How Does Marketing Work in The Franchise System?

Franchising is based on healthy cooperation between a franchisee and a franchisor, which is often an extremely successful and internationally known company. At the same time, the latter is also the reason that managing directors decide to become franchisors and applicants who decide to become franchisees. Why is that?

Franchisors are interested in ensuring that their already popular brand continues to be promoted, but of course, they cannot take care of everything, and certainly not international business development in the individual countries. For candidates and interested parties, franchising is an attractive solution for benefiting from successful companies’ preparatory work. Specifically, this means that franchise companies have been marketing for decades and have slowly but surely and continuously increased the brand’s value and awareness.

Catching up this “backlog” would possibly be at least a lot of work, if not hardly feasible when starting a new company. That is why more and more founders are opting for franchising as a recipe for success. In most cases, the franchisor offers a comprehensive service package, such as marketing for the franchise system and other business support.

In the following article, you will find out exactly what we mean by the term marketing, how we can distinguish it from advertising, and whether it is not even worthwhile for franchisees to take care of marketing themselves.

Marketing and advertising in the franchise system

First of all, one should be aware of the difference between marketing and advertising.

Advertising aims to market an individual or specific product or service of the company and increase its awareness level. As a result, advertising is tailored to a specific target group and specific people. The purpose of advertising is to stimulate the target group to consume – through targeted addressing in a specified period of time through the various advertising media such as flyers, brochures, advertisements, and television and radio advertising.

The franchisor is generally responsible for advertising in the franchise system. In return, the franchisee often pays an additional fee of 1 to 3 percent in addition to the general monthly franchise fee of the monthly sales for the marketing and advertising measures of the franchisor.

The latter organizes the company’s advertising and marketing on a national and international level so that a uniform corporate identity is achieved and represented at all locations. In this way, customers and future customers will be able to perceive the company as a strong unit.

Depending on the franchisee’s mentality and attitude, the concepts for the marketing and advertising of the franchise company are developed in working groups and seminars.

In contrast to advertising, marketing refers to a holistic view of the market, general consumer behavior, price developments, and, in general, market research, including the investigation of competitive behavior and its strategies.

But what exactly can one imagine under this term? In general, it can be said that marketing aims to fulfill the wishes of customers. Because only if the products or services are appropriately designed and prepared will customers feel the urge to buy the product or use the service.

If the customers are satisfied, sales are automatically increased, and the company can post higher sales. Marketing is accordingly linked to an analysis, planning, implementation, and control methods and is one of the most important functions of corporate management. In order to establish an effective marketing plan for franchise businesses, there are a few key pillars to the layout.

On the one hand, this includes the budget for the marketing measures. Sure, there is always a balancing act between the goals set and the resources available, but it is very important to set the budget realistically.

Furthermore, the market and the target group, as well as their needs and wishes, should be precisely defined or, if necessary, determined. If you, as a franchisor, are to address potential franchisees with very different characteristics, for example, it is advantageous if the advertising message also addresses a broad target group. You should also think about the timing of your marketing measures, taking into account that it takes about 12 weeks on average from the first contact to the contract’s signing.

If you are aware of the potential target group’s needs, you can then think more precisely about the products and services offered and their properties, and finally about the price policy of the last one.

Ultimately, once you have successfully found customers or leads, you should think about the distribution policy and any sales points, points of services, or e-commerce.

The most important marketing instruments are the 4 P’s:

1. Product policy

2. Pricing Policy

3. Communication policy

4. Distribution Policy

These simply state that there is a previously developed strategy behind the processes and procedures in a company. To explain the theory a little more clearly, let’s take a company that manufactures cosmetics as an example. Because if there were no marketing strategies to which the cosmetics company could orientate, the company would manufacture products without preparation and without a plan.

The result would certainly be acceptable and respectable. Still, one could not assume with certainty that customers will well receive the product because the article was not developed with their wishes and interests in mind. In order to prevent such a situation, the marketing strategies were developed to which the companies can orient themselves. We would now like to explain these 4 P’s in more detail using a specific example.

1. Product:

This first point explains the product policy that must be included in the manufacturing process of a product. The new item should be easily integrated into the current range and have an attractive appearance. For example, our imaginary company decided to make a new mascara. It should, therefore, be clarified in advance what properties the product has.

  • What color is the mascara? Is it classic black, brown, or would you prefer a fancy blue?
  • Will a conventional mascara be developed, or do you fall back on the waterproof model?
  • How is the brush shaped? Is it curved, in a comb shape, or round and compact?
  • Does the mascara even contain shiny particles or care substances?

In the next step, the marketing experts have to consider how to design the packaging so that it underlines the purpose and intent of the product as best as possible. Color and shape considerations should be made. In addition, of course, the product name also plays a decisive role, and the keywords with which the packaging is provided. Furthermore, this should be designed so that it not only attracts customers’ eyes but is also bought afterward.

2. Place:

This term is primarily understood to mean the distribution policy. This includes the consideration in which way the product should be introduced to the customer. So is the mascara sold in an online shop, for example, or do you prefer to deliver the product to a sales agent? These include supermarkets, drugstores, discounters, and specialist shops.

It should also be decided whether the product is only available regionally or whether customers in all parts of country or even internationally have access to the mascara. In order to make such decisions, comprehensive market analyzes that take all factors into account must be used.

3. Price:

The next logical step is, of course, to define the pricing policy. Of course, this involves fixed discounts, bonuses, and the conditions associated with the product’s delivery and distribution. At the same time, however, a price must generally be specified. However, this decision should not be made indiscriminately.

The manufacturers of mascara, for example, have to orientate themselves on similar products that already exist on the market. However, this decision also depends, above all, on the intended target group because the manufacturers should primarily think about whether they would rather sell a cheaper product, which accordingly has qualitative deficiencies. Or whether they attach great importance to the quality of the product and thereby limit the target group.

4. PhD

We come to the last point: the doctorate. This is often confused with the term marketing, although it is only part of this field. In this last step, the main thing is to market the product – in our case, the mascara. There are many ways a company can draw the attention of its customers to a product. In the past, print media, such as brochures, flyers, or posters, were mainly used to encourage customers to buy.

Today, advertising is a little more complex and is characterized by a high degree of sophistication. Of course, the print media, television, and radio are also used to make a product known. However, public relations work is also used, trade fairs are visited, and sponsoring is carried out.

For some years now, the Internet has also become increasingly important for doctoral studies. Because people spend a large part of their free time on social media or shopping online. And since the economy has, of course, become aware of this fact, it is used effectively to place advertisements and thus entice people to buy certain products.

Some communication agencies can also manage the performance of such seminars and brainstorming meetings. So every franchise partner can add “his mustard,” and you can agree on a corporate identity strategy with which every partner can identify and which he gladly accepts and represents.

There are many different approaches in the franchise economy with regard to the organization of marketing between franchisees and franchisors. In some franchise companies, the franchisor takes over the management, and in other franchise companies, the concept is worked out together with all franchise partners.

As a franchisee, you now have to decide whether to pay the monthly advertising and marketing fee or whether to take care of these matters independently. Both have advantages and disadvantages.

Since the franchisor’s measures are often designed to be supraregional and national, the advertising cannot be optimally adapted to individual branches. Independent management of marketing and advertising can then be quite conceivable. However, it should always be kept in mind that marketing cannot be done quickly on the side.

Some opinions are of the opinion that franchisees should kindly take care of the marketing for their area themselves because afterward, it is also about their own sales. On the other hand, one should be careful with such models because if “marketing” also means online marketing, there is a risk that the franchisees “get in each other’s way” and, above all, a uniform corporate image can not be guaranteed.

On the other hand, it is questionable whether franchisees even have sufficient time to carry out proper marketing and advertising measures. It is a lengthy process that requires a great deal of knowledge and expertise.

Even if the franchisees have the time or are very resilient to devote themselves to marketing, it is still not a given that they also have the appropriate skills and experience. One should be aware that poorly thought out marketing measure can be fatal for the company and its reputation.

After all, there are already countless examples of companies that have resorted to such rash actions and still suffer from the customer loss caused by it.

Another possibility would be to hire special staff or to hire an external company. However, this can be very expensive and quickly exceed the branch’s budget. In most cases, it is, therefore, better to accept the franchisor’s offer. They certainly don’t mind if their measures are supplemented with specific information, offers, and promotions.