Advertising Quality

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A M o d e l fo r P r e d ic t in g A d v e r t i s in g Q u a l i t y

A s a K ey t o D r iv in g S a le s G ro w th

How Television Advertising Quality

Affected McDonald’s Sales Growth Over Six Years

CHARLES YOUNG

Ameritest

[email protected]

ADAM PAGE

Amerites t

[email protected]

The current research used McDonald’s data to explore the relationship between

advertising quality and sales growth. Based on a 6.5-year dataset involving more than

180,000 consumer interviews, the researchers found that nearly half of McDonald’s sales

growth could be explained by variables related to advertising quality. Specifically, the study

found that factors such as sales momentum, the introduction of calorie content on to

quick-service restaurant (QSR, i.e., fast-food) menus, and variables related to key research

metrics—and, importantly, the right messaging strategy—can be effective in linking

advertising to variation in sales.

INTRODUCTION

An ongoing challenge to advertising researchers is

how to validate predictions about real-world sales

performance based on pre-tes ting metrics. Such

validations are important for three reasons:

• quantifying the contribution advertising can

make to re turn on investment (ROI),

• confirming the general construct of how adver

tising "quality" works can be implemented as

a quality-control step in the creative process—

something once lamented as a "dream that will

never come to be" (Metzger, 2013), and

• providing a baseline for distinguishing between

what is known and not known about how adver

tising works is a critical element in evaluating

improvements in the research process.

Much previous research has found that the qualityof advertising matters in terms of perceived brand

perceptions and marketing efforts (Dahlen, Rosen-

gren, and Torn, 2008) and that it drives mind-set

metrics like cognition, affect, and experience that

can be linked to sales performance (Bruce, Peters,

and Naik, 2012). To the current authors' knowl

edge, however, a large dataset analysis never has

• Quality of advertising creative is a major factor driving sales response. Marketing-mix models

attempting to quantify ROI are incomplete if they do not include a creative-quality variable.

• Relative performance of advertising versus the competitive may provide insight into one of the

fundamenta l questions facing brand marketers.

• A definition of creative “quality” needs to take into account the relationship between brand

positioning and brand image.

• The current study examined how emotional engagement with advertisements can be converted to

long-term brand memories.

DOI: 10.2501/JAR-54-4-393-397 December 2014 J D U R R A L O F R D U E R T I S i n G R E S E A R C H 393



A MODEL FOR PREDICTING ADVERTISING QUALITY AS A KEY TO DRIVING SALES GROWTH

been performed to link advertising quality

and sales.

The current study explored the relation-

ship between the quality of McDonald's

U.S. television advertising creative productand publicly reported McDonald's sales

figures. Advertising quality was measured

by a testing system created by Ameritest,

the international marketingresearch firm

based in Albuquerque, NM.

Given the size and extended period

of the dataset, the authors believe that

the current analysis offers a "bigdata"

approach to validation. They also believe

that they can explain nearly half of the

sales growth reported by McDonald's

during this 6.5year period by examining

four variables:

• sales momentum;

• advertisingquality metrics;

• calorie variables (beginning when

McDonald's began offering calorie

counts on its menus); and

• negative advertising quality (advertising

that failed to communicate its intended

message).

Importantly, each variable relates directly

to the quality of the advertising creative

work. Moreover, the size of the advertis-

ing investment was not a consideration in

the current study; McDonald's spending

data is proprietary information, and the

research team did not have access to it. One

benefit of this necessary omission is that it

sets this study apart from other marketing

mix models that often tend to be driven

heavily by media spend. Another benefit

was that the researchers could establish the

importance of creative quality more clearly

without regard to advertising expenditure.

MCDONALD’S METRICS AND DATA

For a variety of reasons, the research team

found McDonald's to be a particularly apt

subject for a researchvalidation exercise.

G i v e n t h e s i z e a n d e x t e n d e d p e r io d o f t h e d a t a s e t ,

t h e a u t h o r s b e l i e v e t h a t t h e c u r r en t a n a l y s i s

o f f e r s a “ b i g - d a t a ” a p p r o a c h t o v a l id a t i o n .

For one thing, as quickservice restaurants

(QSR) tend to produce much advertising in

short periods of time, a television advertis-

ing investment likely would have a great

influence on sales.

In a typical year, the top 18 QSR brands

produce and place more than 300 thirty

second advertisements on national tele-

vision. As the category leader, McDonald's

airs approximately 20 percent of the cate-

gory's distinct television spots each year.

With this kind of investment, McDonald's

management certainly would expect to see

a strong relationship between advertising

and sales.

Moreover, because of its fasttempo

advertising strategy, McDonald's changes

out its creative product monthly, with

four to five new commercials airing each

month. As a result, the time frame for

seeing a direct advertisingtosales effect

should offer a fairly narrow window for

analysis. This pace allowed the authors

of this study to have more confidence in

the variables they chose to use. In fact, due

to the rate at which advertising changes

in the category, sales theoretically should

change quickly in response to specific

advertisements.Regular validation exercises are stand-

ard for most major pretesting clients.

The results of such work, however, often

are proprietary. For the current study, the

authors used either publicly available

information or an Ameritest database of

syndicated creative scores.

The sales data used in the current

analysis are the monthly change in same

store sales compared to the prior year for

McDonald's U.S. operations—information

reported to Wall Street and obtained from

Morgan Stanley by the research team.

The data covers 6.5 years, from January

2007 through May 2013. To test the stabil-

ity of the model, the authors first studied

the 5year period that ended in 2012. They

then updated that analysis with data from

the sixth year. Essentially, the findings

were similar for both time periods.

The sample of advertisements used in

the study represented a virtual "census"

of all 30second QSR commercials aired in

the United States in the past 6.5 years—or

almost 2,000 commercials—with 180,000

consumer interviews. Of these commer-

cials, 441 were for McDonald's, and 1,533

were for McDonald's competitors.

The creative metrics used were collected

continuously using a standard method-

ology developed by Ameritest over a

significant period of time and among a

controlled sample of consumers for a large

number of advertisements.

METHODOLOGY

A model predicting McDonald's sales was

built using multiple regressions. To keep

the model parsimonious, only four vari-

ables were used. The model related salesfor any given month to the performance

of commercials airing that month. This

fourvariable model explains almost half

of the variation in sales growth, with an

Rsquared of 48 percent.

The Model

Y = 0.50X1 + 0.39X2 + 0.20X3

0.39X4 0.826

394 J 0 U R I 1 R L O F R D U E R T I S I R G R E S E R R C H December 2014




The variables are defined as follows (Y—

Monthly change in same-store sales):

• XI: A "mome ntum" variable—the aver

age of the prior three months' sales

growth—that accounted for longer-term

effects of advertising

• X2: An advertising-quality metric com

pr ised of executional performance met

rics and comm unication metrics

• X3: A "calorie" variab le—in this case, a

dummy variable set to 0 and to 1—that

allowed the research team to account

for the period beginning in late 2012,

when McDonald's began offering calo

rie counts for its products on its menus

• X4: A nega tive-advertising quality var i

able that identified any advertisements

that had failed to communicate a rel

evant strategic message to consumers

other than the default consumer infer

ence of "convenience."

Further Explanation of t he Variables

The momentum variable (XI) was

designed to reflect the idea that month-

to-month changes in sales were not inde

pe nd en t of one another but ra ther b ui lt on

one another over a period of time.

The advertising quality variable (X2)

was a composite index:

Ad Quality = Execution x Strategy =

Creative Idea x Relevant Message =

(Ameritest Performance Index)

x Messaging

The Ameritest Performance Index (API)

consisted of "Attention," " Branding," and

"Motivation" (intent to visit restaurant),

which are standard pretest "report-card"

measures.

The messaging metric (X3) is the top-

rated message from the group of ten

fast-food messages collected in the brand

ratings. To calculate the composite creative

index score for each month, the research

ers examined the messaging of each

advertisement and included only "effec

tive" advertisements that scored at (or

above) average (index greater than 100) on

at least one strategic message.

The API scores for these qualifying

advertisements were multiplied by the top

message rating scored by that advertise

ment. From those data, the authors were

able to calculate an average creative index

score for the number of effective advertise

ments running that month.

The negative-advertising quality vari

able (X4) was calculated in a way th at was

analogous to X2, except that only adver

tisements that communicated "conveni

ence" as the top-rated message were used

in the average for each month; advertise

ments w ith low and high API scores were

included.

The Research Model

The momentum variable (XI) is the most

important of the four variables examined

in the study and accounts for about a third

of sales growth, with an R-squared of

34 percent.


is the next most important, with an

R-squared of 9 percent. Of course, this

part of th e an alys is acco un ts on ly for

advertising's contribution to short-term

sales and is not tied to long-term brand

buildin g effects th a t may re sult from

advertising used to establish a brand

posit io n in g and im ag e. The se ty pes

of effects would be contained in themomentum variable.


that accounts for ineffective advertise

ments that fail to contribute a strategic

message also enters the model in a nega

tive way—with a negative beta coeffi

cient—to increase the predictive power of

the mod el by ano ther 2 percent.

Finally, the dummy variable marking

McDonald's decision to communicate calo

rie content (X3) adds 3 percent to the model.

FINDINGS

The Impo rtance of Strategic

Communication

In one seminal analysis, communication

was found to occur only when a particu

lar message is selected from a set of pos

sible messages that must be known to

bo th se nd er an d receiver (Shannon an d

Weaver, 1949). For the QSR industry, these

messages include such ideas as taste, vari

ety, health, and a family-friendly atmos

phere, an d each message can va ry in its

creative expression and degree, (e.g.,

Dahlen et al., 2008).

By contrast, Subway's strategy is quitedifferent: Its messaging has focused

entirely on health claims, as the QSR has

attempted to position its brand against the

entire fast-food category, which often is

perceived as unhealthy.

The presence of a strategic mes

sage by itself is not enough to explain

advertising's impact on McDonald's

sales growth. In combination, however,

with industry measures of executional

strength—"attention," "branding," and

"motivation"—it is possible to assess

how the quality of the creative produ ct in

advertising may drive sales.

The Impact of a Failed-Message Strategy

One way that advertising can fail to be

effective is by not communicating a mes

sage that suppor ts the strategic positioning

of the brand. As the authors of this study

observed in certain McDonald's messagingstrategies, this kind of failure may do dam

age that extends beyond the lost invest

ment of misplaced media dollars. Creative

work that strays too far from what the

brand stands for in the mind of the con

sumer can blur the brand positioning and

damage the bran d image.

An example: A McDonald's ad vertise

ment tha t reminds consumers of only the

convenience of eating at McDonald's.

In practice, the QSR never would run

December 2014 J 0U R I1R L O f R D U E R T I S i n G R E S E R R C H 3 9 5




advertising with the primary messag-

ing intent of the categorical attribute—

"convenience"—which so often has

negative connotations of poor quality

and poor nutrition throughout the com- pet itive set.

When looking at the distribution of

McDonald's advertising by messaging,

the authors of the current study found

that 60 percent of commercials con-

veyed a primary message of one or more

strategic benefits {i.e., taste or variety).

However, for 30 percent of McDonald's

advertisements, the primary or only mes-

sage communicated by the advertise-

ment was "convenient." In the absence of

any stronger conveyed benefit, "conveni-

ence" becomes the default message taken

away by the advertising. The remaining

10 percent conveyed none of these stra-

tegic QSR messages.

As the meaning of a McDonald's adver-

tisement defaulted to convenience—or to

nothing at all—the quality rating declined

accordingly. More specifically, in looking at

the correlation with "motivation" scores,

when convenience was the only message

of an advertisement, the correlation was

negative (21 percent) but could be a posi-

tive (+26 percent) when convenience was

couched with other relevant messages.

Thus, in the current model, the authors

found evidence not only that the quality

of the advertising creative product was an

important variable in driving sales per-

formance but that unfocused advertisingactually could hurt sales.

Additionally, the authors discovered

that finding a strong strategic message was

important to ward off competitive attacks.

In months when McDonald's communi-

cated a stronger strategic message than

its competition, sales tended to increase.

During months when competitive spots

more effectively communicated a strategic

brand message, McDonald's sales growth

stagnated or even declined.

A d d i t i o n a l l y , t h e a u t h o r s d i s c o v e r e d t h a t

f in d i n g a s t ro n g s t r a t e g i c m e s s a g e w a s

i m p o r t a n t t o w a r d o f f c o m p e t i t iv e a t t a c k s .

This finding highlighted the need to be

aware of the competitive set in the mar-

ketplace. In fact, when McDonald's had

an execution in the topthree performers

among QSR advertisements for any given

month, average sales were half a percent

higher than when McDonald's did not

have a topthree advertisement. And that

halfpercent may amount to hundreds

of millions of dollars, underscoring how

important it is for McDonald's to know

where it stands versus the kind of adver-

tising its competition is running.

Long-Term Advert ising Effects

Judging from the betas in the model,

the authors of the current study found

that the momentum variable (XI),

which described effects that per-

sisted longer than a single month,

was most important. This variable

summarized a variety of marketing

inputs, including changes in service

operations, changes in product offerings

and, of course, the longerterm contribu-

tions of advertising to the McDonald's

brand.

The link between memory and expe-rience is clear but multifaceted (Kah

neman, 2011). A consumer's "brand

memory" of McDonald's, therefore, is

complex, composed of all past expe-

riences (real or imagined) that the

consumer has had with McDonald's,

including engagement with advertising.

To fully understand how advertis-

ing drives sales, it is essential to under-

stand that the "brand" is nothing more

than a memory. An effective McDonald's

advertisement transcends the simple stim-

ulus response of sales promotions and thus

can be expected to have an effect on sales

for some time after it has aired.

To demonstrate how advertising persists

in memory, the authors of the current study

performed a simple experiment with fivehighly effective, attentiongetting fastfood

commercials. Tested among three differ-

ent consumer samples per advertisement,

the authors measured memory—frame by

frame—20 minutes after commercial expo-

sure, 24 hours after commercial exposure,

and seven days after exposure.

Not surprisingly, the greater the amount

of time consumers had to forget, the less

they remembered. While an average of

77 percent of images from these com-

mercials were remembered after 20 min-

utes, after a full day, only 62 percent were

remembered. After a week, consumers

remembered 52 percent of the images from

the commercial.

Importantly, when the researchers

looked across the five commercials, they

saw similar patterns with the rhythmic

peaks and valleys of the memory map. The

images that were peaks after 20 minutesremained peaks after longer time periods.

In other words, the images that were key

to predicting breakthrough scores or com-

mercial engagement were the same images

that lodged most strongly in longterm

memory to build a brand's image.

As these images persist over time in

consumer memory, they likely form the

emotional basis of consumer loyalty to

complement a more rational basis for loy-

alty (Reynolds and Phillips, 2005). And

396 J D U R n f l L O F R D U E R T I S I R G R E S E A R C H December 2014




that emotional bond suggests the mecha-

nism for advertising's longterm contri-

bution to the momentum variable in the

current model.

IMPLICATIONS AND CONCLUSION

Marketing managers seek to understand

the relationship between advertising qual-

ity and sales growth. This McDonald's

analysis—with a 48 percent R2 on sales

growth by using advertising quality met-

rics—demonstrates that this link is not

only possible but highly important to a full

marketingmix model.

The authors of the current study

believe the link between the quali ty of

creative work in advertising and short-

term sales growth is clear. This high-

lights the everevolving need to generate

strong insights about creative quality,

so a marketer can both understand the

"whys" of his or her advertising and take

this into account when making a sales

forecast. Linking strong creative quality

with established marketingmix model

principles, such as sales momentum andnew category information (e.g., as in the

case of McDonald's calorie content com-

munication), should give the marketing

manager a clearer picture of the market-

place and expected results.

To improve understanding of the link

between advertising and sales growth,

marketing managers should take note of

the following conclusions the authors have

drawn from this study:

• Independent of mediaspending levels,

the quality of the advertising crea-

tive product is a major factor driving

sales response. Marketingmix models

attempting to quantify ROI are incom-

plete if they do not include a quality

variable for the creative work.

• Relative perform ance of adve rtis-

ing versus the competitive set is

important—one of the "fundamen-

tal questions facing brand marketers"

(Reynolds and Phillips, 2005). The

authors believe, therefore, that competi-

tive testing and awareness is a necessarycomponent in the analysis of fluctua-

tions in sales figures. Such analysis can

lead to the identification of areas where

the brand needs to position to fend off

competitive attacks.

• Creative "quality" is a composite of mes-

sage communication and executional

variables. This distinction parallels

two common ways of thinking about

a brand: "positioning" versus "brand

image." A brand manager's structural

composition of an advertisement and

messaging strategy, therefore, needs

these two elements to be linked at opti-

mum levels to ensure that both position-

ing and brand image can be understood

completely by the consumer. Also, one

cannot be traded off for the other; com-

municating a relevant message is as

essential to the advertising story as the

executional pieces needed to hold that

message together.

• Longerterm effects of advertising on

sales need to be better understood and

quantified. Much previous research

has focused on "emotional engage-

ment." Research suppliers consist-

ently have introduced new products

and services—among them biometrics

and facial response techniques—that

measure the emotional response of the

consumer.

Even in the face of such metrics, the

authors of the current study believe that

the importance of "brand memory"—as it

relates to loyalty and consumer trends—is

a missing part of the emotional equation.

Future research should shift attention

to the study of how these emotional

engagement strategies connect with

advertisements to create longterm brand

memories. flJT)

Ch ar l e s Y o u n g is founder and ceo of Ameritest, a global

research firm, based in Albuquerque. NM. Young

invented the firm’s Ameritest’s Picture Sorts technique

that analyzes visual components of advertising.

Previously, he was research partner for Euro/Tatham

and a new-product consultant for Leo Burnett. In 2004 ,

Young won the Advertising Research Foundation's Grand

Ogilvy Award for a case study conducted with IBM. He

is the auth or of The Advertising Research Handbook

(Ideas in Flight Publishing, Seattle, WA, 2008).

A d am Pag e is an associate research and analytics director

at Ameritest, in which capacity he has developed

statistical models for a number of Ameritest clients.

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December 2014 J O U R I E O F H D U F R T I S I O G R E S E H R C H 397



C o p y r i g h t o f J o u r n a l o f A d v e r t i s i n g R e s e a r c h i s t h e p r o p e r t y o f W a r c L T D a n d i t s c o n t e n t

m a y n o t b e c o p i e d o r e m a i l e d t o m u l t i p l e s i t e s o r p o s t e d t o a l i s t s e r v w i t h o u t t h e c o p y r i g h t

h o l d e r ' s e x p r e s s w r i t t e n p e r m i s s i o n . H o w e v e r , u s e r s m a y p r i n t , d o w n l o a d , o r e m a i l a r t i c l e s f o r

i n d i v i d u a l u s e .

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