Oh great, those Twitter hack brigades are at it again. This time, they got to Chipotle Mexican Grill, Inc. (NYSE:CMG), with a string of cryptic tweets about avocados and how to use Twitter.
It’s a clever stunt, but there was just one thing wrong about that: it was a fake hack all along.
It was a marketing stunt by Chipotle Mexican Grill, Inc. (NYSE:CMG) to draw attention to its 20th anniversary scavenger hunt for prizes and giveaways, and it resulted in 1,500 retweets, as well as increasing the amount of followers to Chipotle’s twitter page. It’s clear that this was a successful advertising ploy by Chipotle, and also shows how advertising and marketing has come of age through social networking in terms of reach and cost.
Push the product, save on ads
To give the long and short of Chipotle Mexican Grill, Inc. (NYSE:CMG)’s marketing strategy: it’s about highlighting how unique the company is in its products, as well as allowing word of mouth advertising and social media to do the heavy lifting. Its main tool of marketing is that Chipotle prides itself in natural, fresh ingredients, as well as using internet social platforms, like Facebook Inc (NASDAQ:FB) and Twitter, to spread the word. Its Twitter page has over 230,000 followers, while its Facebook page has over 2 million likes, allowing the company to advertise with a wide range of frequent social media users for less than the cost of television advertising.
As a result, Chipotle Mexican Grill, Inc. (NYSE:CMG)’s advertising budget is low compared to its competitors and dropping. In 2011, the company spent a mere $6 million in advertising, a 20% drop from the previous year. To put that into perspective, Taco Bell, a competing Mexican restaurant chain, spent nearly $250 million in advertising in the US alone. This is because Taco Bell relies more on television advertisements than Chipotle, which has cut into its operating profit margins.
Taco Bell: Got the followers, need the tweets
Chipotle Mexican Grill, Inc. (NYSE:CMG), according to its 2012 earnings report, grew its operating profit by 30%, while Taco Bell only grew by 8%. While this may be due to Taco Bell not being a standalone company (it is owned by Yum! Brands, Inc. (NYSE:YUM)), and having less room for profit increases, it does show that a smaller company like Chipotle can compete vigorously with an international brand like Taco Bell by keeping advertising budgets small, and using social media more aggressively.
At last count, Taco Bell may have three times the Twitter followers, but Chipotle Mexican Grill, Inc. (NYSE:CMG) has tweeted nearly 8 times more than Taco Bell. This means that Taco Bell isn’t using Twitter to its full capacity, and word of mouth isn’t getting around as much as it does for Chipotle, which may be a problem in the near future as fewer switch on televisions and switch on to Twitter.
The Starbucks of burritos?
In this manner, Chipotle Mexican Grill, Inc. (NYSE:CMG) kind of reminds me of another company that has an unconventional advertising plan: Starbucks Corporation (NASDAQ:SBUX). Unlike Starbucks’ rivals, like Dunkin Donuts, it does not have a habit of spending big on advertising.
In 2012, Starbucks Corporation (NASDAQ:SBUX) spent only $150 million on advertising, only 1.4% of its revenue, while competitors like Dunkin spend over 10 times that percentage. Like Chipotle Mexican Grill, Inc. (NYSE:CMG), it also focuses on tech savvy gimmicks, like “Daily Deals” that require email registration, or art design contests for bags of coffee. Starbucks also sponsors art shows and social charities in big cities, which puts them in the public eye to a lot of people through free local media advertising, and helps expand its social awareness niche, like how Chipotle uses its fresh, environmentally responsible ingredients in its advertising.