solution to winning their trust back. But if using "free pizza" to get college students to attend events points to anything, it's that people go crazy for free food.

"Free things give consumers a psychological boost because we're getting something we don't have to pay for," says Lars Perner, an assistant professor of clinical marketing at the University of Southern California. "But also, food in particular gives immediate gratification." Perner says that it's possible for a free-food plan to backfire, as it could remind customers of the reason they're getting "rewarded" in the first place (such as Chipotle's E. coli scare), but it could also prove to be the key to getting customers back on the train.

Like Chipotle, Mast Brothers has been offering free food to customers during the aftermath of its image crisis. A series of tastings took place in New York City in mid-February, although Mast Brothers public relations representative Tim Monaghan claims that "Mast always has and will continue to do tastings" and that "the upcoming tastings are business as usual and not anything out of the ordinary." Mast has offered tastings in the past, but experts claim that the tasting could still be used to the brand's advantage. David Johnson, the CEO of Strategic Visions PR Group, says that given the timing of these tastings, Mast Brothers could strengthen its fan base through these tastings and could even win back some customers.

"Free things give consumers a psycho­logical boost, but food in particular provides immediate grati­fication."

"An offer for free food gets incentive," says Johnson, later adding that "if you can hook [customers] in, even if it's through free food, there's the potential they'll become hooked again and say, 'Look, they may have done something wrong, but I really like this.'"

Free food is helpful to mend relationships with customers, but it's not an absolute savior for managing companies' crises. During the first quarter of 2011, Taco Bell was slapped with an infamous (and eventually dismissed) class-action lawsuit alleging the brand's taco "meat" contained only 35 percent actual meat, far below the USDA standards. In February 2011, the hard shell champion made a symbolic concession by offering its consumer base 10 million coupons for free tacos, obtainable by "liking" Taco Bell's Facebook page and downloading or printing the coupon, good for one $0.99 taco. Similarly, in 2014, McDonald's locations in Japan were outed as using expired chicken meat in their Chicken McNuggets. Seeing that McNugget sales weren't showing signs of recovery after the scandal, the Japanese branch did what every desperate chain does: It offered customers free McNuggets in a promotion that lasted about 10 weeks.

Even with its free taco coupons, however, Taco Bell's sales flatlined during Q1 of 2011 when the lawsuit first came to light, and dipped five percent in Q2. According to Reuters, chief executive David Novak reported in the same earning-announcing conference call that Taco Bell expected sales to continue to be in the negatives in the third quarter. Unsurprisingly, McDonald's Japan also suffered losses after the chicken scandal broke in October 2014. McDonald's Japan continued on its slide until September 2015, when it saw its first sign of sales growth —€” at approximately 2.8 percent.

In 2011, Taco Bell thanked Facebook fans by exchanging "Likes" for free taco coupons.

Did the free-food promotions help? Taco Bell saw a systemwide decline in sales of 1.4 percent in 2011, but the chain did return to its fast-food stoner throne upon introducing new menu items throughout 2012. In January, the Bell rolled out its first breakfast menu items in select states; later in March, it doubled down with the nationwide availability of its Doritos Locos Tacos. McDonald's Japan arm, however, saw continued year-end net losses by the end of 2015, in addition to its net losses in 2014 (though the fact that two customers found a human tooth and a piece of vinyl in their meals definitely didn't help).

Taco Bell and McDonald's both prove that free food can be used to entice customers' short-term return, but it might not be enough to reclaim the lost market. In the case of Taco Bell, the commenters on news and food websites (such as Eater) who announced they had downloaded the coupon typically claimed they were already fans of the Bell and indifferent of the ongoing "beef"; others already dedicated to prothletizing their diatribes of Taco Bell simply used the scandal as more ammo for their already-developed viewpoints.

According to several industry experts and representatives, improved safety regulations and a dedication to transparency are the main ways that companies like Chipotle and Jeni's can regain customers' trust. Chipotle could not be reached for comment, but the sentiment of transparency — aka keeping customers in the loop — was echoed by Jeni's on its website.

"I got the coupon for the free burrito, and then I got hooked again. I literally ate it for lunch today."

Ryan Morgan, the experience leader at Jeni's, says "the best chance you have to maintain trust and earn forgiveness is to be open and honest about what happened. To own it —€” even when it sucks." He admits that Jeni's wasn't "in the position to" implement a free-food strategy like the one currently being used by Chipotle. During the listeria scare, the company dumped 500,000 pounds of ice cream —” approximately a whopping $2.5 million of revenue. It did, however, offer to reimburse customers for any ice cream purchased around the time of the listeria announcement.

Ultimately, there's no crystal ball telling us whether Chipotle, Jeni's, and Mast Brothers will ever return to their previous levels of success. Mast has largely evaded public scrutiny since the December fallout, and Morgan of Jeni's says the company is "coming back stronger than we were before." And while Chipotle has seen sharp decreases in sales since the fourth quarter of 2015, it sees signs of regaining support: Social media surrounding Chipotle blew up after the company announced its "raincheck" offer,€” and devoted Chipotle fans vocalized their support for the company's openness regarding the ongoing recovery. With these various techniques being incorporated in order to earn customer trust, the companies just might find their way back into a popular light.

"I kinda stopped eating Chipotle after the E. coli scare," says Hector Sabino, an employee at a coffee shop across the street from a packed Chipotle near NYC's Columbia University. "Then my friend told me about the raincheck. I got the coupon for the free burrito, and then I got hooked again. I literally ate it for lunch today."

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