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Chapter 6. The Service Delivery System a... > Why is Marketing Important in a Fran...

Why is Marketing Important in a Franchise?

Marketing States the System’s Promise to the Customer

If you know who most needs and wants your product and have a pretty good idea where those folks live and work, then you have to convince them to make a purchase. Marketing drives a process that stems from an understanding of the demographics, geographics, and psychographics of the PTA (primary target audience). You use this understanding to make a promise to customers that their needs will be met in a consistent fashion across all points of contact, often a store, an office, or a vehicle. When the point-of-sale validates that promise through your SDS, a brand is built. The larger the franchise system, the more marketing dollars get generated. Eventually, only a small percentage of the marketing budget is needed to produce first-class marketing material, and the rest goes into buying advertising time and space.

Marketing Sells Franchises and Raises Capital

A strong, well-known brand is not only important in attracting customers, but also helps in both selling franchises and obtaining additional financing for growth. From a debt-financing perspective, a successful franchise brand carries the preexisting recognition that promotes a level of comfort in creditors. Banks like brand names! For example, the United States Small Business Administration has a special lending program for franchises.[2] The benefit of having a recognized brand in terms of financing also holds true from an equity perspective, especially in the case of an initial public offering (IPO). During the weeks leading up to an IPO, franchised offerings often use significant marketing expenditures to further leverage their existing brand awareness. This practice has been credited with increased multiples on the stock and greater growth capacity.[3]


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