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Data Analysis of Quick Service Restaurant (QSR) Mobile Marketing ProgramsDATA-DRIVEN INSIGHTS PROVIDE KEYS TO SUCCESS

September 2012

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www.helloworld.com | Data Analysis of Qucik Service Restaurant (QRS) Mobile Marketing Programs | September 2012 2

INTRODUCTIONAs an industry develops, it reaches certain significant milestones. Malcolm Gladwell would suggest we call them tipping points; times when something gains critical mass in order to ‘tip’ into society at large and gain wider adoption. In SMS, there have been three major milestones. The first was the use of text-voting in American Idol in 2003 as ordinary Americans rushed out to buy an AT&T phone so they could text “IDOLS01” and propel their favorite candidate forward another week. The second was the widely written about use of mobile during the Obama presidential campaign in 2008 – and most notably when he announced his choice of vice president via a text message. The third was when in 2010, mobile commerce gained traction as the American Red Cross ran a mobile donation campaign to support their efforts in Haiti, opening consumers up to the idea that their phone was capable of more than just sending and receiving text messages.

Like mobile in general, the QSR industry has followed a similar path. Each year since 2005, industry pundits claimed that the year was going to be the year that mobile marketing broke through and became a widespread marketing tool. While many companies have been experimenting with mobile marketing, our research indicates that in 2011 many companies actually put mobile front and center of their marketing plans. This holds true for the QSR industry, and in particular for small operators and franchisees.

Why is mobile marketing becoming a must-have tool for QSRs? Like any marketing technology, the main reason mobile marketing is gaining traction is the ability to generate consistant, measurable results. Mobile marketing is an ideal way for QSRs to build customer loyalty, generate instant demand during off-peak times, increase customer spend per visit and increase customer visit frequency.

ABOUT THE STUDYHelloWorld is a leading provider of mobile marketing solutions for the QSR industry, and counts franchisees of many national chains among its clients. To help QSRs learn the best ways to succeed with mobile marketing, HelloWorld has analyzed the data from about 9,000 mobile marketing campaigns it conducted on behalf of 125 QSR clients over the last year. The average mobile subscriber list size was 791 (with a max of 2,275 and a min of 37), representative of the small-to-medium sized nature of the accounts. Most clients studied are franchisees of national chains, or regional franchise groups.

HelloWorld analyzed the data to develop a wide variety of metrics and data-driven conclusions on the following topics that touch on the entire lifecycle of mobile marketing, including: best ways to build the subscriber list, most effective offers, coupons and promotions, and the optimal timing and frequency for campaigns. Below is a more detailed breakout of these findings.

NEW SUBSCRIBER ACQUISITION TACTICSThe first step in developing a successful mobile program is to begin to build the subscriber list. Many QSRs in the study sought to build their list with low cost, easy-to-execute tactics. While the specific tactics varied, the acquisition methods can be categorized into the following types of tactics: on-premise, social media, advertising and refer-a-friend.

ON-PREMISEGiven the low cost nature of this tactic and full control over the experience, QSRs should maximize this channel. Menu call-outs, in-restaurant signage and box-toppers for delivery service/take-out are all cost-effective ways to build a mobile loyalty program subscriber list. As an example, a single location takeout food client in central Illinois hung a poster in the establishment with the words “Text PICKLES to XXXXX to receive an instant discount & subscribe to our mobile club” to great success.

Social Media & Email – QSRs took advantage of their established social media communities and email databases to promote the mobile program. Bold calls to action on Twitter, Facebook or in email newsletters complimented online signup forms to quickly and effectively drive traffic into the mobile club. An average of 10% of these online communities, members converted over into the mobile program. As with on-premise, there is little to no cost to use these channels to drive subscribers.


Advertising – A wide-reaching way to drive mobile loyalty club subscribers is to leverage existing advertising campaigns, including television, print and/or radio spots. The call to action is typically short, and is easily integrated into existing media buys for no incremental spend. 57 percent of clients used direct mail such as free-standing coupon inserts to raise awareness of the club and 23 percent used radio advertising. The call to action should be both oral and visual when available.

Refer-a-friend – Tapping into existing subscribers is a great way to build a subscriber list for QSRs. The average participation rate of existing subscribers was 21 percent with a standard incentive for the refer-a-friend programs HelloWorld analyzed, while the average conversion rate for referred friends was 36 percent. The average increase in database size after one refer-a-friend program was 16 percent.

For all tactics, the call to action should be strong and clearly stated to ensure that customers know exactly what to do. The staff should be properly trained in how the program works in order to assist customers who may be less familiar with text messaging in opting into the program. In many cases, with the exception of the Refer-a-friend program where it is against best practices, QSRs provided an immediate benefit to subscribers through an instant offer or discount which increased participation.

CONTENT: COUPONSWhile acquisition tactics bring subscribers in, it is the content that keeps them subscribed (and increases the viral multiplier of subscribers). Content can take many different forms, including announcements, contests and promotions. However, by far, the largest percentage of messages sent in the analysis were for mobile coupon related content.

The top three types of mobile coupons sent by HelloWorld QSR clients include the following:

1. Set priced “value” deals such as “Buy 2 large pizzas, get a free order of breadsticks and a 12-liter soda”. This type of offer can also be referred to as a BOGO, or buy-one-get-one.

2. Free item upon opt-in for a new subscriber or for special occasions.

3. A discount off a menu item, such as $2.00 off any sandwich or 10 percent off any beverage.

Subscriber Total 30Days Post-Launch

Subscriber Total 90Days Post-Launch

= 350

14x1xHelloWorld Clients Build Their Mobile Subscriber Lists Quickly

During the period surveyed, there were 89 new account activations for a major QSR brand. The above represents the average subscriber growth over the period for each account in this sub-segment of our total QSR client database.


THE MOST EFFECTIVE OFFER: BOGOHelloWorld sent out a text message survey to 796 individual subscribers of a national QSR campaign to determine what type of offer they preferred. Overwhelmingly, 68% indicated a preference for a Buy-One-Get-One (BOGO) offer as opposed to “free with purchase” (6%) and “% off” (22%). In follow up conversations with select consumers, their responses unveiled that the perceived value of BOGO offers was higher. Respondent believed that the “free” coupon was for items of lower value, while a traditional discount (cash off or a percentage discount) wasn’t mentally as appealing. This all despite the fact that the relative value of all offers, including the BOGO, was similar.

REDEMPTION NOT AN ISSUECoupon providers, and especially mobile coupon providers, face challenges when it comes to redemption. The paper coupon industry has decades of evolution during which they have adopted universal standards and integrated options for redemption directly into point of sale systems. Due to mobile couponing’s infancy, widespread adoption of mobile standards by point of sale system suppliers has not yet caught on. To mitigate this, HelloWorld has provided their clients with numerous redemption options that include web-based interfaces, widgets, smart phone applications – and in some cases, direct integration with leading foodservice point of sale systems.

Due to fragmented point of sale ecosystems within even same-brand franchise groups, as well as the independent nature of the owner-operator franchise model, only two of the customers surveyed made their redemption data available to HelloWorld. All others used internal redemption options, unique to their situation or franchise brand, and retained their data as confidential. The local nature of small businesses allowed operators to personally track and monitor redemption, while also observing first had the effects each campaign had on business.

As one franchisee put it, “for 24 hours after I send out a campaign, I have customer after customer who walks in, pulls out their phone and waves it at me asking for their mobile special offer.”

EXTREMELY HIGH MOBILE COUPON REDEMPTION RATESFor the two QSR clients that did use HelloWorld redemption tools, HelloWorld found high redemption rates that were consistent with other industries. For QSR Brand 1, two offers were sent out to over five thousand and ten thousand recipients respectively, which generated redemption rates of 55% and 43% respectively. These high value offers (50% off and $ off) were received well. QSR Brand 2 sent three different offers that offered free products with and without purchase. Redemption was 40% for a free entrée without purchase, 21% for a free dessert, and on the low end, 4% for a free side item with purchase. The average across all HelloWorld clients, including QSR clients, is 23% - which dovetails nicely with the QSR specific findings.

CONTENT: PROMOTIONS & OTHERPROMOTIONAL PROGRAMSA mobile program anchored in couponing can become stagnant and condition customers to expect discounts. To counter that, the survey found many clients ran various promotional programs to diversify their mobile marketing and keep the program exciting for customers. Additionally, these activities acted as an acquisition tactic – often growing the database while having some fun. Following are some examples of mobile marketing promotions:

TEXT-TO-WIN QSR Brand 1: Promotion prize included 2 tickets to a nationally promoted concert, with hotel stay. Promotion gained a 13 percent increase in new subscriber acquisition over a 30 day time frame.

CUSTOMER FEEDBACK QSR Brand 1: Customers are able to provide feedback to the restaurant while visiting and the program alerts management staff immediately to resolve any situations.


OTHER POPULAR TYPES OF CONTENTIn addition to mobile offers and promotions, many QSRs created timely or community centric content. Local and regional sports teams were popular themes, along with seasonal content around back-to-school or school breaks (summer break or spring break), holiday including Mother’s Day, Father’s Day and Valentine’s Day. Franchise specific information also showed up frequently on the survey, as operators used mobile to announce new menu items, and special national or regional promotions.

Of particular interest was the cross pollination of the mobile database with other digital marketing initiatives. Many QSRs include calls to action such as “Like” us on Facebook, donate to a specific charity or click on a link to visit the website and receive a coupon.

CADENCE: TIMINGDAY OF THE WEEKDue to the immediacy of text messages, HelloWorld is able to track engagement by day. Of the accounts surveyed, counter intuitively, HelloWorld found that the best days to send messages are weekdays. Subscriber numbers were higher and unsubscriber numbers lower for messages sent during the weekdays than the weekends.

HelloWorld also saw higher engagement for QSR customers when messages are timed to make sure they are targeting their customers during periods when they are most likely to be interested in the offer. Sending an offer for a free dessert is probably not likely to be very effective when it is sent at 10:00 a.m. as compared to sending it at 3:00 p.m. when many customers are beginning to think about their post-work plans.

Weekend.65%

Week Day.97%

Average .87%

Average Week Day

7.67SUBSCRIBERS

Average Weekend Day

5.12SUBSCRIBERS

Average Daily

6.88SUBSCRIBERS

New Subscribers Average, Week Day, & Weekend Day

Average of New Subscribers by Account


Weekend Day 4.75%

Week Day1.85%

Average 2.69%

Average Week Day

14.68UNSUBSCRIBERS

Average Weekend

37.57UNSUBSCRIBERS

Average Daily

21.27UNSUBSCRIBERS

= 10

Unsubscribers Average, Week Day, & Weekend Day

Average Percent of Unsubscribers per 1000 / Messages Sent

MESSAGE FREQUENCYWhen it comes to message frequency, HelloWorld finds that QSRs typically follow the Rule of 1s: no more than one message a week, and no less than one message a month. This formula has been found to entice response from subscribers, with the least amount of unsubscribe requests.

The average number of campaigns QSRs conducted was 1.84 per week and an average of 7.88 per month, reflecting the fact that many QSRs segmented customers on to multiple distribution lists. For example, a QSR might have a database of people interested in contests and promotions, and a second database that wants only discount offers. In that case, the QSR typically would send one message to each database a week.

WHAT’S NEXT IN MOBILE MARKETING FOR QSRS?As HelloWorld looks at its QSR clients and the mobile industry in general, there are three trends that start to emerge worth commenting on.

NEAR FIELD COMMUNICATIONS (NFC)Devices have begun to sprout up that support NFC technology, which would allow payments and other communications to take place directly between equipment at the point of sale and the phone. This is promising and interesting, especially as the industry explores the idea of a mobile wallet.

Due to the lag in technology flow to independently owned as well as franchised businesses, HelloWorld predicts that NFC will have minimal impact on the mobile landscape for QSR businesses in the coming years. 2012 should see the technology expand on a national level, and may start to appear in the Point-of-Sale (POS) systems for progressive QSR franchised chains. However, we see this as being something that will not likely hit most QSRs until 2013 or later.

LOCATION BASED SERVICES (LBS)Some clients have started experimenting with the ability of many phones, either using built-in GPS systems or tri-angulation off of cell towers, to determine a customer’s exact coordinates and provide offers to them based on that location. The accuracy of these services varies, and expenses are higher for messages using LBS.


Adoption by consumers is expected to be slow, as many consumers are reluctant to willingly divulge additional information beyond what already is being collected. However, as these services continue to demonstrate value to the consumer, we see this objection subsiding.

Due to the relatively small size of the subject lists for most QSRs (on average, they were 791 subscribers), and the local nature of the customer base, HelloWorld does not LBS services to have a significant impact on QSR’s. Most are already affiliating their offers with a specific location/franchisee in order to provide custom offers through area code matching or outright location matching.

COUPON REDEMPTIONAs more QSR outlets rely on mobile couponing to drive traffic, redemption solutions become more important. Watch for increased options on the redemption front in 2013, with more point-of-sale vendors working closely with mobile marketing providers to integrate their respective systems.

ABOUT HELLOWORLD, INC.HelloWorld is a global leader in digital engagement. The company’s multi-channel solutions enable the world’s largest brands to create a dialogue with consumers on web, social, and mobile, and integrated with point of sale systems. All campaigns can be executed from a unified technology platform. Fortune 500 brands and world-class agencies rely on HelloWorld’s creative, technology and legal services. HelloWorld has created promotional campaigns, CRM programs and loyalty solutions in 44 countries for clients like Coca-Cola, Microsoft, The Gap, Lenovo, NHL, Yahoo!, P&G and AT&T. Headquartered in Detroit, HelloWorld also has offices in Chicago, Los Angeles, Nashville, New York, and Seattle. HelloWorld has acquired five companies in the last two years. See our press page on helloworld.com for details or text CRM to 35350 for mobile demos and alerts.