Often it takes a tragedy to make two parties’ feud seem trivial and bring them back together. For Red Robin Gourmet Burger and television advertising, that sad situation is the very challenging business environment that has severely depressed the casual-dining chain’s sales.
Reversing a very public breakup earlier this year, when it dismissed TV advertising as expensive and ineffective, Red Robin this week told analysts that a 10-market test of local TV buys yielded significant ROI. That was the good news during a quarterly earnings call during which Red Robin had to report some dismal numbers: restaurant revenue down 10.4% for the quarter ended Oct. 4, 2009; same-store sales at company units down 14.9%; guest counts down 13.8%; average guest check off 1.1%. Yikes.
The quarter included only the first few weeks of sales for Red Robin’s Wise Guy Burger and Chicken Caprese sandwich, two high-profile limited-time menu offerings with suggested menu prices of $9.49.
But in 10 company-store markets (representing 100 units, or about one-third of company-owned locations), TV spots promoted the LTOs at a special $5.99 price point. Minneapolis-based Periscope, named agency of record in August, created the TV spots, which ran with higher media weight than Red Robin used in the second quarter for local TV spots backing steak sliders.
SVP-Chief Marketing Officer Susan Lintonsmith told analysts that for the four weeks prior to the TV test, guest counts in the 10 test markets were off 11.4% from the previous year. The three weeks of TV brought an increase in traffic of 1,200 basis points, moving it into the black.
Similarly, sales in the 10 markets were down a disturbing 12.4% vs. prior year during the four weeks preceding the TV test. The heavy local buy yielded an improvement of 900 basis points, Lintonsmith said. “We believe the TV ads paid for themselves,” she said. Both the Wise Guy and Caprese items were among the top 3 sellers in all 10 markets.
The Wise Guy/Caprese promotion ends Nov. 8, and Red Robin has no major new menu additions planned until February 2010, but Lintonsmith says TV, both local and national, will be “important parts” of Red Robin LTO marketing next year.
In markets that did not get the $5.99 TV campaign, Red Robin distributed $3-off coupons for the two LTOs. Direct mail, “endorsement radio” and online marketing also will be used in 2010. Through year-end, Red Robin will promote gift cards and expand the Red Royalty guest-loyalty program that it began testing in July of this year.