Tag line meets bottom line in funding marketing plans: finance officers look for measurements of promotional programs' success

Nation's Restaurant News, May 19, 2003 by Susan Spielberg

Marketing folks--they like to talk about concepts," David Koehier, chief financial officer of Checkers Drive-In Restaurants Inc., states. "I say, 'Well, give me a number!' That's like, 'Where's the beef?'"

Unlike his colleagues on the creative side of Checkers' marketing efforts, Koehler is talking about the bottom line.

One particularly crucial challenge of managing a marketing campaign is quantifying its effectiveness, since there is no textbook way for measuring how much bang an operator is supposed to get for his promotional buck. A lot of that is a judgment call. And such calls often are made most loudly by chains' finance chiefs.

"It's very difficult," says Fred Grant, senior vice president of finance for Ryan's Family Steak Houses. "The easy part would be taking a look at your difference in sales before and after a marketing campaign . . the residual effect. Then the question is, How long does it last, and how long do I measure it for?"

Once you have defined your measurement period, you would look at your incremental profit and compare that with the cost of the advertising, he explains.

"But most marketing programs, in order to have impact, have to have continuity; you don't run a media program just one time," he cautions, concluding that defining the payback period would be one example of a judgment call.

Grant points out that Ryan's use of marketing has not been extensive, compared with some other chains.

On the other hand, Checkers has employed extensive and varying marketing techniques as part of its effort to change its image from a seller of discount hamburgers to that of a place that connects with the lifestyles of people on the go. The company's "You Gotta Eat" campaign takes a retail branding approach instead of a product approach.

Checkers and its franchisees own 398 Checkers and 380 Rally's Hamburgers drive-thrus.

"We want to connect to people's lifestyles. We don't want to just try to see if we can out-product and out-maneuver the competitors," Checkers CEO Koehler says.

One tool the company uses to measure the success of its image changeover process is focus groups.

"Back in the beginning of 2001, with our new marketing agency, we broadened our perspective from the 18-to-26-year-old male to the full gamut of demographics," Koehler says.

Checkers' vice president of operations, Adam Noyes, says the focus group studies showed the image of Checkers starting to change about nine months into the campaign, but really taking hold after a year and a half.

According to Koehler, sales increases are the first indication of success.

"The first year the campaign came on, in 2001, we hit double-digit same-store sales growth, while the rest of the industry was flat," he states. "We were hitting anywhere from 10-percent to 14-percent sales growth for the overall system, and in some markets we were up 40 to 50 percent from time to time, when we'd come on with this marketing campaign."

Checkers' same-store sales jumped 11.6 percent for fiscal 2001, with higher figures in the latter part of the year. Total sales of $145.4 million in 2001 were lower than in 2000 because the company had shut many stores at the end of 2000 and didn't replace them until the second half of 2001.

Another way to gauge effectiveness is to compare markets in which the campaign is taking place with ones where such an effort is absent.

"You could keep testing your theory" Koehler explains. "Certain markets would come on the TV, and then you could separate, whether [the effect] was really from the TV or if it was just from the general economy. If all your markets went on at once, it would be hard to separate it."

Koehler points to one instance where a franchisee with 10 outlets was skeptical initially about the impact of television advertising but saw a 20-percent jump in sales the day after airing a commercial.

Another operator of 18 company-owned stores was one of the chain's leaders in same-store sales growth, with 15 percent to 18-percent increases attributed to television advertising. However, since total sales in his market were small, relative to the cost of television advertising, those costs as a percentage of sales were 10 percent, so the ads were discontinued. But after they were pulled, his territory dropped to the bottom rank of Checkers restaurants.

Checkers generally likes to budget advertising at 6 percent of sales.

Noyes, Checkers' vice president of operations, points out that in order for a marketing campaign to be successful in the long run, a company must have its operations in order.

"Marketing gets you in the door, but it's my job to keep them coming," he says. "Marketing brings people in once or twice, but they won't return if our operations aren't intact."

Assuming that a marketing campaign is successful and operations are in place to handle increased traffic, is there such a thing as a campaign being too successful?

Koehler says that if a promotion brought people into the stores, hut the customers bought only the lowest-margin products--if they cherry-picked--then increased sales and traffic would not be a mark of success, because the bottom line would suffer.