Chipotle and Taco Bell

Final Submission

Aamna Tauqeer
Alaiha Khan
Munhib Mazhar
Qudsia Noor
Zain Butt

Services Marketing
 Contents
Question 1. Introduce both the service organizations briefly..........................................................3
Question 2. Which economic factors have impacted this service industry and how? How has
COVID-19 impacted this service industry?.....................................................................................4
Question 3. List down the search, experience and credence attributes of both the service
organization?....................................................................................................................................4
Question 4. What positioning strategies are the firm trying to maintain. Make perceptual map.. .7
Question 5. According to you what focus strategy have both the firms adapted? According to you
can they reposition themselves? Justify our answer........................................................................9
Question. 6 Compare the Flower of service of both the firms and suggest any improvements.
Justify your answer........................................................................................................................12
Question. 7 Compare the distribution strategy of both the firm. How well have they incorporated
technology and remote distribution channels? In case these firms plan to expand themselves
internationally (in case they haven’t so far) or are already operating internationally, what should
be the major concerns of owners while taking such a big decision?.............................................13
Question 8. According to you which pricing strategy is followed by both the firms? Suggest any
ideas for revenue management strategy (physical and nonphysical rate fencing techniques).......14
Question 9. What kind of communication mix is followed by both the firms? Do you suggest any
improvements? What kind of difficulty might they face while promoting their service?.............16
Question 10. Make a service blueprint for both the firms can you identify any fail points? What
changes would you suggest in their processes to make it more streamlined and fail proof..........18
Question 11. What kind of physical environment is maintained by both firms, discuss good and
bad points.......................................................................................................................................20
Question 12. Make servuction system of both firms, identify pros and cons and suggest
improvement..................................................................................................................................21
•......................................................................................................................................................21
Question 13. Which one and what kind of employees are required by the concerned service
industry. What qualifications must they possess. Is there any kind of reward and recognition
system, performance appraisal, training, practiced by firms to retain employees?.......................22
References......................................................................................................................................24
 Question 1. Introduce both the service organizations briefly.
The competing firms chosen for this project are Taco Bell and Chipotle. Taco Bell is an
American fast-food chain specializing in Mexican food, with over 7000 restaurants in USA and
500 across other countries. It is owned by PepsiCo under YUM brands! Subsidiary. Chipotle is
also an American fast-food chain specializing in Mexican food operating in USA, UK, Canada
and other countries. For the purpose of our project we will be discussing these chains, in the
country where they are most popular and have the highest number of branches which is USA.
These companies belong in the food and accommodating sector of the service industry, in
the people processing category. This means that the production of service and and the
consumption is usually occurring at the same time (drive-thru, dine-in) and customers have to be
physically present at the restaurants. However, these companies also offer online ordering and
home delivery services. The location selected for the operation of these restaurants have to be
ideal, in well populated areas in USA where they can attract the general public. This fast food is
mass marketed and but most specifically to millennials. This means that the environment of these
restaurants, the ability to take and serve orders timely (demand capacity) has to be suited to the
masses but also to the 20% of its customers which provide 80% of its sales. They are high
contact service organizations with high level of involvement amongst customers. From placing
the order, to waiting for it, receiving it, be it in a drive thru, take out or dine in, customers see the
staff, the interiors of these restaurants, the hygiene level, attitudes of staff, etc. Hence these
places have specific interior themes, colour schemes, policies for their staff to follow in order to
give their customers a pleasant experience. The behaviour and attitudes of the staff, their
friendliness contributes quite a lot to customer attitudes about the service and whether or not they
will choose to revisit that service.

Question 2. Which economic factors have impacted this service industry and how?
How has COVID-19 impacted this service industry?
The food service industry has faced quite a few challenges due to economic factors.
Many restaurants in USA used to have a “dollar menu” where everything was for a dollar, this
menu was on McDonalds, Burger King, Taco Bell etc. This was widely popular amongst
customers as it was extremely affordable for everyone. However due to inflation, rising labour
costs, increased price of fuel, rising cost of key ingredients, the dollar menu is slowly being
renamed, as the items are no longer as cheap as a dollar and are often starting at $2 now.
Moreover, in order to keep up with the rising costs, the prices for fast food and gourmet food
have increased over time. External factors such as technological development has impacted this
industry because restaurants need to establish an online presence and partner with food delivery
apps such as UberEats and Postmates in order to offer home delivery. Huge chains like
McDonalds, Pizza Hut, Dominos, Chipotle have their own delivery network apps to cater to their
customer orders.
In COVID-19, the food industry suffered in the start as people were afraid to order food
from external sources due to fear of getting sick. Restaurants had to adapt and implement SOPs
and safety protocols, they had to ensure these protocols were communicated to their customers
through TV ads and social media. This was done so that customers would trust the restaurant and
feel less fearful to order from it. In the lockdown period, due to ban on dine-in customers,
restaurants had to improve their home delivery, drive thru and takeout facilities as all orders were
coming through these channels. To make up for the economic loss, due to shut down restaurants
and scared citizens, they had to lay off their waiting staff because due to ban on dine-in, waiters
were no longer required. These fast-food chains had to invest in proper safety gear and sanitizers
in order to ensure safe preparation of the food. In USA, companies like Chipotle performed well
in COVID-19 outbreak, and this was even mentioned in Forbes. This was due to their strong
digital order facility. Online orders and contact-free delivery was of and is of great importance as
dining in was not an option and and some people still prefer not to go out to eat. Break-fast
timings faced great decline in traffic for orders in this industry as due to work-from-home,
people no longer used their daily driving routes. While giant chains with quick adaptation to
digital delivery systems were able to survive the lockdown period of COVID 19, many small
restaurants had to shut down as they were unable to afford their operations.

Question 3. List down the search, experience and credence attributes of both the
service organization?
Chipotle Mexican Grill
 Search Attributes
All those attributes which you know prior to availing a certain service and you don’t have
any doubt about them are known as search attributes.
The color scheme they have used in the whole attire of restaurants which is their main
theme is extracted from Mexican food color. You can see them in their logo that with two colors
they have decided the theme of their restaurant.

These are the two colors which are always portrayed as Mexican color in Hollywood
movies that’s why they decided that people would be already familiar with theme and color of
their restaurant.
The texture of chipotle Mexican grill is designed according to the area they are going to
open their new restaurant. Just like if they are opening their restaurant in a posh area the texture
they’ll be used will be a decent and a very soothing color scheme which will eventually give
their customer a feeling of fine dine, on the other hand if they are going to open their road side
restaurants like on highways and motorways where people usually go for travelling and have fun
so the texture would be a little funky which goes with the mood of the people which is fun.
 Chipotle Mexican grill is famous for the taste of spices in their food. The food they are
serving is basically the fast foods so they came up with different sauces to make their food little
different than other neighborhood restaurants, that’s why people who often visits other cities
prefer chipotle Mexican because they know what they are looking for and from where they’ll get
it.
Experience Attribute:
You must experience service to know about it. Only after availing the service, you will be
able to better tell about your experience. This is known as experience attributes.
Experience attribute is analyzed upon the experience of customer who have just availed
the service of that particular thing. This attribute is totally based upon the perception of the
customer, taste of the customer and value of money according to the customer. These bunch of
things add up as experience. Experience attribute is also backed up by search attributes where
from the whole ambience of restaurant to the menu of the restaurant is decided which is added
into the experience of the customer. Customer review of chipotle Mexican grill can be given as
an experience attribute. The customer experience is given through the suggestion box.
Credence Attribute:
This type of attribute is usually not analyzed by any customer if there isn’t any major
change in the restaurant. If the air conditioner in any restaurant of chipotle Mexican grill isn’t
working and they have repaired it some other time and next time customer will not feel that there
was any problem in that restaurant. Credence attribute explains the repairs and maintenance of
any service provider. For examples. Customers have to trust that their server washes his hands
before dealing with food, they assume that their table was wiped down with disinfectant after the
previous customer left. These are things they cannot observe but trust the service provider to do.
They trust that the low-fat food options at Chipotle have indeed low-fast ingredients used in
them.
Taco Bell

Search Attributes:
The logo of taco bell interprets the typical American restaurants theme of hanging bells at
the door of the restaurants, the purpose of this bell is whenever customer enters into the
restaurants the bell at door rings and alerts the workers at the restaurants to look after the new
customer.
Taco Bell is characterized as a fast-food chain, serving Tex-Mex food at an affordable
price range. These are the search attributes associated with Taco Bell and all this information can
be found online on their website or on social media.
Experience attributes:
The distinct taste of Taco Bell sauces, the attitude of the staff members, the waiters, the
comfort level of the seating arrangement, the ambience of the restaurant are all factors that need
to be experienced by availing the service. The music played at Taco Bell, the thermostat
temperature, the cleanliness of the floors, the neatness of the restrooms, the waiting time between
service order and service delivery all need to be experienced. This can also depend on personal
tastes such as whether customers like spicy food, whether they like Mexican dishes etc.

Credence Attributes:
Customers at Taco bell are not able to see the back-end kitchen where their food is being
prepared. Therefore, they have to assume that proper hairnets and gloves are being worn, fresh
food is being prepared, proper hygienic practices are being followed in the kitchen. They have to
trust that Taco-Bell is providing them with good quality food.

Question 4. What positioning strategies are the firm trying to maintain. Make
perceptual map.
What positioning strategy are these firms trying to maintain? Make perceptual map of
this service industry and locate your service organization. What are your insights from the map?
Give reason for the attributes you have chosen for x and y axis.
Ans. Chipotle currently has the positioning statement of “food with integrity”. This is
what they are trying to stand for in the minds of their potential customers. This is a simple
consistent message for Chipotle. There adverts further detail this by saying they use meats raised
without anti-biotics or added hormones, pasture raised dairy, local produce and non-GMO
ingredients.
Although Chipotle food is enjoyed by all, young, old, families, it is highly targeted to the
millennial population. It has segmented its consumers based on demographic and behavioral
factors. It targets customers in urban areas who want quick food, but not just fast food. A
younger, hipper clientele is targeted with the cool, modern décor of each restaurant, and want
fresh food. It employs a service focused strategy. They use non-traditional marketing methods
such as influencer marketing. Youtube ads, Youtuber sponsors, collaborating with clothing
brands to promote their firm. To differentiate itself from its competitors, Chipotle offers
extremely low waiting time for its customers. It has a unique service delivery set up which
includes:
Expediters. The extra person between the one who rolls your burrito and the one who
rings up your order.
 Linebackers. The employees who patrol the countertops, so that the e ones who are
actually serving customers never turn their backs on them.
Mise en place. Chipotle has zero tolerance for not having absolutely everything in place
ahead of lunch and dinner rush hours, and therefore all tools needed are strategically places for
most efficient operations.
“Aces in their places”: A policy which ensures each branch puts who it considers its top
servers in the most important positions at peak times, so there are no trainees working at burrito
rush hour.
Its most effective marketing message that even got previewed in cinemas and at award
shows, was called The Scarecrow, and communicated Chipotle’s views on ethical farming and
contribution towards healthy farming practices and fresh organic ingredients.
Taco Bell’s positioning is that it aims to provide Mexican-style fast food. Taco Bell has
segmented the market according to the demographic and it targets youth between the ages of 20
and 30. They offer cheap meals, such as their Dollar Cravings Menu and therefore target all
income groups. Their affordable prices target lower income groups while their cool hip vibe,
widespread popularity among youth target the middle- and upper-class-income groups too.
Under behavioral segmentation, it targets the market that is too busy for grocery shopping
or often live in accommodations where cooking is not possible such as university housing. It
offers Taco-Bell as the convenient and time-saving option. Like Chipotle they use channels like
social media and influencers to reach their Target Market.

Perceptual Map
 When considering restaurants to eat in the fast-food industry, the two most important
attributes are the price and the quality of food i.e healthy or junk food. The price determines
which segment will purchase the food as income levels drive the food purchase decisions. People
prefer fast-food to be affordable and convenient for their purchase. Moreover, people who prefer
cheap food still care if it is healthy or not especially these days when the millennials are
becoming careful of what they are putting in their bodies. Hence healthy food/junk food was one
attribute and the price was the second attribute.
This map shows that Chipotle offers much healthier food than the other chains but it also
has a higher price range than most competitors. Taco Bell is quite competitive in terms of price
range with its competitors and offers food that is healthy to some extent.
Question 5. According to you what focus strategy have both the firms adapted?
According to you can they reposition themselves? Justify our answer.
Both, Chipotle and Taco Bell, adapt the service focus strategy since both of them offer a
narrow range of services to a fairly broad market. Both the organizations have segmented the
market based on demographics where the age group of 20-30 years is targeted as well as the
children and youth. Market has been segmented according to the income level as well where the
lower, middle, and upper-class income groups are targeted as the price bracket of the services
offered by both firms cater these groups. Those who are not overly price sensitive and see value
in time-saving and convenience are the market segment to which both, Chipotle and Taco Bell,
also try to cater. Moreover, both the firms provide healthy food options which cater to the health-
conscious segment of the market. Hence this proves that a fairly broad market is targeted by
these 2 US based fast food restaurant giants.
Chipotle can reposition itself through making significant changes in its existing position
by revising some of its service characteristics. It can add the facility of fine dining in its drive
through menu in order to ease those customers who are fond of having a fine dining experience.
Customers can get delicious and fancy gourmet food without socializing or dressing up, within
the comfort of their car which would enhance their service experience and would create a
position in their minds of Chipotle being a restaurant which provides a remarkable drive through
experience as well.
On the other hand, Taco bell can reposition itself by improving the negative brand
perception of fast food being unhealthy. Although over the years, it has introduced healthy food
options in its menu in order to cater the health conscious segment of the market, it can introduce
a sperate menu comprising of only healthy food which would provide even more choice and
variety to the health conscious individuals and would enhance their service experience as it is
well known that the main dishes served by many fast food chains is deemed as unhealthy. Hence
using such a repositioning strategy would introduce new dimensions into Taco bell’s positioning
equation that other rivals cannot immediately match and can also add to Taco bell’s unique
selling point (USP).
Question 6. What are the most crucial risks faced by these firms and how are they coping
up with them?
Despite the pandemic, Chipotle and Taco Bell were able to beat COVID-19 as a major
risk factor. Due to their efficient digital delivery system in the USA and effective marketing
campaigns such as with Youtubers, they were able to continue profitable operations despite the
outbreak.
Chipotle Mexican grill
When the food chain is spread over thousands of branches it has some risks even with the
huge billions of dollars turn over. Chipotle Mexican grill faced the major risks primarily to the
product and the policies of them with customer.
1-Price Risk
Chipotle Mexican along with the other fellow players in the market faces price risk in the
market. These risks start to rise when the price of ingredients and items used in their products
starts to increase as well. These issues occur when the supply doesn’t meet the demand and
eventually prices gets high. So, Chipotle Mexican does contact their vender from a minimum of
one month to eighteen months period in a row and make them eligible to give them ingredients at
fixed rate.
2-Interest Rate Risk
As of June 30, the company had $730.6 million in investments, cash accounts—which are
interest bearing—and insurance-related restricted trust accounts. The company also had $389.2
million in accounts with earnings credits and is classified as interest income. The combined
weighted average rate for these investments is 0.33%. Restaurants and establishments with high
financial leverage, such as those found in ETFs like the Consumer Discretionary Select Sector
SPDR Fund (XLY) and the Power Shares Dynamic Food & Beverage ETF (PBJ), face a higher
interest rate risk.
3-Changing fitness trends
Negative marketing campaigns in USA against obesity which promote healthy eating and
smear fast food chains are gaining popularity. These have started making consumers more aware
of what they are putting in their bodies and switch to a more healthy or vegan eating patterns.
These changing trends are a risk factor for Chipotle as Chipotle can be seen as unhealthy fast
food and therefore the consumer’s perceptions might change.
4-Chipotle Outbreak
Chipotle has faced six different foodborne illness outbreaks which include two outbreaks
of norovirus, three strains of E. Coli, and one Salmonella contamination. This affected 514
people across Chipotle branches and this is only the tested number, actual number may vary
significantly. This caused the stock to drop by 40% in 2015. After nine lawsuits, Chipotle
employed strict policies for their food suppliers and since then have managed to work well but
they have to continue to maintain their hygiene in order to stay away from risks.
Taco bell
Taco Bell also faced some serious issues just like Chipotle Mexican Grill but even though
they were the food chain with over thousands of branches all across the world, they dealt with
these issues to an extent but somehow it damages the reputation of the brand.
1-Foodborne Illness Outbreak
Just like Mexican chipotle grill, Taco Bell also faced some serious issues related to food
poisoning. Taco Bell faced claims arising out of a foodborne illness outbreak after the U.S.
Centers for Disease Control and Prevention determined that the outbreak was most likely caused
by E. coli-contaminated lettuce consumed at Taco Bell restaurants. Taco Bell sued Ready Pac
Foods, Inc., the likely supplier of the contaminated lettuce, seeking damages for bodily injury
and property damage, as well as damages suffered because of the alleged decline in patronage at
all Taco Bell restaurants resulting from the outbreak.
2-Failed Mexico Take Over
The one notable place where Taco Bell has failed to catch on is in Mexico, a country with
more than 350 KFCs and 400 McDonald's, which is located just 130 miles away from where
Taco Bell was founded. This may not be a surprise to anyone who has ever dined in Mexico,
where tacos are cheap, easily accessible, and aren’t typically made with mysterious ingredients.
But these facts didn’t stop Taco Bell from trying to establish locations in Mexico not once, but
twice and failing miserably each time.
3. Changing consumer behaviour: New researches and the heightened awareness among
the public about the harmful health impacts of fast-food consumption is a threat to Taco Bell’s
fast-food menus.
 4. Taco Bell, like other restaurants is highly labor intensive which increases the
subjectivity involved in the delivery of services. Therefore, consistency in the quality of service
offered, i.e food quality, friendliness of staff, waiting time, is important to reduce any
discrepancies and ensure a high standard amongst all branches.

Question. 6 Compare the Flower of service of both the firms and suggest any
improvements. Justify your answer.
Since both companies are in the same service sector and have a similar business model,
their flower of service is the same. Specifically, in terms of their supplementary services, which
aid in delivering their core product (food). The information service of Taco Bell and Chipotle
have the following similar offers. Both firms provide information regarding their company
ethics, quality assurance online. Both firms provide their complete menu with prices online,
contact information, all their addresses for their branch locations, and opening times. This makes
the customers feel well informed, existing customers can use this information to stay updated
and check if branch is open while new customers can compare menu items and prices to make
their purchase decision.
Secondly in terms of the order-taking service process, once again both firms rival each
other in their similarities. From self-service touch screen counters, to drive thru, to cellphone
apps, third party contracts (Postmates, UberEATS) and their own mobile applications. They use
technology and trained polite staff to ensure a quick and convenient order-taking process which
does not confuse their customers.
Itemized, clear bills showing tax, tip and sales amount are offered by both with various
payment options such as Applepay, credit/debit cards, cash, PayPal etc.
Therefore, in terms of facilitating services, both companies are thriving, if one
improvement can be made it is that they upgrade their apps so that they don’t crash when
customers are placing their orders as that seems to be a slight issue.
In terms of their enhancing services, such as hospitality Taco Bell has well behaved
young staff for the most part however over the years, a few photographs leaked of employee
being unsanitary in the kitchen which put a negative impression on the consumers. Moreover,
since Taco Bell is a huge chain and wildly popular, the bathrooms are not always clean due to
the crowd of people that visit the chain. Therefore, being more vigilant in the cleanliness and
making customers feel greeted and special as they have face to face encounters and this would
improve the flower of service. Chipotle is slightly upscale than Taco Bell and their staff is
extremely friendly with their employees. However, the interior of most Chipotle branches is
fairly basic with not much colour or updated modern furnishings. This should be improved as
before COVID and hopefully post COVID people do enter the physical location of these outlets.
Both chains offer consultation in terms of customized orders and advice on what the
customers might enjoy based on their preferences.
In terms of special requests, one interesting feature offered by both places is a “secret
menu’. These are items that are not officially listed on the menu but servers make it if the users
request it. This option is quite popular as it allows customers to try new combinations. Moreover,
they both have established complaint departments and have made their contact to these
departments known online in case of any issues encountered by the customers.
However, they can improve in terms of their restitution department as a couple took Taco
Bell to court in 2019 over false price advertising when they had to pay $2.18 extra.
 Overall, all the different petals of the flower of service for Taco Bell and Chipotle are
working fairly well to keep the flower fresh. Some problem areas such as hospitality and
restitution are risk but overall, they offer a good combination of supplementary services.

Question. 7 Compare the distribution strategy of both the firm. How well have they
incorporated technology and remote distribution channels? In case these firms plan to
expand themselves internationally (in case they haven’t so far) or are already operating
internationally, what should be the major concerns of owners while taking such a big
decision?

For the distribution strategy for Taco Bell, we will first discuss the flows. The
information flows i.e promotional materials, ads, marketing materials flow through mainly
electronic channels such as social media ads, Tv ads, Youtube ads and radio ads. The product
flows occur through several channels.
How these products (food) are delivered by Taco Bell is through two modes, either the
customer goes to the physical Taco Bell branch, this can be through drive thru or going inside
and this can occur at multiple sites, whichever is closest to the employer. The second option is
that the product is delivered to the customer after customer places order online or through phone
call. This can also be through third party delivery services such as Postmates, UberEATS, Grub
Hub etc.
Thirdly, the location comes into play. Taco Bell has hundreds of branches in USA and
also globally. In terms of USA, their primary base, Taco Bell branches are located in areas near
their competitors such as McDonalds, they are in commercial, popular locations that are easily
accessible. Taco Bell also has a K-minus strategy where there front and back operations are
separated and it involves restaurants without kitchens. Food preparation takes place in a central
location. The meals are then shipped to restaurants (which are able to devote more of their
expensive floor area to customer use) and to other “points of access” and hence improve their
flower of service as well (hospitality). Taco-Bell is also located in multipurpose facilities like
airports and malls.
They have opening hours after 11 am to late night in most branches, and the same timing
applies for deliveries. They are open 7 days a week and have variable labour costs due to extra
shifts and hourly wages of their lower level employees.
The intermediaries used include third party services that deliver food on behalf of Taco
Bell. This allows Taco Bell to devote its labour to their core product and the external delivery
people are able to manage time and deliver their orders more effectively providing customers
with better service.
Taco Bell is also franchised to franchisees internationally or within USA. This allow
brand expansion and newer sources of income to the brand.
For the distribution strategy for Chipotle, we see that it is similar to Taco Bell. A big
reason for this is that the CEO of Taco Bell resigned and signed as CEO of Chipotle to rebuild
the company. The information flows i.e promotional materials, ads, marketing materials flow
through mainly electronic channels such as social media ads, Tv ads, Youtube ads and radio ads.
The product flows occur through several channels.
Chipotle delivered its food through two modes, either the customer goes to the physical
branch, this can be through drive thru or going inside and this can occur at multiple sites,
whichever is closest to the employer. The second option is that the product is delivered to the
customer after customer places order online or through phone call.
Thirdly, the location comes into play. Chipotle also hundreds of branches in USA but
they are fewer than Taco Bell. Chipotle is expanding internationally at a very slow pace in
comparison to Taco bell. This can be that Chipotle leans towards a more authentic style of
Mexican food whereas Taco-Bell is a fusion of fast food and Mexican cuisine and therefore has
to adapt to different cultures. Chipotle branches are in commercial, popular locations that are
easily accessible. Chipotle has a popular new feature called
“Chipotlanes” which are exclusive drive thru/take away lanes. Customers can place their orders
online and go pick up or simply order on the go without leaving their car. They are also located
in multipurpose facilities like airports and malls.
They have opening hours after 11 am to late night in most branches, and the same timing
applies for deliveries. They are open 7 days a week and have variable labour costs due to extra
shifts and hourly wages of their lower level employees.
The intermediaries used include third party services that deliver food on behalf of
Chipotle. This allows them to devote its labour to their core product and the external delivery
people are able to manage time and deliver their orders more effectively providing customers
with better service.
Due to quality control issues that have plagued Chipotle they do not sell as a franchise
currently and most branches are company owned.
Both the brands have incorporated technology very successfully into their distribution
strategies. Successful web and app-delivery services, with options like live char provide
customers with helpful service and data stored allows customers to re-order their last order or get
recommendations through quizzes on what they would like to eat. Moreover, these online apps
offer some exclusive discounts and an ease of search to the customers. The order-taking process
is user friendly and allows user to take as much as they need as there is no rush of queues.
Especially in COVID, these channels have allowed these businesses to sustain themselves. Taco
Bell has a special food and rewards app which gives customers points on every order which they
can redeem. The app has more than 800,000 downloads on the App store and Playstore
combined which shows people do use these. Chipotle copies the same rewards point model on
their app as well. For every $1 spent, ten reward point is given, and 1250 points can give the
customers a free meal.
Taco-Bell has already expanded itself internationally and has hundreds of branches
worldwide. Its main focus was Brazil, Canada, India, and China. These markets were chosen
primarily because of their high populations, as well as a prominence of youth culture.
They used social media to create a feeling of community with local cultures in these
markets and added alterations to their menu to adapt them to local tastes.
Chipotle has also already started its international expansion, in European countries. To
adapt, they changed their spice levels and dish names so that they are more successful in those
nations.

Question 8. According to you which pricing strategy is followed by both the firms?
Suggest any ideas for revenue management strategy (physical and nonphysical rate fencing
techniques)
 Taco Bell 's pricing is quite competitive and based on value for money. The pricing
strategy that it follows is competition-based pricing where prices are set based on what
competitors charge. There is neither any relationship between cost and price nor any relationship
between price and demand in competition-based pricing. Instead of fancy pricey delicacies, Taco
bell is a fast-food chain that depends on volume sales as it is one of the top five chains in the
United States mainly because of the variety of food options it provides. Although not known for
its quality, Taco Bell likes to stress the value they offer to consumers. They battle with other
fast-food giants and this was called the “value wars” by the QSR magazine. The rates are such
that it is affordable for individuals and families of the middle class and working class around the
world. Most of the items range from $1 to $4 and 75 percent of their items are included in the
$1-$2 menu that can appeal to the needs of most people for breakfast and snack. Price is one area
where Taco bell seems to have an upper hand over its competitors like Chipotle as its dollar
cravings menu offers everything, from burritos to cinnamon twists, just for $1 which is
affordable for everyone and helps Taco bell to attract the masses.
Although majority of the restaurants follow competition-based pricing, however when we
talk about Chipotle, the pricing strategy that it follows is Value based pricing. Value based
pricing is the value to the customer and wherever you feel the expectation of the customer in
mind while devising your pricing strategy. Price depends upon the demand or value that is in the
mind of the customers. Chipotle uses high and fresh quality ingredients in which it prides itself
in. With Chipotle’s fresh ingredients they are able to distinguish themselves from other fast-food
restaurants like McDonalds. This adds to the buyer’s perception of value and hence buyers
perceive Chipotle’s food offerings as high priced due to the high-quality organic ingredients
used. The dishes are priced in accordance with the ingredients used. Their customers belong to
the middle and high sections of society, who can afford their prices easily. Regardless of the high
variety, these consumers are looking out for delicious and high-quality items. By having a value
pricing policy, Chipotle seeks to differentiate itself. They are priced slightly higher in
comparison to fast food places, but they are just about the same price compared to other fast
casual places. Chipotle has generated a strong demand for their products. Because demand is at a
constant pace, without losing revenue or customers, they are able to charge high prices for their
food. The consistency and nature of their food ingredients and the origin of these ingredients are
also a factor in deciding their food prices.
Many service businesses focus on strategies to maximize their revenue. Revenue
management is when you are trying to manage your revenue by customizing the service.
Revenue management is important in value creation as it ensures better capacity utilization and
reserves capacity for higher paying segments. Rate fences deter customers willing to pay more
from trading down to lower prices. Fences can either be physical or non-physical.
When we talk about Taco bell, their physical rate fences include lunch time deals where
regular deals are offered at discounted rates to attract customers during that specific time period
and increase sales. They provide the facility of dining in on roof tops at their restaurants at an
additional price in order to ensure a smooth and comfortable dine in experience for their
customer. Taco Bell supports several sporting activities in which individuals attending the event
receive vouchers for free food products. Their non-physical rate fencing includes free delivery
charges for orders within 5 kms of their restaurant. Any order beyond that has delivery charges
attached to it which are quite low. Recently they had an offer on their nachos where customers
would get nachos at 50% off with free delivery if they order them for home delivery. This of
course reinstates the idea of social distancing to ensure the safety of everyone during the COVID
19 crisis. Taco bell also offers loyalty cards to their loyal and regular customers where they get a
free meal on a specific purchase amount. Moreover, as part of their promotional offer, Taco bell
offers discounts on ordering food through their mobile application
When we talk about Chipotle, their physical rate fencing includes weekend deals at their
restaurants to increase sales. Group discounts are also offered. Chipotle provides the base
product with a price and different prices for the accessories that come with it. This gives the
option to customers to customize their own meal which caters to their requirements and best suits
them. There are bundle deals as well where products are bundled together and sold at prices
lower than the total of individual items. Moreover, Chipotle offers discounts to students who are
able to show their identity card at the counter during the time of ordering at dine in and drive
through. The purpose of this is to establish a larger customer base. Non-physical rate fencing
includes mid night hour deals which are offered online at discounted rates. However before mid-
night, Chipotle charges a higher price for the items it offers online. This is because the cost of
delivery is included regardless of the location of the order. Loyalty cards are given to the loyal
customers just like their competitor Taco bell does. Reward points are added on each purchase
and after some specific reward points, discounts and free meals are offered to the customers to
reward them for their loyalty.

Question 9. What kind of communication mix is followed by both the firms? Do you
suggest any improvements? What kind of difficulty might they face while promoting their
service?
Both brands follow a similar type of communication mix as they have quite similar
objectives. We will start by discussing Taco bell. The target audience for Taco Bell are their
potential and existing customers and all their marketing communications aim to differentiate
their brand as a cool, trendy brand aimed at millennials, people from 18 to 34 years old.
Taco Bell communications mix and how it helps achieve their tactical and strategic
objectives
In advertising Taco Bell has the traditional billboard advertising. They have cool
billboards placed on popular areas where traffic is high to attract customer attention and gain
potential customers. For direct marketing, Taco Bell engages in email marketing. They send
extremely catchy, brightly colored emails with slogans like “get your free taco today”, and offers
about their new flavours, updated pricing etc. The graphic designing of these emails is quite
aesthetically pleasing and aims to make the brand memorable. However, the most impactful is
the online marketing for Taco Bell.
While they have their website, the most significant is their social media marketing, their
Instagram handling and their Youtube Channel. Taco Bell Youtube ads have views above 30
million, their ads are modern, fun, trendy, matching the millennial style. Their Instagram is
brightly colored and shows their corporate design quite well. The purple yellow and pink tones
for Taco Bell are incorporated into a variety of different designs. They have tried to make their
logo its own identity, they have done with by using the bright colours to make clothing
collaborations. Taco Bell has its own merchandise, which is basically stationary, clothing that
signifies the brand identity. These are so popular that they have their special collections like
holiday collection, thanks giving collection, pins, socks, bags, office supplies. This allows user
generated content which incorporates the personal communication into the marketing
communication mix. Users post pictures online with their Taco Bell clothes, taco bell themed
makeup, taco bell further supports this by reposting these on their page. What this does is help in
the post purchase stage as it creates a sense of community and brand loyalty amongst Taco Bell
customers. This increases their word of mouth advertising amongst customers as well, leading to
customer acquisition.
They also have sales in their marketing mix. They have several special price promotions
and coupons. Their app offers loyalty point promotions, they have BOGOF promotions, and
plenty of upsell promotions featuring combinations of different taco deals.
Their service delivery itself communicates to their customers, their fast service speed,
easy to use interactive app, interior designs of their branches all integrate their marketing during
the purchase stage of buying a service.
For PR they have their press kits that they send to influencers for building word of mouth
marketing.
Chipotle communications mix and how it helps achieve their tactical and strategic
objectives
Like Taco Bell, Chipotle also has the traditional billboard advertising placed on popular
areas where traffic is high to attract customer attention and gain potential customers. For direct
marketing, Chipotle engages in email marketing. Unlike Taco Bell which has a brightly colored
aesthetic, chipotle has a minimal red black and white colour theme. Their email marketing is not
that extensive. They do however have effective online marketing.
Chipotle’s Instagram features more than 1 million followers which they keep engaged by
posting meme and other humorous content that is directed towards their millennial target
audience. Chipotle Youtube has videos that inform their customers about their ingredient
freshness, how their ingredients are sourced from farms and how their food is not processed.
These ads convey Chipotle’s differentiating point which is their sourcing of ingredients to their
customers. Chipotle’s corporate design theme is minimal and aesthetic. It is more focused on
neutral colour tones rather than bright and catchy. To promote this, they have their custom
clothing merch as well to support their brand image such as T-shirts and tote bags. This also
allows user generated content which incorporates the personal communication into the
marketing communication mix. Users post pictures online with their chipotle clothes, which
spreads word of mouth and brand awareness and customer involvement. It helps to create brand
loyalty amongst customers. This increases their word of mouth advertising amongst customers as
well, leading to customer acquisition. One effective marketing strategy by Chipotle was
partnering with David Dobrik, a Youtube/TV celebrity with a huge fan following (in the
millions). This generated quite a lot of buzz.
They also have sales in their marketing mix. They have several special price promotions
and coupons. Their app offers loyalty point promotions as well.
Their service delivery itself communicates to their customers, their fast service speed,
easy to use interactive app, interior designs of their branches all integrate their marketing during
the purchase stage of buying a service. Chipotle’s drive thru called Chipotlane is a very fast and
safe way to get food and conveys the brand’s core aims to pleasing customers.
Taco Bell’s marketing communication mix the biggest reason they have achieved such
popularity and I have no changes to suggest for them however Chipotle, in contrast to Taco Bell
is lagging behind. Chipotle’s Instagram feels too impersonal and does not feature much user
generated content. Moreover, their email marketing is too bland to stand out in the sea of
promotional emails. I would suggest Chipotle builds up their email marketing and adds catchy
attention-grabbing wording in their marketing materials, I would suggest Chipotle give special
attention to Youtube as many popular youtubers with millions of followers already really like
Chipotle and mention it. Using them to their advantage will help Chipotle in developing
communication that is personal, creates a sense of community and helps acquire more customers.
Issues that fast-food chains like Chipotle and Taco-Bell can face are non-searchability
and generality. Since it is food, customers cannot truly experience what the taste it like.
Customers cannot taste the actual product that these fast-food chains offer and therefore there is
the problem of generality as it is harder to create a unique proposition. One solution for this is to
create adverts that show service being carried out. Asking influencers to generate content on
what it is like to buy food from these places can show how the service is quick, the staff
behaviour etc. It will show exactly what it is like to experience these services. Moreover, for the
issue of non-searchability, they can create ads that feature people trying out their food for the
first time and their testimonials. They can also offer mini-versions of their new flavours
complementary with customer orders so that customers can get a chance to try out the product.
This reduces their uncertainty and helps better the credence attributes.

Question 10. Make a service blueprint for both the firms can you identify any fail
points? What changes would you suggest in their processes to make it more streamlined
and fail proof.
Ans. Since both organizations have the same business model, the service blueprint is the
same for both. For fail points, it is almost always possible to fail to provide the customer service
during long waiting times. Fast food chains, Taco Bell and Chipotle, people go there to get their
food quickly and conveniently therefore it is so important that these service companies deliver
their food on time. First fail point is in the queue, if a customer has to wait too long in the queue,
they will get irritated and their zone of tolerance will be pushed. Second fail point is when the
food preparation in the kitchen takes a long time, delayed order preparation will mean that the
new orders will take even longer and therefore customer will get even more frustrated or even
leave. Third fail point is the waiting time after the customer has placed their order, and fourthly
if customers do not find a place to sit, they will feel that the service provider is not competent.
To combat these fail points, they should improve on their assembly line. The food
serviced by these places, is Mexican and has a lot of components. By having an efficient
assembly line, each person is skilled at their own task and therefore they can work faster at
combining these separate components. Moreover, they should have a sufficient number of
counters for order pickup and order placement. This can be arranged by calculating how many
customers they have on average on weekends and weekdays, then assign the counters
accordingly. This way the queues will not be that long and customer wait will be short. Lastly,
assuring seating is also important which means the cleaning crew will have to be very fast in
cleaning the tables once a customer leaves to ensure that it is immediately available for the next
customer.
 Question 11. What kind of physical environment is maintained by both firms,
discuss good and bad points.
Ans. Before 2016, Taco Bell had a very casually designed interior, similar to that of
McDonalds. With basic metal iron wrought chairs, and simplistic tables, resembling a neat
cafeteria with purple themed wall art. However, after 2016, they did a major of their interior and
came out with four new themes that they applied to majority of their branches. These themes
were Heritage, California sol, Modern Explorer and Urban Edge. All of these have upscale
interiors, designed to make the restaurants look far more attractive. The heritage theme has warm
white walls, rustic timber tables, simple clean look with a touch of culture. California Sol has
very modern plush furniture, cozy lounge chairs, and ample outdoor dining space. Modern
Explorer has soda fountains and high-top tables with colorful wall paintings. Urban Edge has
modern red streaked wooden tables with modern classy lighting, and eclectic theme. They have
featured open kitchen in all branches so that their customers can see their fresh food being
prepared. Moreover, they have energy efficient heating cooling and lighting. Moreover, they
have digital menu boards, TV monitors and Taco Bell mobile ordering and payment app pick up
and, in some branches, self-order kiosks as well.
The self-order kiosks are touch screen and, on the side, so that people can order on their
own without server interaction, this suits some people and also helps reduce queues at the
counter.

The good part about their ambience is that due to their style renovations, the place has an
upscale attractive vibe. There is transparency in the kitchen therefore customers can have an
authentic trusted experience which increases the integrity of the service. Moreover, the modern
lighting with the art creates a trendy vibe that matches the company profile. Furthermore, the
digital menu board, payment app, self-order kiosk makes use of technology to create an efficient
service process.
The flaws of the ambience are that in the branches that have not yet been renovated, the
seating is quite dull, uncomfortable and bland and fails to capture an attractive vibe.

Chipotle has an interior that consists of order counters with digital monitors, TV
monitors, mobile payment and soda fountains. The tables are quite simple, wooden plain with no
design and so are the chairs. The ceilings have hanging lights and grids. There is no special art
on the walls, the place is clean however. The simplicity and dullness of the place fails to create a
specific authentic vibe that expresses the brand personality of Chipotle.
One feels like there is no individuality at Chipotle, the hanging grids from the ceilings
look quite unpleasant, the simplicity and dullness and lack of colour in the place makes
everything look dull and there is no uniqueness in the place. Chipotle should definitely upgrade
their interior with better seating and furniture and brighter wall colours. A good ambience with a
nice colour selection along with comfortable modern seating make a branch look much better
and makes people want to sit there.
The good part is that since they are technologically advanced with digital monitors and
LED screens and therefore, they have an efficient order-taking system.
––
 Question 12. Make servuction system of both firms, identify pros and cons and
suggest improvement.

•
Ans. Branch selected:
Chipotle 50 California Street San Francisco
Taco Bell Cantina 224 7TH Ave New York
Servuction System
Both places have the same type of floor plan, only difference being that in the selected
branches, Taco Bell is smaller than the Chipotle branch.
Backstage
Service Operations System, Technical Core:
Since they both have open kitchens, there is very minimal backstage/invisible side.
Employee lockers, employee restroom, cleaning supplies closet, and dirty kitchen make up the
backstage. The cleaning of dirty trays, assigning of staff duties, and storage of extra supplies
needed for service delivery is kept here. Computerized processing of payment process and
inventory management are invisible elements that are conducted as well.
Front-stage
Service Delivery System; inanimate environment
This consists of the servicescape. For Taco Bell the main elements include the open
kitchen, where assembling of ingredients to make the customer orders takes place. Next it
includes the order counters with digital LED monitors that show the menu, the card machine, the
pickup lane, the LED board that shows order pickup information, the seating, the modern
lighting, long tables, art on the walls, and the exterior of the building which has huge neon sign
of Taco Bell logo.
Service Delivery System; Contact Personnel
This includes all the people who would come into contact with customers. First is the
primary service provider, these are people that will be taking the order behind the counter, their
attitude towards the staff is very important. Secondary service providers are the people who work
in the open kitchen and the ones responsible for cleaning as they will come into brief contact
with the customers as well. Thirdly, other customers present availing the service may also be
included.
The Pros of the floor design:
The physical environment is very trendy. The light fixtures along with the modern
furnishings make the ambience quite nice.
There is a very efficient management process, the electronic system automatically
updates inventory after each order and automatically lets the supplier know when to restock,
moreover its records payments in the database as well.
The order collection screen is quite large, and clearly shows which customer’s order is
being prepared.
An open kitchen is quite beneficial as it allows customers to see their food being made
and therefore this ensures a better standard of hygiene.

Cons:
According to our research in the Taco Bell branch, the place gets quite crowded and
therefore it gets a little congested during rush hours.
 An open kitchen also has its flaws as customers might get angry at the chefs if order is
delayed and yell at them, or customers might get extra picky and make unnecessary requests that
can slow down the service delivery.
There are only two counters for order taking in both branches this may cause long queues
which can create frustration and discomfort amongst the customers.
Improvements:
Taco bell should consider expanding the place, and if that is not possible then they should
open a separate takeout kiosk to avoid rush inside the place.
They should establish some kind of frosted glass half way across the open kitchen so that
while it is visible a little, there should still be some kind of privacy so that the workers can work
in peace and are not constantly hounded by the customers. Moreover, they should add an extra
counter to the order placing station.

Question 13. Which one and what kind of employees are required by the concerned
service industry. What qualifications must they possess. Is there any kind of reward and
recognition system, performance appraisal, training, practiced by firms to retain
employees?
Ans. The fast-food service industry requires employees with people skills. These
employees have to be friendly, polite, with effective time management skills. Since working here
involves different roles, all of which are interchangeable, these employees must have fast hands,
they should be quick to learn, responsible, hygienic, social, and friendly. The goal is for these
employees to work neatly but at a fast speed to prepare the customer’s food order in a hygienic
manner and be responsible and attentive when the customer is placing an order. Moreover, they
should be polite to deal with customers, well informed about promotions and ingredients to
answer customer questions. And have quick thinking to resolve any issues that occur such as
compensating customers when there is a mistake in the order. They also need to be able to use
technology, as they have to operate menu screen, order screen, drive and pos terminals.
At Taco Bell. some perks workers get with their jobs include free meals meal discount
vouchers, paid holidays, paid sick leaves, and health insurance depending on the number of years
worked and job level as well. They call their employees “champions” as a morale booster, so that
the employees feel like their work has a good purpose. They have two types of training, on the
job and online. Taco Bell provides online training via the Learning Zone training portal. This
program helps their employees prepare how to safely handle food, and learn to clean all areas of
the restaurant properly, and implement exceptional customer service and more. Employees have
to score at least 90% on the online tests and complete the whole training in order to work in the
kitchen. There is also on-the-job training that will help ensure their success. Managers and shift
leads will coordinate this training with all new employees. For senior employees there are also
benefits like retirement plans to allow them to stay with the company and work hard.
Chipotle announced a lot of reward incentives for their employees in 2018, these included
better thorough training programs for employees, including a formalized classroom program with
comprehensive teaching.
Qualified hourly and salaried restaurant employees at Chipotle would receive a special
one-time cash bonus of up to $1,000. Qualified staff employees will get a one-time stock grant.
Moreover, they added parental leave for all their employees, from hourly workers to
salaried employees.
Life Insurance and Short-Term Disability were also added for hourly managers. Chipotle
has also made an investment in educational benefits for their workers in partnership with Guild
Education which allows up to $5000 dollars for employee tuition and reduced cost-courses and
degree programs.
These firms have performance appraisals for the managers, which they judge by the sales,
cleanliness rating, inventory control, and overall customer reviews. The managers therefore
ensure that all their employees are accomplishing the tasks expected of them efficiently and that
the restaurant is running smoothly as it reflects on them.
 References
Adams, P., & Adams, P. (2020, April 30). Taco Bell, Chipotle adjust marketing around
Cinco de Mayo amid coronavirus. Marketing Dive. https://www.marketingdive.com/news/taco-
bell-chipotle-adjust-marketing-around-cinco-de-mayo-amid-coronavirus/577106/

Chipotle Announces Bonuses, New Training Programs And Expanded Parental Leave
For Employees. (2020). Chipotle. https://ir.chipotle.com/news-releases?item=122378

Chipotle Employees Can Now Earn an Extra Month of Pay. (2020). QSR Magazine.
https://www.qsrmagazine.com/employee-management/chipotle-employees-can-now-earn-extra-
month-pay

Chipotle: It’s not the burrito - it’s the operating model. (2015, December 10). Technology
and Operations Management. https://digital.hbs.edu/platform-rctom/submission/chipotle-its-not-
the-burrito-its-the-operating-model/

Mottl, J. (2018, July 9). Taco Bell to install self-order kiosks in all stores in 2019 under
its All Access initiative. Www.Kioskmarketplace.Com.
https://www.kioskmarketplace.com/articles/an-inside-look-at-taco-bells-digital-transformation-
to-deliver-an-enhanced-customer-experience-3/

Nisen, M. (2014, March 20). How Chipotle transformed itself by upending its approach
to management. Quartz. https://qz.com/183224/how-chipotle-transformed-itself-by-upending-its-
approach-to-management/

Taco Bell. (2015, October 7). [Video]. YouTube. https://www.youtube.com/user/tacobell

Taco Bell - Restaurant | 224 7th Ave, New York, NY 10011, USA. (2020, November 30).
USA Restaurants. https://usarestaurants.info/explore/united-states/new-york/new-york-
county/267580-taco-bell.htm

Taco Bell Pushes Community in 4 New Store Designs. (2018). QSR Magazine.
https://www.qsrmagazine.com/news/taco-bell-pushes-community-4-new-store-designs
 Taco Bell tempts app users with free taco after mobile purchase | Retail Dive. (2018).
Retail Dive. https://www.retaildive.com/ex/mobilecommercedaily/taco-bell-tempts-app-users-
with-free-taco-after-mobile-purchase