Are your online banner ads helping your competitors?
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Online advertising has become an important part of restaurant marketing. With unprecedented reach and targeting options, online ads seem like a great way to reach potential customers.

And often, that’s exactly what happens. But research has shown that sometimes online restaurant marketing can actually benefit the advertiser’s competitors more than it helps the advertiser itself.

How can this be?

The Spillover Effect

Let’s talk about something known as the “spillover effect.” According to Navdeep Sahni, associate professor of marketing at Stanford Graduate School of Business, the spillover effect occurs when an online restaurant ad unintentionally boosts the cumulative sales of competitors.

The cumulative effect across all competitors’ sales was up to five times bigger than the benefit experienced by the company doing the advertising.

That means, that when you add up all the sales gains made by the advertiser’s competitors, the online ads had a greater positive effect for the competitors than for the advertiser.

Old school restaurant marketing was less susceptible to the spillover effect.
Old school restaurant marketing was less susceptible to the spillover effect.

Sahni did a series of experiments in India focused on restaurant advertising. In these experiments, he was able to control the banner ads that users saw on a restaurant review site. He tracked when users clicked through to obtain a specific restaurant’s phone number. This was an action that was highly correlated with placing an order.

Sahni found that sales leads for individual competitors increased by an average of 4%. This was significant because the advertisers has multiple competitors in the same market.

The beneficial effects for competitors were greatest when the competitor offered a menu that was similar to the advertiser and received favorable reviews on the restaurant review website.

One exception to the spillover effect involved already popular restaurants. Sahni explains this by saying, “if it’s a well-known chain, anyone who’s going to buy from that chain is already thinking of it.”

What Spillover Means for Restaurant Marketing

The spillover effect basically tells us that when a user sees an ad for one restaurant, they are likely to be reminded of other, similar restaurants that may then actually be the beneficiary of the original advertiser’s efforts.

“If you look at one object, you’re reminded of other related objects that become salient,” says Sahni.

So if you advertise your pizza place online, you may just be reminding potential customers of other pizza places that they already familiar with. And that could lead them to make a purchase decision from one of these restaurants instead of yours.

Spillover Defense

How can you fight spillover? There are a couple of strategies that can help to counteract the spillover effect.

“Advertisers can counteract spillover by creating ads that emphasize what distinguishes them from their competitors.”
– Navdeep Sahni

First, Sahni recommends that restaurants create ads that emphasize what distinguishes them from their competitors. If there is something unique about your restaurant offering or if there is something that customers can’t get anywhere else, that is what your ads should focus on.

Similarly, restaurants should strive to understand their customers wants and needs. For example, if your restaurant customers value lower prices, then your ad should emphasize your low prices and good values.

If you believe that your customers value positive reviews, then you could include a testimonial quote on your ads.

Sahni’s research also discovered that the spillover effect can be overcome by increasing the frequency with which your online ads are seen by potential customers. His research indicates that low-frequency ad exposures helped competitors more than higher-frequency ad exposures. Sahni’s experiments showed that 3 or more ad exposures virtually eliminated the spillover effect.

Bottom line: increased spending and ad coverage can help combat sensitizing potential customers to your competitors and losing potential sales.

“To convert an impression into a sale, you have to beat the competitors that your ad reminds people of,” says Sahni. “If you can tell consumers that you’re actually better than your competitors, then you’re going to get more sales.”


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