Could Chipotle Have Saved Millions of Dollars By Taking Online Reviews More Seriously? | Street Fight

Could Chipotle Have Saved Millions of Dollars By Taking Online Reviews More Seriously?

Could Chipotle Have Saved Millions of Dollars By Taking Online Reviews More Seriously?

84% of all consumers say they are influenced by online reviews, according to Bright Local.

However, there is currently no meaningful way to harness the content of these reviews to improve strategy. This fact is reflected in the many articles which tell you “what to do with customer reviews” as well as the nature of the jobs surrounding reputation management. For example, a social media manager is expected as a part of their job to sensitively address negative reviews so to better the perception of the business and brand. While this is an important task, there is another name for it: firefighting.

But changing the way we think about online reviews could save businesses money. Indeed, if done right, Online Reputation Management (ORM) can act as an early warning system and the holistic monitoring and analysis of reviews and online assessments across all locations and review platforms can help companies to identify where structural and service-provision problems lie. This can ultimately prevent long-term damage to their brand and reduce the risk of decreasing profits.

When companies lack the resources to monitor such content across all their locations, they miss tremendous opportunities to amend underlying problems in their businesses. Two gastronomic examples from the U.S. and Germany show how companies suffered damages to their brand (and revenue shortfalls up to 33%) because executives only became aware of customer dissatisfaction when it was too late.

Chipotle: Real-time reputation management replaces annual customer surveys. 
Chipotle, one of the fast-food industry’s success stories, had one of the most inconvenient investor conference calls of 2016: The CEO Steve Ells was forced to announce during this call that profits were down by an incredible 22% in the last quarter (an announcement that would send share prices down by 22% too). He explained that the decline in sales was due to a decrease in customer satisfaction, which was brought on by long waiting times due to low throughput and frequently missing ingredients. These two factors were identified in a guest satisfaction survey amongst frustrated customers and made executives realize that an estimated 1,000 out of 2,100 Chipotle restaurant locations in the U.S. were falling short of set standards.

Making that call shouldn’t have been necessary: A year prior to the announcement, more and more negative online reviews were left across the U.S. on platforms such as Yelp, Foursquare and Google My Business. These all shared similarities: Eating at Chipotle was a disappointment for the same two reasons that executives found out through their survey. Customers were describing their sub-par dining experiences in brutal terms, writing that service staff were “inexperienced,” the waiting time was “too long,” and the actual product was “missing ingredients — and perhaps worst of all, “overpriced for what it is.”

These online reflections were left across a number of platforms for locations across the U.S., and were a key sign of deeper structural problems. However, they could not be translated in time into actionable insights, as executives did not take notice of them. As Foursquare showed in 2016 with their accurate prediction of a previous revenue decline of 30%, analyzing data points on a local level — in their case, check-ins — can serve as a valuable early warning indicator. The beauty of ORM lies in not just detecting business trends but also understanding the underlying reasons. It’s only through these that effective countermeasures can be derived.

Burger King: How online reviews could have prevented a franchising nightmare
Throughout 2013 Yi-Ko Holding rose to become Burger King’s largest franchisee in Germany, operating 89 out of their 688 restaurants. This stellar growth came at the expense of quality standards, however. Undercover journalists from the TV network RTL in April 2014, uncovered dramatic hygiene problems, and inhuman pressure on understaffed employees. This scandal forced Burger King cancel their contracts with Yi-Ko Holding resulting in the closing of 13% of their restaurants in Germany and reoriented forever the way the company manages its franchise-arrangements in the country.

Over the course of 2013 customers of Yi-Ko Holding’s restaurants increasingly left public online reviews about “broken and dirty furniture,” “sleeping and indifferent staff,” and “mice running around in the kitchen.” Per the nature of a franchise system, to the typical consumer it was unclear that these problems were limited to this individual franchisee. Consequently, the Burger King brand as a whole began to deteriorate and customers reduced their consumption across all locations, leading to revenue declines of up to 33% for some other franchisees.

By properly monitoring and analyzing all these publicly available local data points, Burger King not only could have been made aware earlier of poor hygienic conditions, and poor social conditions for workers. They would also have seen the trend that the locations with on average 0.7 points lower ratings (on a 1-5 scale) were franchised by a single owner: Yi-Ko Holdings. Instead, customers’ stories of displeasure reached a wider audience, and eventually led to a legal scandal. Yi-Ko Holding filed for bankruptcy, employee tribunals were conducted and the entire event was a PR disaster.

Reviews drive bottom-line sales
These two examples, demonstrate commonalities that appear in many companies across all industries:

  1. Local online reviews were at worst ignored, or at best viewed as being individual instances of bad service — the fate of a single person.
  2. Reviews were not collected and holistically analyzed in a timely fashion to derive strategic measures.
  3. Without having an early warning system, companies got eventually surprised by bad publicity causing significant losses and potentially hurting their brand long term.

Negative reviews can thus be treated as a symptom and not the cause of deeper structural problems. Rather than treating individual customer reviews as a problem to be tackled, businesses should see them as potentially indicative of underlying structural issues. Of course, they should continue making consumer opinions a priority, accommodating negative reviews, but once managed, the problem is not ‘solved’. Rather, analyzing reviews across all locations and platforms, businesses might reveal  structural problems they’re facing.

Remedying these issues will not only affect marketing, but also reveal valuable insights for a multitude of areas including: training of staff and business leaders, customer loyalty initiatives, quality assurances or even the improvement of entire business models. If done right, online reputation management — by collecting data, analyzing it and deriving actionable measures — helps businesses to provide a better customer experience, and drive bottom-line sales

florian-huebnerFlorian Huebner is co-founder and MD of uberall. He was previously a management consultant with McKinsey & Company, and studied at the universities of Karlsruhe, Southern California and Sydney. He tweets at @flohuebner.