"We don't want to rely on a continuing basis on discounting. Obviously, that cheapens the brand, and creates a sense of entitlement ultimately such that people just begin to expect it," Ells told analysts on a conference call last week.
From Feb. 8 to May 15, Chipotle reached out to consumers with deals on food via direct mail, mobile and social media. Chipotle kicked things off on Feb. 8 by offering a "rain check" free food promotion on mobile devices for people who showed up while its stores were closed for several hours during a company-wide employee meeting. It also sent out about 21 million direct-mail pieces containing free-food offers during the period.
Then, Chipotle launched Chiptopia Summer Rewards, a limited-time loyalty rewards program that gave customers free food for making multiple visits in a month. The three-month promotion started July 1 and ran through Sept. 30. Chipotle said it had roughly 6 million participants in the reward program, with more than 2.5 million people earning rewards.
And last but not least, in October Chipotle debuted an online game called "Love Story" that gave anyone who plays a buy-one-get-one-free entree offer. More than 3 million buy-one-get-one rewards were earned by people playing the game, says Chipotle.
Despite the free food giveaways, new loyalty program and stepped-up marketing, Chipotle still hasn't managed to recover.
The embattled burrito giant's third-quarter sales plunged 21.9%, falling well shy of Wall Street forecasts for a drop of 18.9%. Meanwhile, the discounting exacted a hefty toll on Chipotle's bottom line. Excluding one-time items, earnings came in at 56 cents a share, badly missing analyst expectations for earnings of $1.56 a share. A year ago, Chipotle delivered earnings of $4.59 a share.
Chipotle executives told analysts on the call that same-store sales in October were running down about 21%.
"Chipotle's third-quarter earnings reinforces our thesis that the path to recovery remains slow and the brand has yet to regain credibility with the consumer. Therefore, we believe it's too early to buy the stock, as same-store sales remain well below pre-incident [pre-E. coli] levels, despite aggressive promotions," wrote Canaccord Genuity analyst Lynne Collier in a note.