Like all restaurateurs, Dan McDonald wants to be sure he’s not wasting his marketing budget, especially in a year that looks as challenging as 2009 is projected to be.
But tracking the return on investment for all his advertising, including for local TV and radio spots, fliers and coupons, isn’t easy, he said. So he’s scouting out new ways to get the most bang for his advertising buck.
“With radio and TV, I don’t know how you measure it,” said McDonald, owner of a nine-unit franchise of Jersey Mike’s Subs in Nashville, Tenn. “Nobody comes in and says, ‘I’m here because I heard you on the radio.’”
Tighter budgets are forcing both chain and independent operators to more carefully scrutinize their ad spending. For some that means trying new marketing tactics to increase ROI, while others seek ways to better measure ROI or broadening their advertisings’ reach at a lower cost.
McDonald began testing a gift card program late last year to bolster his marketing spending with initiatives he could be sure were effective. The prepaid debit card, which is called “Facecard” and managed by Nashville-based marketing firm edo Interactive, can be loaded with digital incentives called “prewards” and sent directly to the tech-savvy consumers that opt in to the program. Best of all, McDonald said, he only pays edo a fee per redemption of each preward purchase, and tracking usage is easier.
For instance, he can instruct edo to hand out 5,000 prewards worth $1 each to every registered Facecard owner aged 18 to 25 that lives within two miles of any Jersey Mike’s unit he owns. If every recipient redeemed the preward, it would only cost him the $5,000 initial investment, plus a “not unreasonable” fee per use, he said. Redemption rates were around 17 percent during the last test, compared with low-single-digit rates for traditional coupons, and the check average for those transactions was about $11.
McDonald said such certainty about his marketing ROI is reflected in data derived from frequent reports he gets from edo about preward redemptions. He’ll continue to overlay that information with his company’s back-office systems to create efficiencies for staffing, purchasing and prepping.
“With Facecard, I know exactly who accepted the offer and when they came into my store, and I can build some real data around that,” he said. “The information it gives us is phenomenal. Talk about return on investment: I can give edo a sum of money, and it only costs me what gets used.”
While restaurants want more efficient marketing, few are slashing their ad budgets, said San Francisco-based consultant Andrew Freeman, chief executive of Andrew Freeman & Co.
“The last thing you want to do is stop marketing,” he said. “The restaurants that are going to survive and thrive this year are the ones that look at less expensive options for marketing.… Before the technology and economic booms, restaurants got customers through word-of-mouth.”
With many industries in the United States getting battered by the recession, however, total advertising spending is expected to contract. Barclays Capital said in a report last month that 2009 domestic ad spending is projected to fall 10 percent. By comparison, the 1991 recession caused a drop in ad spending of 1.9 percent, and the post-9/11 recession accounted for a 6.2-percent decrease in 2001. However, Barclays said Internet advertising would rise 6.1 percent—still lower than the firm’s initial projections—and account for 10 percent of all advertising spending in 2009.
California Tortilla is one company that will spend more to market online. The nearly 40-unit fast-casual chain, based in Rockville, Md., advertises specials via social-networking sites Facebook and Twitter and has sent out its “Taco Talk” newsletter to fans for years.
“Cal Tort,” as the chain is known on Twitter and in the six Mid-Atlantic markets where it trades, measures the success of its Web-based advertising through buzz generated for its events, said Stacey Kane, director of marketing. The next event, advertised to the chain’s 1,500-plus Facebook fans and 200 Twitter followers, is an “inaugural ball” set for Jan. 20, where customers receive a free taco for “doing a little dance” in honor of Inauguration Day.
“That will stimulate trial for us, and it will stimulate customers to come in,” Kane said. “There’s a huge return on investment, because it doesn’t cost anything beyond the free taco, and most people make another purchase in that case.”
Because social-networking accounts are free, they provide cheap, easy outreach for small companies, Kane said. However, Web-based marketing won’t supplant traditional methods any time soon. In a survey of chief marketing officers conducted by BDO Seidman, 57 percent of marketers will spend the majority of their budgets on print advertising this year, while 21 percent will spend it mostly on broadcast outlets and 19 percent will concentrate on online ad buys, including social networking.
Still, marketers will want to ensure how efficiently they engage customers while using print, TV or radio, said Richard Virgilio, managing director of PayPerClip, a public-relations firm in Califon, N.J. His firm’s business model is pay-per-placement, which Virgilio believes could benefit an independent restaurant that relies on an outside P.R. firm to announce promotions to drive traffic.
“There’s a lot of fluff related to retainer-based programs,” he said. “Restaurants don’t necessarily need full-service P.R. It’s something where they want to be on ‘Martha Stewart’ or in their local paper, not a constant churn of press releases. Say, in November, you needed $30,000 worth of press because you’re ramping up for the holidays, but in October or September you didn’t need a lot of that effort. With a pay-for-performance model, you wouldn’t have paid for anything, and then you could have ramped it up when you needed it and got a direct line to your return on investment: Your reservations were up, your holiday bookings increased, or however you judge it.”
Operators also will have to evaluate marketing plans and adjust more often, Freeman said, because economic turmoil will distort restaurants’ standby metrics like year-over-year same-store sales.
“Year-to-year comparisons that restaurants use so much will be off next year,” he said. “We’re comparing apples to ‘Oh my god, what happened?’”