Chapter 5 - Franchise Market Process

The Franchising Market Process Chapter 5 Presented by: Nina Isabel Diaz

INTRODUCTION

STRATEGIC PLANNING IN FRANCHISING 4 Essential Factors: 1. How it will support the franchise system’s operations

2. How it will foster communications with franchisees 3. What financial results the firm and its franchisees can anticipate 4. How it will market its franchise once the franchise program is in place Core Marketing issues: 1. Business image 2. Determining the market direction 3. Recruitment and selection of franchisees 4. Grand opening and ongoing advertising programs in support of the local franchisees units

Business Image • •

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It is the image that the franchisor “packages” for public consumption is the key attraction for potential franchisees and customers to the franchise system’s product and service The image must be distinctive, appealing, have appropriate graphics, colors, logo, trademarks and exterior and interior designs and colors to project the image sought by the franchise system.

Determining the market direction -is a crucial decision in the early stages of the development of a franchise system.

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Franchisors tend to cluster franchised locations internal to established market areas because these markets, are known to be successful for franchised firms

Recruitment of franchisees -should be based on the profile of the type of people desired, their goals and aspirations, skills, financial capability, motivation and level of commitment required of a franchisee owner-operator. Types of people that will plunge into Franchising: • • • • •

The immigrant The Mompreneur The Baby Boomer The Professional Woman The Gen-Yer

Ongoing advertising and grand openings •

Constitute extremely important services provided by the franchisor

The Changing Marketplace

Problems in Applying Strategic Planning to Smaller Business Typical Characteristics of Smaller Firms: • • • • • • • •

Limited resources are available to achieve business objectives Scale of operation is smaller Government regulations and compliance requirements can significantly increase operating expenses Business performance is highly susceptible to changes in customer buying behavior Minor changes in operating efficiently can affect availability of resources and business profitability Firms are often without specialized staff to address legal, accounting and other needs of business Owner often lacks objectivity needed to evaluate and plan activities efficiently Business often fails to have sufficient working capital, financial controls or materials or inventory on hand

Steps in Strategic Market Planning Franchise Organization Mission

Hierarchy of Objectives and Strategies

Determine Niche(s) suitable to Company Strengths

Marketing Strategies for Continuity and Growth

Steps in Strategic Planning Franchise Organization Mission • •

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Franchise business exists with the aim of accomplishing something within and through its economic environment Methods to be used to accomplish the overall mission should be clearly set fort by the franchisor before any franchisees are recruited A franchisor must answer and ask the following questions to formulate a carefully prepared mission statement. – – – –

What is my business? Who is my customer? What are the needs of my customer? What do I want my business to be in the long run?

Hierarchy of Objectives and Strategies •

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Formulate a detailed set of supporting objectives for the major functions of the business and the distribution network being established, maintained or developed Objectives should be determined for functions and then arranged them in hierarchy according to importance Specific plans to implement the marketing strategy need to be spelled out to provide many quantifiable target results

Determining Niche(s) Suitable to Company Strengths • Involves choosing a propitious niche within which the franchise can target its operation in its industry • Niche maybe a segment of the total line of products and services offered by competitors within the industry • It maybe predetermined group of customers targeted according to characteristics such as: size of group, income level and location

Products and Services • A franchised business opts to expand in order to achieve synergistic results for the business. • A franchisor considering expansion involving both new customer group and new product/service can be done through conglomeration • A franchised firm looking to expand will consider combinations of niches that supplement or reinforce one another in a synergistic way

Marketing Strategies for Continuity and Growth Strategy Type

Business Profile

Characteristics

Initiator

Entrepreneurial; growth oriented; high risk taking

Knowledge of current customer needs/wants in order to stimulate demand for product/services; access to capital; good timing

Early Imitator

Has good market sense; introspective; risk-taking; willing to commit change without full knowledge of cost/benefits of product development

Flexibility in relation to current product and or production; speed and efficiency in making necessary product/modifications; ability to differentiate product/service from that of competition

Follower

Externally dedicated to market, yet internally focused on production; seeks to produce high-volume or high value product/services

Knowledge of market pricing and demand levels; desire to maximize market share based on known strengths of firm

Market Segmenter

Seeks niche or opportunity for market skimming; market dedicated, but lacking capacity for high volume at present; willing to take only minimal risk

Goal of discrete segments with promise of strong demand; flexibility; concentration of firm’s resources

Four Market-Focused Business Strategies

Steps in Market Strategy Making

THREATS AND OPPORTUNITES OBJECTIVES

TARGET MARKET MARKET INTELLIGENCE AND RESEARCH

ACTION PLAN AND TACTICS

PRODUCT/SERVIC ES MIX

Market Research and Intelligence • It can be viewed from both internal and external perspective: – Internal market information is data from controllable activities of the franchise system. – External market information needs are outside the realm of activities controlled by the franchise system.

Generic Categories of Goods and Services • Four generic categories to classify consumer goods: – – – –

Convenience goods or service Homogenous shopping goods or service Heterogeneous shopping goods or service Specialty products

Characteristics of a service •

Perishability – means that a particular service cannot be inventoried or stored for a period of time.

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Intangibility – refers to the lack of tangibility of a product or service such as what can be seen, touched, smelled, tasted or heard prior to purchase. Some services offer tangibility with the intangible.

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Variability – means the random, or unwanted, levels of quality that the customer can receive as they purchase, receive, and consume the service.

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Inseparability – refers to the simultaneous production and consumption of a service.

Life Cycle •

1st state: The Introduction – is a period of slow, gradual sales growth.

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2nd stage: The Growth stage – the life cycle curve takes a dramatic upward surge.

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3rd stage: The Maturity stage – this occurs when the rate of sale growth slows and ultimately, sales level off.

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4th stage: The Decline stage – during this stage it is typical for sales volume to drop as demand shifts to other products.

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