Dec 10 2007
Mass Media Vs Buzz Advertising
If you're new here, you may want to subscribe to my RSS feed so you don't miss any of the NEW IDEAS posted twice per day. Thanks for visiting!
Most fast-food chains drum up traffic by barraging consumers with mass-media ads, trumpeting their newest product or latest deal.
Chipotle Mexican Grill Inc. plays by different rules. The Denver-based company shuns TV commercials and most other traditional Advertising. In fact, it spends less in a year on Advertising than McDonald’s its former parent, McDonalds spends in 48 hours.
“Advertising,” declares M. Steven Ells, Chipotle’s founder and chief executive, “is not believable.” Instead, Chipotle banks on customers to spread the word.
Chipotle believes in generating buzz for word-of-mouth marketing. These days the typical consumer is exposed to so many paid pitches-estimates range from 600 to 3,000 a day-that people tend to tune them out. People also dismiss almost anything that comes from big companies, notes Dan Buczaczer, senior vice-president of Denuo, a new-media consulting division of Publicis Groupe, But if people hear the same message from a friend or even a stranger, he adds, they’ll probably believe it since the tipster has nothing to gain
What Advertising Chipotle does is mostly on billboards or radio, featuring the size or fresh ingredients of its burritos and tacos, along with a touch of irony.
But its marketing budget is minimal. Over the first 11 months of 2006, McDonald’s spent $818.9 million on traditional media Advertising in the U.S., Taco Bell unit spent $252.4 million, according to Nielsen Monitor-Plus.
Chipotle’s outlay over the same span: $4.5 million. Looked at another way, Chipotle spent less than 1% of its full-year revenue of $882.9 million on ads vs. 4% or more by its larger rivals.
The thriftiness goes back to Chipotle’s start in 1993, when Ells opened a cramped outlet in a Denver storefront. With only $85,000 to cover everything, he recalls, even a single ad seemed too costly. Ells thought customers should be swayed first and foremost by the food. So instead of telling people about Chipotle’s burritos he gave them away.
When dozens of reporters were camped out in Denver in 1997 as Timothy J. McVeigh was tried for the 1995 Oklahoma City bombing, Chipotle regularly delivered free food to the courthouse.
The handouts are now part of Chipotle’s strategy. When Chipotle came to midtown Manhattan last July, it gave burritos away to 6,000 people, some of whom stood in line for two hours. The stunt cost $35,000, figures James W. Adams, Chipotle’s marketing director. In return, the company landed 6,000 new spokespeople. “You could spend that same amount on an ad in The New York Times and you wouldn’t have that many people talking about you,” Adams points out. “The response to the food is almost always positive. It’s unique and it’s tasty.” But don’t just take it from him; any Chipotle regular would probably say the same thing.
.
.
…Don’t miss any of our twice daily posts of NEW IDEAS, Subscribe NOW in your RSS reader
.
If “advertising is unbelievable,” then why:
1. Are hundreds of millions of dollars spent on it each year by erstwhile smart and successful businesses (like P&G, Toyota, McDonalds, etc.)? Are they stupid? Has it not fully sunken in to them that it does not work?
2. Should anyone believe Chipotle’s corporately-provoked “word of mouth (advertising)”?
Steven Ells should cut the mindless chatter or completely cut his ad budget (kill the billboards and save the $4.5 million) and put real teeth into his prattle.
If “advertising is unbelievable,” then why:
1. Are hundreds of billions of dollars spent on it each year by erstwhile smart and successful businesses (like P&G, Toyota, McDonalds, etc.)? Are they stupid? Has it not fully sunken in to them that it does not work?
2. Should anyone believe Chipotle’s corporately-provoked “word of mouth (advertising)”?
Steven Ells should cut the mindless chatter or completely cut his ad budget (kill the billboards and save the $4.5 million) and put real teeth into his prattle.