March 2020 (Vol. 60, Issue 1): CREATIVITY
Advertising and Promotional Effects on Consumer Service Firm Sales: Media Ad Spend and Quality Matter for Driving Restaurant Sales
Most of the data from research on the relationship between sales and individual marketing-communications variables comes from the fast-moving consumer products sector. It typically focuses on individual variables, such as ad spend, executional quality or promotions. This study takes all of those variables into account in its focus on consumer service firms—specifically quick-service (fast-food) restaurants (QSRs)—an often overlooked sector with high marketing-communication expenditures.
“Researchers rarely have studied these variables together … to understand their relative effect on sales,” Harlan E. Spotts (Western New England University), Marc G. Weinberger (University of Massachusetts, Amherst), and Michelle F. Weinberger (Northwestern University), note. “The lack of industry-wide retail-tracking data for service categories has limited researchers’ ability to extend advertising research to most services.”
Spotts et al.’s work using brand-level data on QSRs “represents a unique instance when advertising spending, advertising quality and promotional effects all are examined in a single study, something that rarely occurs, regardless of product category.”
The study involves datasets from four research providers—NPD Group, Ameritest, Kantar Media and the National Restaurant Association—for nine national restaurant brands over a five-year period (January 2009 through December 2013). With the exception of Dunkin Donuts and Starbucks, the nine QSR brands represent 85% of the sales revenue of the top 15 brands in this category. Ameritest, in a 2014 study published in this journal, used McDonald’s data to explore the relationship between advertising quality and sales growth. Spotts et al.’s study used the same measure that Ameritest designed (advertisement performance index, or API), which calculates advertising-execution quality as a function of attention, brand linkage and motivation.
Among Spotts et al.’s findings:
- For most brands, advertising-media spending, particularly television spending, had the greatest impact on changes in sales performance. The quality of advertising execution was still important, but it played a lesser role for the group of eight nonleading brands.
- For the category leader, advertising spending at current levels did not drive additional sales. Instead, advertising quality mattered most—supporting the 2014 Ameritest study—perhaps reflecting saturation in awareness. This suggests that this category leader may be able to reallocate resources devoted to exposure. Total promotions also were not related to changes in sales for this market leader.
- Brands that experienced gains in average sales performance over the five-year period had higher share of voice across media, higher advertising-executional quality and fewer sales driven by promotions, than those that declined in sales performance.
- Although classic promotion activity was not a significant driver of sales change, menu-based promotion actually had a negative effect on changes in sales. There is some evidence that restaurants increased the use of menu-based promotions when sales were flagging, a strategy that may be counterproductive.
Read the full article.