By: Shetil Rastogi, Managing Director, ZenithRise Group
When we work with Franchisors and Franchisees, a strategic discussion around centralization or decentralization of marketing inevitably occurs. While there are merits to both approaches, this article, provided by ZenithRise Group, a marketing agency located in California, argues for the merit of both approaches. It is our view that a hybrid hybrid centralized and decentralized marketing approach is in the best interests of both parties AND most importantly in the interests of customers that drive the revenue.
Let’s first define what we mean by a centralized and a decentralized approach. A ‘purely’ centralized approach is where the Franchisor: (1) sets the annual marketing plan and overarching marketing strategy for its network to follow, (2) produces the creative imagery and messaging for its ad placements, (3) generates the media plan and (4) executes, measures and monitors marketing performance against marketing and business objectives that have been set. And by and large, in this situation, the Franchisees are expected to follow overarching Franchisor guidance. In fact, they are contractually obligated to do so (in Franchise Agreements).
A ‘purely’ decentralized approach is where the Franchisee: (1) sets the annual marketing plan and overarching marketing strategy for its network to follow, (2) produces the creative imagery and messaging for its ad placements, (3) generates the media plan and (4) executes, measures and monitors marketing performance against marketing and business objectives that have been set. And by and large, in this situation, the Franchisor has no role except for collecting royalties from the revenue generated.
Here are some valid reasons for centralized marketing:
1. Intimacy of Brand knowledge lies with the Franchisor.
Marketing is about communicating the Brand’s position, its value and its benefits to the target. And ultimately, the Franchisor knows its Brand the best. In fact, this knowledge and vision for the Brand is what the Franchisees bought into in the first place (i.e. the Franchisees bought into the Franchisor’s dream). As such, because of this intimate familiarity with the Brand’s positioning, its values, and its intended emotional connections with target audiences, Franchisors need to control the narrative around the brand.
2. The risks of non-centralization can impact not just one Franchisee location, but the entire Franchisee network.
With the accessibility of social media and digital media to anyone anywhere in the world, any divergence (at best when Franchisees exercise ‘creative liberty’) or misrepresentation (at worst in the case of disgruntled or rogue Franchisees) from the Brand’s positioning and values can have negative consequences not only for the location that releases the marketing message, but for all locations in the network. That’s a significant reputational risk. Centralized control of the message mitigates this risk.
3. The investment efficiencies that come with planning and execution.
When working across the network, Franchisors are able to generate product, creative and media strategy that can apply nation-wide. The nuances of each location can be reflected in messaging (e.g. local phrases, etc.) and creative (e.g. unique location-based imagery). While these individual nuances are important to ensure that Franchisor’s message resonates in the locations of its Franchisees, by and large, there are efficiencies in planning for national marketing plans and campaigns.
The more compelling efficiencies, however, can come in execution. Whether it’s production of physical marketing assets (e.g. Out of Home signage, print collateral, even video assets) or buy of digital media nationally (with the option to geo-target the message to individual locations), a larger ‘buy’ generally allows the Franchisor to incur savings and pass these savings on to its Franchisees in the form of reduced monthly marketing fund fees.
4. Rich data-driven marketing planning and execution.
Franchisors have access to performance data from all of its Franchisee locations. In addition they have access to the the demographic and psychographic data that defined entry into those locations in the first place (ie. when the Franchise was awarded). When this data is consolidated and then segmented or aggregated for trends, the insights can be very powerful. For example, certain products may perform better at certain locations and warrant product-specific campaigns. Or there may be certain seasonality in an area of the country that warrants over-communication of certain services. Regardless, the data set that Franchisors have to draw from make for more optimized campaigns. But, as we will see below, this localized insight cannot be and should not be executed without significant input from the group that knows the local market best, the Franchisee.
5. Access to resources that may be cost-prohibitive for Franchisees to incur on their own.
With a larger budget, Franchisors can generally invest in agencies, legal review, and other marketing resources that Franchisees cannot afford to invest in individually.
6. The ability to unify a digital marketing presence.
With a larger view to the network, access to higher quality resources, and larger data sets to base decisions upon, Franchisors are able to more harmoniously connect the pieces of the marketing puzzle, specifically SEO to Social Media to customer acquisition via Marketing Automation.
And here are equally valid reasons for decentralized marketing:
1. Intimacy with the market lies with the Franchisee.
Ultimately the Franchisor and Franchisee are both successful if the Franchisee is able to sell products to local customers.
The reality with selling to local customers is that local nuances of the market have to be reflected in the marketing and sales processes. For example, in Southern California, a Fast-Food Franchisor might want to allow for the marketing of unique Mexican flavors in their product (e.g. seasoning fried with Tajin). A national gym franchisor might want to allow for disproportionate marketing of less physically oriented and more spiritually-oriented classes such as Yoga or Tai-Chi. The messaging may need to be in both English and Spanish, etc. There may need to be more outdoor events or unique media (e.g. rickshaw taxis) because of the warmer weather factor.
The Franchisee knows the market. As long as they stay within Brand Guidelines on color, tonality, logo proportions, etc., they need to have the flexibility to sell. This doesn’t mean that all marketing doesn’t require Franchisor approval. And it doesn’t mean that certain national messages can be omitted. These Franchisor elements have a role. But tight rigid control of the message should not be a reason for Franchisor oppposition.
2. Customers are buying the relationship with the Franchisee. The Franchisee has to be able to express his/her/themselves.
In many local markets, the Franchisee is known to the local community. And in many cases, customers have or will develop a loyalty to the Franchisee over the Brand he/she/they represent.
If the ultimate goal is to sell to the customer, incur the revenue, and garner the loyalty of recurring revenues from the customer – AND the Franchisee’s uniqueness helps in doing that – the Franchisee should have good discretional control over his/her/their own marketing budget and efforts.
This could mean adjustments to messaging and creative to reflect local nuances, investment in certain media (e.g. local magazines) that reach audiences more intimately, and especially presence at local events to showcase the Franchisee’s business and the Franchisor’s Brand. These opportunities are important to recognize and account for by having a component of each Franchisee’s required marketing budget be labelled ‘Localized Marketing’ at the discretion of the Franchisee.
Customer Lifetime Value is simply the total amount of revenues incurred by a business from a particular customer over the lifetime of the relationship with the business. Every business, regardless of industry, wants to maximize Customer Lifetime Value.
And Franchisees are in the best position to do that because they have frequent interactions with those customers. They know them and their preferences. So they can upsell additional products and services. Staying with food, if an ice-cream Franchisee knows an ice-cream customer has a strong inclination towards mangos because of a deep cultural history with the fruit, wouldn’t the Franchisee want to encourage them to combine a scoop of mango ice-cream with their vanilla sundae? Similarly, if the Franchisee knows a gym member is struggling with flexibility post-surgery, wouldn’t he/she/they want to encourage them to supplement their yoga sessions with flexibility-oriented personal training? Of course. Provided the products enhance the customer experience, focusing on a higher Customer Lifetime Value is not only good customer service – it’s also good business. So unique customer marketing should be allowed.
4. Franchisors want national distribution. And some markets can be more important than others for the Brand credibility and financial success of the Franchisor.
While all markets a Franchisor enters are important to the larger network, some markets have disproportionate importance. A presence in larger markets, or markets with higher per capital incomes, or markets that are high profile in the country (e.g. New York, Miami) for their lifestyle, etc.. generally bode well for Franchisors not only in terms of financial success in those locations, but also in terms of Brand credibility. Think about it – if a fashion Franchisor doesn’t have a location in New York, isn’t there the risk of a Brand credibility gap – or at least the perception of a Brand credibility gap?
In conclusion,
Franchisors and Franchisees need one another. It floors us when the marketing relationship is a difficult one because the Franchisor has the responsibility to ensure the Franchisee succeeds. Conversely, the Franchisee has the responsibility to reward this support with higher royalties for the Franchisor. So if a flexible centralized/decentralized approach will maximize the chance of both happening, why the disconnect?
