NEW YORK (AdAge.com) -- A number of regional brands are finding a surprising way to drive efficiency: a national cable buy. Just in fast food, Domino's, Dairy Queen and Sonic have all increased reach and improved sales by swapping local TV spending for national cable even if that means advertising in markets where they don't operate.
"This is a definite trend in the industry," said Dairy Queen CMO Michael Keller. "You can see in the data more and more medium-size competitors in our market have moved to national [buys] using cable as their springboard because it's national and much more affordable."
This year, Dairy Queen flipped what's been a regionally slanted TV budget, putting 60% into national cable and leaving 40% for regional markets. Mr. Keller noted that increasing media fragmentation and growing popularity of cable programming has brought cable and broadcast to near parity in viewership, but cable is generally much cheaper. For Dairy Queen, which has a high concentration of locations in the most-expensive markets, like New York (mostly in New Jersey) and Los Angeles, a cable buy made sense.
The strategy shift seems to be industry wide. According to Kantar Media, measured network cable TV spending by fast-food marketers has increased nearly 50% over the past four years to $738 million in 2009 from $506 million in 2006. Spot TV buys declined 16% over the same period to $739 million, from $882 million. Network TV spending also fell 13%, to $831 million.
And it's not just the medium-size players. Domino's adjusted the way franchisees pay advertising royalties for 2010. Operators have traditionally put 4% of sales toward national advertising and 2% toward regional advertising. But the chain bet on national media, asking franchisees for 5.5% of sales to fund national advertising and giving 0.5% back for the operators to spend as they see fit. The bigger spending was ready for Domino's new-recipe launch in December, and first-quarter same-store sales soared 14%.
Local works for Sonic
Sonic was first with this strategy in 2005. The chain then had about 2,600 locations, but wasn't nationally known. However, Dominic Losacco, VP-marketing channels at Sonic, said they took a look at where its consumers were spending their time. "They were watching more and more cable as cable was getting a bigger presence in the media space," he said. "When we did the break-even analysis, it was more efficient for us to buy cable nationally than on a market-by-market basis."
Sonic now has about 3,600 locations, and Mr. Losacco said the national advertising has been a boon for the brand. Sales increased, and he added that new stores also opened more strongly because local consumers had been seeing commercials.
Jack Poor, VP-strategic planning at Television Bureau of Advertising, said the organization saw an uptick in quick-service restaurant spending in spot TV during the first quarter. One of the brands spending more this year is Sonic, which Mr. Losacco said has found the right level of network cable spending and is beginning to reinvest in the local market.
Mr. Poor added that spot TV market rates have been falling relative to network cable prices. "While the brand people may still want to go national for strategic reasons, they've lost a lot of the economic argument, and the franchisees will be able to make a stronger case for keeping the money local."
As the role of programmatic buying and selling in digital advertising continues to grow, issues surrounding viewability and verification are moving to the forefront. This white paper looks at the current state of and future prospects for programmatic in a digital ad industry increasingly defined by viewability and verification. Brought to you by RhythmOne.Learn more