Corporate Crises in the Digital AgeA Content Analysis of Chipotle’s Crisis

Stephanie McGuintyB.A. Communications & Spanish | CHRP Candidate

@step_mcg

smcguinty@gmail.com

ca.linkedin.com/in/smcguinty

Chipotle’s Crisis October 2015 to February 2016Founded in 1993, Chipotle Mexican Grill is fast-food

restaurant chain with over 2,000 stores across North

America. Chipotle competes against McDonald’s, Taco

Bell, and Nando’s.

From October 2015 to February 2016, over 500 outbreaks

of E. coli were identified among individuals who consumed

Chipotle. This led to the closure of 43 restaurants in some

States. Restaurants were investigated by the Centre

of Disease Control (CDC) and the U.S. Food & Drug

Administration, who were unable to trace the source of

E. coli, nor attribute responsibility to Chipotle. As stores

reopened, Chipotle reinstated a new food safety policy

and held a company-wide meeting, where all Chipotle

stores were closed for four hours.

Chipotle’s sales plummeted to an all-time low during this

crisis. Various news outlets reported incidents of this

case, both through traditional and social media. Chipotle

also used Twitter to communicate some details with its

followers. This case study will examine Chipotle’s Twitter

strategy through the period examined.

Research Questions R1 - How can social media analytics be used to measure

data during organizational crises?

R2 - How did Twitter contribute to Chipotle’s handling of

the crisis?

R3 - How can Twitter be used to sucessfully manage

organizational crises? .

Social Media & Chipotle. Twitter Followers: 794,000

Faceobook Page Likes: 2,900,000

Instagram Followers: 355,000

Ranks top 10 in fast food restaurant following in the U.S

Method 1. Data Anlysis - Comparison of three periods (pre-cri-

sis, during crisis, and post-crisis)

*Engagement Scores measure audience responses to

the company’s proactive tweets and activity on Twit-

ter. Based on this formula, shares and re-tweets are

weighed higher than likes and favourites as they ampli-

fy the audience reach of a tweet.

2. Case Analysis - In addition to analytics, information

from Chipotle’s Investor Relations page was gathered.

The information shows significant drops in Chipotle’s

stock, and sales during the fourth quarter of 2015 and

first quarter of 2016.

3. Theoretical Framework - Use of Coomb’s Situational

Crisis Communication Theory (SCCT), a framework

which helps orgnaizations protect themselves during

crises; Pearson & Clair’s Crisis Success Outcome Measure

Framework; and Aaker’s Brand Equity Ten, which outlines

ten brand equity measures, such as price premium,

perceived quality, and market share.

Data During the crisis phase, Chipotle responded to users’

concerns quicker than normal (33 minutes for average

response time) - some of the keywords and hashtags

that were most used were “health” “Chipotleallteam”

and “e.coli”. Prior to the crisis, Chipotle’s tweets were

very produce-oriented, with an emphasis on freshness.

However, after a few cases of E. coli identified, those

tweets stopped.

In terms of brand equity, Chipotle’s price premium

is significantly higher than its competitors. However,

Chipotle continues to attract a young crowd, perhaps

illustrating the preferences of Millenials and a strong

brand loyalty. Based on Chipotle’s “Food With Integrity”

campaign, which explains the company’s efforts to

serve naturally-raised meats and produce free of added

hormones, the quality of its products is higher than most

of its fast-food competitors. Chipotle’s market share has

historically been strong - ever since its public offering in

2006, stocks sky-rocketed and restaurant sales increaed

every year. During the time of crisis, profits sunk 44%

and by the following quarter, stocks were down 40%. In

total, Chipotle had a net loss of $26.4 million as opposed

to a net income of $122.6 million in the previous year.

Chipotle’s customer base consists mostly of Millenials

(born between years 1980 to 2000), which is also the

prominent age group of Twitter users.

ResultsUsing Peason & Clair’s success measures, Chipotle’s

crisis outcome has been rated based on the following

criteria: signal detection, incident containment, business

resumption, effects on learning, reputation, resource

availability, and decision-making. The outcome selected

is midground - which means the company did not fully

succeed at managing the crisis, nor did it completely fail.

R1. How to use analytics R1 : Engagement scores are used to identify the impact

of a crisis on users following brand tweets. They can

also be analyzed in comparison to the time of tweet. A

higher engagement score is desireable. Keywords and

hashtags (#) can be counted to see where conversations

are occuring, between who, and how many times they

appear. Organizations can then reach out to those

individuals and monitor concerns. Types of tweets are

also important to understand (mentions, proactive, re-

tweet, links to sources) as organizations can tailor content

to audiences. For example, Millenials enjoy videos and

photos, as such it would be advisable to use them in

tweets. Finally, understanding follower profile may help in

tailoring content, message tone, and frequency of posts.

Twitter Analytics’ Dashboard functions allows account

holders to monitor interests and demographics of its

followers.

R2.Twitter’s contribution to Chipot-le’s crisis management outcome R2. Twitter was used to communicate with its consumers

at a high level, but was not used to inform users about

news content, such as store investigations. It seems as

though Chipotle refrained from posting crisis-related

content for fear of starting a viral trend, or “Twitter wars”

(which previously occurred). The reality of today’s digital

economy is that information must be posted where users

are - in this case, Chipotle’s consumer base is on the web.

The most important use of Twitter to mitigate crisis was

the response rate - over 90% of Chipotle’s tweets were

responses to other users.

R3.How to use Twitter to manage crises (strategies) - Measure, measure, measure! This must take place before

the crisis takes place (in anticipation of it happening).

- Use hashtags: generates interest, trends, and a sense

of community

- Foster conversation: Twitter is an ideal platform for brand

& user interaction. Millennials generally have more liberal

views and like an open platform to express themselves.

- Provide timely responses (Average Response Time -

ART): companies are competing for customers and being

able to provide timely responses is crucial to customer

satisfaction.If the user does not receive a timely response,

60% of them are likely to take negative action to express

themselves.

- Collaborate with brand Influencers: these are other

brands (companies, users) with a large following who can

advocate on behalf of the company. A strategy would be

to partner with brands and collaborate on informative

content.

-Provide personalized responses: they provide a better

connection between the user and brand. A Twitter

research indicates that 77% of consumers are likely to

recommend a brand following a personalized brand

interaction (sign with a name!).

Crisis Strategy Matrix The following matrix has been created to assist crisis

managers in the digital age, using a combination of

Coombs’ SCCT framework and data from this research.

The practice of crisis communication has evolved since the rise of digital technologies and social media. Defined as an unexpected and nonroutine event with high levels of uncertainty, crisis management is essential to organizations. Failure to strategically manage crises may result in significant damages and losses. This MRP examines a recent corporate crisis - the case of Chipotle Mexican Grill during the 2015-2016 E. coli outbreak across the United-States - and how the social media strategy influenced the outcome of the case. Using a combination of data analytics and theoretical frameworks, this research brings to light the importance of measuring online data, and how it can be effectively used to manage various types of crises.

The table above illustrates differences in data gathered from Chipotlle’s

Twitter page during the three periods examined. This data was obtained

through Unmetric, a data analytics platform for online users.

Variables Mar 1/15 -

Jul 31/15 Oct 1/15 - Mar 1/16

Apr 1/16 - Jul 9/16

Day count 153 153 100

Follower growth 6.5% 6% 4.8%

Engagement * 383 566 863

Number of tweets

42,000 44,000 36,000

Average tweet/day

207 290 300

% Tweets are replies

99% 98% 97%

Average Response Time (ART)

43 minutes 33 minutes 51 minutes

Common hashtags

#chipotle #lovewins

#chipotlecultivate

#boorito #ecoli

#chipotleallteam

#raincheck

#chipotle101

#waitinginlinethoughts #mplusplac

es Influencers Vogue

Paul Coelho People

Magazine

Kevin Hart CNN*

Today Show*

N/A

“CONSUMERS WILL PUNISH BRANDS THAT FAIL TO RESPOND ON TWITTER QUICKLY” If a Tweet is a complaint, 72% of users will expect an answer within an hour

Crisis

Cluster Crisis Strategy Social Strategies

Accidental Diminish convince stakeholders the crisis is not as bad as people think

• Post often, post fast

• Use consistent message across platforms

• Partner with positive brand influencers

Victim Deny

eliminates the link between organization and crisis

• Post links referring to legitimate sources

• Post facts

Preventable Rebuild suggests that organizations should compensate affected stakeholders for errors

• Marketing and promotion campaigns (#trends)

• Social media apology

• Personal responses