Ph.
D Ho Nhut Quang
THE FRANCHISING
MARKET PROCESS
1 CHAPTER 5
LEARNING EXPECTATIONS
• Learn steps involved in strategic market
planning
Ph.D Ho Nhut Quang
• Learn about strategic planning in franchising
through examining the market function and
activities.
• Understand how a hierarchy of objectives and
strategies can be developed within a franchise
organization
• Learn how to develop a marketing mix for the
franchise
• Understand the role and use of channels of 2
distribution.
CONCEPTS
Marketing is the delivery of customer
satisfaction at a profit.
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Marketing Strategy: consists of
Identifying one or more target markets
Creating Marketing Mix
Marketing Mix: 4 Ps
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STRATEGIC PLANNING IN FRANCHISING
• A firm which wants to enter franchising should
know how to answer the following questions:
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– How does it support the franchise system’s
operations?
– How will it foster communications with franchisees?
– What financial results that the firm and its
franchisees anticipate?
– How will it market its franchise once the franchise
program is in place?
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SUPPORT PROGRAM PROVIDED BY THE
FRANCHISOR
• Market Research
• Marketing Surveys
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• Site selection
• Operational layout and store design
• Lease negotiation
• Operations manual
• Training Program for franchisees
• Possible financial assistance.
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FRANCHISOR’S MARKETING
RESPONSIBILITIES
• 1. Building Business Image of the franchisor for
both potential franchisees and consumers
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– To attract them to the franchise system’s products
and services.
– Image should be distinctive and appealing
– Image should link them to some graphics,
representative colors, logo, trademarks, exterior and
interior designs, etc.
– EX: McDonald’s uses: red, yellow, blue to support the
image of a family restaurant; use M-logo.
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FRANCHISOR’S MARKETING
RESPONSIBILITIES
2. Determining market direction
Where will the first expansions take place?
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What is the location plan?
How will consumers be served?
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3. RECRUITMENT OF FRANCHISEES
• Based on the profile of the type of people desired,
their goals and aspirations, skills, financial
capability, motivation, and level of commitment
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required the franchisee’s owner.
• The Franchisor should communicate potential
franchisees with the franchise system’s unique
features, its benefits, core competencies,
competitive advantages, etc.
• Types of people who are likely to become
franchisees in the U.S: the Immigrants, the
Mompreneur, The Baby Boomer, Professional
Woman, Gen-Yer 8
4. ONGOING ADVERTISING AND GRAND
OPENINGS TO SUPPORT THE FRANCHISEES
Supportive Advertising program
Advertising may run on the regional or national
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base.
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STEPS IN STRATEGIC PLANNING
Step 1: Writing the Franchise Organization
Mission Statement
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Step 2: Determining Hierarchy of Objectives and
Strategies
Step 3: Determining Niche(s) suitable to
company’s strength (Marketing Research)
Step 4: Establishing Marketing Strategies for
continuity and growth
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FRANCHISE ORGANIZATION MISSION
Mission statement must provide a shared sense
of opportunity, challenge, motivation for the
owners, franchisees, and employees of the
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franchise organization.
Mission statements must address the customer,
not the product.
EX: our mission is to bring to you the feeling of being
protected, softly warming and stylish with our shoes
products.
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MISSION STATEMENT
Market Oriented Characteristics of a
good mission
statement
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Realistic
Specific
Fit Market Environment
Distinctive Competencies
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Motivating
CLASS DISCUSSION
Group Company Products Competitive
Write down mission
Name statements based
/Services on the
Advantages
following
1 and information.
7 Prudential Life Insurance Good Sales Services
VN
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2 and 8 Hong Thanh Shoes Durable, reasonable
Ltd. prices
3 and 9 Tan Hiep Soft drinks Low price, Product
Phat Corp. Differentiation
4 and 10 Viet Tien Male Shirts Acceptable price, Style
Corp.
5 and 11 Nguyen Kim Electronic goods Good After Sales
Ltd. Services, attractive
promotion program
6 and 12 Hoan Long Computers, Product Diversification,
Computer Laptop, IT devices High service quality 13
Ltd.
DETERMINING OBJECTIVES
What to do to be successful in the franchise
business in terms of:
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Marketing
Finance
Human Resources
Operations
Arrange the objectives in the hierarchy of
importance.
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WRITING OBJECTIVES
Objectives are what the firm should do to achieve
the set goals.
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Goals are what the firm wants to achieve in
future.
EX: Goals: increase sales by 35 % next year
Objectives:
Introduce and sell products in new markets: Soc
Trang and Yen Bai.
Reduce price
Sales promotion will be in form of free gifts for goods
A and B.
Write two PR articles 15
Recruit new employees
CLASS DISCUSSION
Group Company Products/ Goals next
Identify objectives
Name of the marketing
plan
services based
year
onand
1 ,7 the13following information:
Prudential VN Life Insurance Sales increases
by 35% next year
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2 and 8 Hong Thanh Shoes Increase market
Ltd. share by 10%
3 and 9 Tan Hiep Phat Soft drinks Enter 4 new
Corp. local markets
4 and 10 Viet Tien Corp. Male Shirts Sales increases
by 30%
5 and 11 Nguyen Kim Electronic goods Open 5 new
Ltd. stores in other
cities
6 and 12 Hoan Long Computers, Develop 3 new
Computer Ltd. Laptop, IT product styles. 16
devices
DETERMINING NICHE(S) SUITABLE TO
COMPANY STRENGTHS
The early days of franchise business, choose a
propitious niche within which the franchise can
target its operations in its industry.
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The niche may be:
A segment of the total lines of products and
services, not all.
A segment of customer targets who share the
same characteristics such as: age, income
level, location, religion, etc.
In long- term, when Franchises grow and gain
experience, the franchisor may add more
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products and services.
PRODUCTS AND SERVICES
A franchised firm can opts to create synergies
when it stands together with another business of
complementary products and services.
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EX: having a restaurant inside a franchised motel.
As the franchises business moves further away
from its present customers or its current products
and services, the benefits of syrnergy diminish
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TYPES OF MARKETING STRATEGIES FOR
CONTINUITY AND GROWTH
1. Initiator Strategy:
Applied by market leaders with highly innovative
businesses.
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Expensive and needs large amount of capital
available.
2. Early Imitator Strategy:
Applied by market challengers
Try to expand numbers of franchised units and
enter additional markets; push competitions and
accept challenges
Require operational consistency, effective
advertising, better field services to existing 19
franchisees, high quality training.
MARKETING STRATEGIES FOR CONTINUITY
AND GROWTH
3. Follower Strategy
Applied by the market followers
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Accommodating strategy
Appropriate in short-term when market
demand is strong.
Develop strategies that “follow” the market
leaders in the industry.
4. Market Segmenter
Applied by market nichers
Choose market segmentation and direct the
strategies to them. 20
STEPS IN MARKET STRATEGY MAKING
1. Setting objectives
2. Market Research and analyze threats and
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opportunities (SWOT)
3. Identify Target Markets
4. Design Product/ Service Mix (Marketing
Strategies)
5. Action plans and Tactics
6. Collect Market Intelligence and do research
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PRODUCT MIX DECISIONS
Width - number of
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different product lines
Length - total number of Product Mix -
items all the product
in product lines lines & items
offered
Depth - number of
versions of each
product 22
MARKET RESEARCH AND INTELLIGENCE
Research questions:
What do your customers want?
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What is your competition really doing?
Do you have a competitor plan?
What foes it take to truly promote your business
model and product or service line?
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DEVELOPING THE MARKETING MIX
Product Price
“Goods-and-service” Amount of money
combination that a that consumers
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company offers a have to pay to
target market Obtain the product
Target
Customers
Intended
Positioning
Activities that Company activities
persuade target that make the
customers to buy product available
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the product
Promotion Place
GENERIC CATEGORIES OF GOODS
CONSUMER PRODUCTS
Convenience Products Homogeneous Shopping
Products
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Buy frequently & immediately Buy less frequently
Low priced Higher price
Mass advertising Fewer purchase locations
Many purchase locations Comparison shop
i.e Candy, newspapers i.e Clothing, cars, appliances
Specialty Products Unsought Products
Special purchase efforts New innovations
High price Products consumers don’t
Unique characteristics want to think about these products
Brand identification Require much advertising & 25
Few purchase locations personal selling
i.e Lamborghini, Rolex i.e Life insurance, blood donation
SHOPPING GOODS AND SERVICES
Homogeneous Shopping goods or services:
Buy less frequent than convenience goods
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Price is the motive for purchase
Various brands
Customers shop for best bargain
Heterogeneous Shopping Goods or Services
Innovative goods with new versions
Price is a low-order concern to the buyer
Ex: cars, flower, coffee shops, etc.
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Type of goods Place/Location Pricing Promotion
or services Strategy Strategy Strategy
Convenience Intensive Odd-even Brand Loyalty
themes; full
communication
mix used;
intensive
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advertising
Homogeneous Intensive Odd-even; low Intensive
shopping price advertising;
Brand conscious;
focus on building
customer traffic
Heterogeneous Limited selective Full range; focus Full range of
Shopping usually not on communication
price mix;
differentiation;
focus on building
customer traffic
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Specialty Selective to Prestige price; Limited ; Niche
Shopping excusive skimming is Focus; image
possible building
WHAT IS A PRODUCT?
A Product is anything that can be offered to a
market for attention, acquisition, use, or
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consumption and that might satisfy a want or
need.
Includes:
Physical Objects
Services
Events
Persons
Places
Organizations
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Ideas
WHAT IS A SERVICE?
A Service is a form of product that consist of activities,
benefits, or satisfactions offered for sale that are
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essentially intangible and do not result in the ownership
of anything.
Examples include:
Banking
Hotels
Tax Preparation
Home Repair Services
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CHARACTERISTICS OF SERVICE
Perishability
Can not be stored or inventoried
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Intangibility
Can not be touched or smelled
Variability
Various levels of quality provided.
2 employees can perform the same service
differently even although following the same
directions.
Inseparability
Service must be produced and consumed at the
same time. 30
PRODUCTS, SERVICES, AND EXPERIENCES
Tangible Good Service With
Pure Tangible With Hybrid Offer Accompanying Pure Service
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Good Accompanying Minor Goods
Services
Auto With Airline Trip With
Soap Accompanying Restaurant Accompanying
Repair Services Snacks Doctor’s Exam
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PRODUCT LIFE CYCLE
Four stages:
Introduction
Growth
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Maturity
Decline
Strategies to prolong the PLC:
Expanding into complementary segments of the
market
Changing the packaging or image
Finding new uses of the product (new benefits or
functions)
Finding new ways to deliver the goods 32
Finding new markets
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