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Regional Advertising

A key achievement in the life of a franchise occurs when it gets big enough to pool advertising funds for regional[4] media purchases. In regional advertising, all franchisees within a defined geographic region are obligated to participate by contributing as much as 4 or 5 percent of their revenue to an advertising fund. Television reach has traditionally defined the region, but there are a variety of methods. Krispy Kreme is the extreme and maybe classic example of a focused, regional market strategy. The goal was to build a sufficient number of restaurants in the southeast to create a critical mass of outlets. The company was formed in 1937, began franchising in the 1970s, and didn’t reach New York until 1996. Along the way it filled in most of the southeast and dominated the market. The focus on radio and television as the principle measure of marketing efficiency underpinned direct-marketing campaigns and other guerilla marketing tactics. The advantage of this program is that these tactics provide a higher level of flexibility on the part of the regional co-op because there is so much money for marketing. Most franchises use a combination of many marketing tools. The key issue is to understand that regional differences will affect the marketing mix. Therefore, contractual obligations have to be flexible enough to meet local needs, yet they must also be measurable by the franchisor. Dunkin’ Donuts dominates fast-food advertising expenditures in New England with a formal regional program called “4-walls marketing.” Again, the regional co-ops (greater Boston, Hartford, and Worcester, Massachusetts, for example) focus on local events like sponsorship of the “slam dunk” exhibit in the Basketball Hall of Fame or the Dunkin’ Donuts night at the American Hockey League’s Hartford Wolf Pack. These events leverage the franchise’s television and radio coverage.

From an operational perspective, regional co-ops utilize nationally produced materials and implement them at a regional level. This usually translates into buying economies initially for radio and newspaper, and eventually for television as well. When television economies are achieved at the regional level, it begins with cable television and then moves to network television. Network television spans the nation, and a purchase at one network can satisfy several regional markets. However, the cable television industry tends to be more fragmented. National cable purchases are cumbersome. To deliver a national spot in cable, a franchisor would have to purchase advertising spots from several cable operators, which would diminish the potential economies. The same holds for newspaper and radio. In addition, radio and newspaper efficiencies at the national level are low (and sometimes negative) due to the differences in listening audiences in regional markets. With radio, cable television, and many newspapers, the optimal economies of scale can be achieved at the regional level.


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