Burger King has been on a slide with declining sales since 2008. In fact, last year Wendy’s completed its overthrow by surpassing Burger King in sales for the first time ever. The two firms sit behind McDonald’s, which has a clear lead in the market.
There is very little room for innovation in the hamburger market. In fact, Burger King has a history of copying innovations originated by McDonald’s. One Burger King advertisement even admitted that its new sandwich was “not original, but it’s affordable.” The newest example of Burger King’s imitation burgers is its Big King sandwich. The sandwich has identical ingredients to the McDonald’s Big Mac, right down to the Thousand Island-style dressing.
In a market with little room for innovation, advertising becomes key. Since there is no way to significantly differentiate your firm, you can resort to advertising to draw a larger share of the market. Burger King has botched several advertisement campaigns so badly that some journalists have ventured to call the firm a train wreck. A bad ad campaign can hurt sales according to Stephen Martin’s Industrial Organization in Context. When considering advertising, we must consider “a firm that operates over many time periods, and by advertising builds up goodwill that benefits it not only in the present but also in the future.” If a firm can build up goodwill that can benefit sales, a failed ad campaign – or, in Burger King’s case, an offensive ad campaign – can build up negative goodwill and be a detriment to sales. Worldwide Burger King has run several offensive ad campaigns in the past decade alone.