Burger king forges marketing alliance with AOL time warner

Nation's Restaurant News, Nov 19, 2001 by Gregg Cabrzynski

MIAMI -- Burger King Corp. is counting on a new alliance with media giant AOL Time Warner to boost sales and increase the burger chain's base of loyal Whopper lovers.

The two companies signed a sweeping, multimillion-dollar deal that would plaster the Burger King name on the Internet and in high-profile magazines. It follows a number of efforts the chain has taken to improve sales as it anticipates spinning off from parent company Diageo PLC, though the alliance was not forged with that in mind, according to DeeDee Drays, BK's senior director of global alliances.

"I really wasn't thinking at all about corporate legal transactions when I was structuring this alliance," she said. "I think this will help the company in many regards, and I probably can't exclude that [spin-off]."

The multiyear agreement would allow consumers to receive digital codes to access special sites within America Online departments, download music for free and nominate local heroes for the Whopper Sports Moment of the Month award.

In addition, the Burger King brand would be promoted across AOL Time Warner's array of TV, print and online media, giving the chain wider exposure than it's ever had.

"This is a very significant alliance for us in terms of driving traffic into our restaurants," Drays said. "This really is turning around the company, setting us apart from the competition."

Drays declined to say specifically when the programs involved in the partnership would begin, saying only that they'd start "very soon." The sports and music promotions would extend beyond standard, four-week promotions, lasting a year or more, and were chosen because they are "the most compelling for our demographic," Drays said.

Franchisee Larry Kessler, who operates 22 Burger King units in Rochester, N.Y, and the surrounding area, said an alliance of such magnitude is overdue.

"This is a partnership that has the quality and talent that we, frankly, should be aligned with," he said. "Heretofore, our competitors were picking up these other big studios, and we'd be losing out to them. This is a big development for us."

AOL Time Warner, of course, stands to benefit as well. Its software would be available at Burger King units, and customers would be exposed to news about Warner Bros. and New Line movies and receive the latest information about musical acts from Warner Music Group and other record labels.

Tray liners even would be involved, containing special features from Time and People magazines.

Although Burger King could gain wider brand exposure, the effectiveness of the alliance will be determined by how that exposure helps sales.

"The important question to ask is, What potential does it have to drive traffic to the stores and drive purchases?" said Jackie Rodriguez, a consultant with Chicago-based Technomic who works one-business projects.

"The potential is definitely there," she said. "The 18- to 34-year-old males who are heavy QSR users dovetail fairly well with heavy Internet users. It's a good match from that standpoint."

Burger King has an advantage in being "more progressive on Internet promotions" than its competitors, Rodriguez said, noting that the chain received an "amazing response on the Web site to the Pokemon promotion" in late 1999. But even in light of that, she cautioned, "the larger question is, What did that do for sales?"

Burger King's same-store sales in North America fell 4 percent during the fiscal year ended June 30, the latest downturn in several years of poor sales. The urgency to reverse that trend is even more critical now as Burger King prepares to spin off from Diageo.

Steve Lewis, president of Burger King's National Franchisee Association, believes the alliance with AOL Time Warner will improve sales by boosting the number of repeat buyers at BK units, similar to the way airlines court frequent flyers.

"Our goal is to work on customer loyalty, and when you look at some of the successes in the airline industry, this is a huge step in the right direction as far as I'm concerned," he said. "It's so new and novel that we all have to be very encouraged with this arrangement."

The heart of the alliance is a system of integrated programs to link Burger King's 12 million daily customers with AOL's Internet and traditional products.

One promotion, called Whopper Sports Moment of the Month, will appear in Sports Illustrated and on the magazine's Web site. Burger King customers will be invited to nominate local sports stars for the feature.

The latest music will be featured on a new BK Backstage site developed by AOL Music. It also will allow free music downloads, prerelease streaming of songs and videos, live chats with recording artists, and a chance to win backstage concert passes and other prizes.

Burger King and AOL also are working on plans to promote the chain on cable networks CNN and TNT, in Time and People magazines, and on America Online brands, including AOL, CompuServe and Netscape.

Burger King employees also could benefit from the alliance under an incentive program that would reward them with concert tickets and discounts on AOL Time Warner products.