November Franchising World 2010

By: Loren Rakich

The economy’s slow growth is still having a large impact on how franchises everywhere think about their budgets and, when it comes to marketing, corners often get cut at high expense to the brand. But cutting corners is different than maximizing potential, and savvy marketers across the board understand the importance of maintaining brand presence while maximizing leads and sales at a lower cost.

These same marketers understand that optimizing marketing efforts isn’t such an unattainable goal. There is plenty of low-hanging fruit when it comes to productive marketing ideas, especially when it comes to franchises. Three specific strategies stand out above the others.

1. Take care of your existing customers.

Companies tend to be focused on acquisition spend, but forget about the hole in the bucket that can be causing them to lose existing customers. Focusing on your current franchises and their customer base is a crucial part of strengthening your brand and building relationships.

When applied to business, the Pareto Principle states that as a general rule 80 percent of your profits will come from 20 percent of your customers. With this in mind, it’s important to determine who your most valuable customers and franchises are. Simple data mining and profiling can help you define the 20 percent of accounts that you should be paying attention to. Data mining can also be useful in identifying and going after additional high-value prospects that are similar in profile to your current top 20 percent.

In marketing, retention-oriented campaigns are typically the first to be listed on the chopping block because their impact is harder to measure than other activities like tracking the number of leads or sales per month. But paying attention to your current customers, especially the highest-value 20 percent, doesn’t have to be expensive. In fact, a focus on customer retention can pay off big time.

A classic 2002 study from the book "Leading on the Edge of Chaos" by Emmett C. Murphy and Mark A. Murphy showed that for average companies, a 2 percent increase in customer retention has the same effect on profits as cutting costs by 10 percent. Here are a few suggested ways to increase retention levels:

• Let customers know you understand that times are tough and make them feel important. Consider promotions that help you gain additional revenue within your customer base. For example, do you have ancillary products or services that you can offer that will increase your value to your existing customers? Studies show that the more products or services you provide for a customer, the better the retention. Consider also that it is much more cost effective to increase a current customer’s revenue than acquire the same revenue from an entirely new one. Data from the Customer Service Institute indicates that it can cost up to five times as much to attract a new customer than to keep an existing one satisfied.

• Keep your best customers and franchises happy, and ask for referrals. In many franchise businesses, more than 30 percent of new franchises are referred from an existing franchise. Depending on your business, customer referral programs can also be made available to your franchisees for their customers to refer new customers. These leads and sales are typically the highest quality and least expensive. They are generated by following the loyalty business model: Quality of service or product leads to customer satisfaction, which leads to customer loyalty, which leads to profitability. Long-term relationships represent the highest customer lifetime value, as well as the best opportunity for improved revenue through increased frequency, cross-selling or up-selling.

2. Re-evaluate your value proposition.

Your prospects and customers are facing the same tough challenges around how to do more with less just as you are. Factors that may have been important in choosing your franchise, product, or service may now be secondary to budget decisions. What is your value proposition to your existing and prospective franchisees and customers and how can you make it more relevant in today’s economy?

In addition to brand building in the general marketplace, marketing’s role is to help reinforce the brand promise and value proposition to existing customers as well. Make sure you understand your value proposition as seen through the customer’s eyes. Re-tool your marketing materials if necessary to focus on the value you bring and how your product or service is solving customer needs in an uncertain economic environment.

A great way to connect and understand the mindset of the customer is to launch an advisory group of your best franchises or customers. There is no richer source of information than your brand’s best representatives. What are they doing right? More importantly, what are you doing wrong? Gathering insight from an advisory board is inexpensive and effective. In today’s market, engaging key players, such as your high-value 20 percent, can help you learn about changes in customer needs or emerging opportunities; gain feedback on your service–what’s working and what’s not; and discover ways to appeal to similar profile customers.

As you plan for marketing initiatives and campaigns ahead, bounce the ideas off of your advisory board. No one knows the business quite like them, and the feedback you gain from this strategy is incredibly valuable.

3. Measure the effectiveness of marketing expenditures and reallocate.

Confucius said: "He who does not economize will have to agonize." But is such a stark choice really the case when it comes to advertising?

If all your competitors are cutting back and you can maintain your advertising through tough times, you will, by definition, have a larger share of recognition. Many companies such as Walmart and Kellogg have successfully increased advertising during past recessionary times and have thrived by gaining share versus their competitors.

With markets and customers in a state of uncertainty, achieving effective spending via advertising requires constant scrutiny. You’ve probably heard the marketing anecdote in which a business owner says: "I know that half of my advertising dollars are wasted, if I only knew which half!"

National Media vs. Targeted Direct Marketing

National media, such as TV and print, is an important vehicle for building your brand and driving sales, but results from utilizing these media are often very difficult to measure. For example, if you are advertising in a national print publication, but your market only covers 40 percent of the United States, then you are wasting 60 percent of your ad dollars. In this scenario, targeting your covered market with direct marketing or local advertising would provide a greater return on advertising investment.

Direct marketing, if done correctly, can be measured very accurately with a known rate of return. Consider ramping up your direct marketing efforts in these areas:

• Direct mail to prospects who have customer profiles similar to your top 20 percent of customers.

• Target former or lapsed customers. This group already has some relationship with your company and will respond at a higher rate than cold prospects.

• Deploy local or regional Google payper-click campaigns. Sponsored ads can be shown for key search terms and this can be targeted by city. The tracking is amazing and, best of all, you only pay if someone clicks through to your Web site.

• Internet Yellow Pages: Utilizing this channel enables you to target by geographic area and many IYPs offer payper-click programs.

Print Media

If you’re using print media to generate franchise leads, consider using a calltracking service such as Call Source or Who’s Calling. I’ve used both of these services with success. They allow you to place a unique number in each ad so you know exactly how many calls you are receiving from each publication. An added benefit is that the calls are also recorded and available to listen to online. After listening to hundreds of calls, our team discovered that our voice prompts were not being used and valuable prospects where abandoning the calls. We quickly retooled our phone systems, removed the ineffective voice prompts, and retrained our staff so that people, not machines, are now answering the phones. Analysis of data combined with quick action led to a more effective "first touch" for our prospects.

Public Relations

Public relations is one of the most cost-effective and credible ways to build your brand, and it can have a measurable impact on achieving your marketing and organizational goals. Through a wellplanned program of media outreach, you can position and build your brand via executive interviews in media channels that target your prospects and key demographics; issue bylined articles by company experts to inform key audiences and build your reputation as a trusted resource; and differentiate your company as a leader by publicizing your participation in key industry recognition programs.

Unlike other forms of advertising, public relations enables a company to communicate about a wide range of its objectives and offerings to both engage prospects and influence market perspective via the credibility of objective thirdparty reporting.

In marketing the old adage applies: "You can’t keep doing the same thing you have always been doing and expect different results." When it’s time to launch a new campaign, be prepared to test and measure your results. Tracking for campaigns and channels is an important way to evaluate the effectiveness of your marketing strategy.

Think innovatively and try new campaigns that have the potential to be scalable and have high impact for your brand. You don’t have to spend lots of money to simply try different things and measure them–and a fresh perspective could be exactly what you need to increase sales.

In the final analysis, marketing during a recession is all about ROI, but it can also be an opportunity to actually gain share if you’re smart about how you allocate your marketing dollars.

No matter what the economy is doing, you can achieve your quest for bottom- line rewards through some simple steps. First, take care of your existing customers and understand who your high-value customers are. Second, examine your value proposition from the eyes of a customer in a tough economy and retool if necessary to meet their needs. And finally, effectively measure your advertising spending and re-allocate to get the most impact for each advertising dollar.

Loren Rakich is vice president of marketing for Coverall Health-Based Cleaning System, a leading commercial cleaning franchising company with a worldwide network of more than 9,000 franchisees, currently serving nearly 50,000 customers in over 90 metropolitan areas. He can be reached at 561-922-2690 or loren.rakich@coverall.com  .