Franchisees are far more likely to succeed in the face of fierce competition than independent start-ups, Michael Johnson, managing director of Card Connection, says
Franchises face threats to their operation like any other business. There is always competition out there looking to take a bigger piece of the pie.
However, the business world is constantly evolving and so some sectors are also threatened by new market entrants who are not merely ‘me too’ companies, but try and offer something completely different, which might also affect market share.
Many new franchisees that approach Card Connection have noticed this phenomenon in the greetings card industry. New players like Moonpig and Funky Pigeon have splashed out on high profile advertising campaigns and are rapidly becoming household names.
Rightly, new franchisees often ask us about the impact this has had on the greetings card market as a whole. We have been monitoring the statistics and trends relating to online greetings card sales on an ongoing basis. Interestingly, while initial interest resulted in relatively rapid growth in this micro sector, it has now flattened and accounts for around just five per cent of the whole greetings card market.
It is also indicative how these online retailers have begun to focus on bundling other products along with greetings cards in an attempt to upsell customers with chocolates or other gifts at the point of purchase.
In real terms, our new franchisees are always reassured to find we have seen little effect on our own overall sales because a large proportion of our customers are ‘distress purchasers’. This is our unique business model. Card Connection franchisees supply convenience stores and forecourts and the simple fact is that last minute purchasers aren’t organised enough to order online.
This situation seems to reflect the experiences of innovative market entrants generally. The reason franchise companies work is that they are using a proven model that appeals to a particular customer base and the sales process has usually been honed over many years to ensure its efficiency and success. A brand new market entrant however innovative - will have to learn the business and change the way a whole generation of customers think in order to make a major impact on the sector and most mass markets just don’t change like that overnight.
For this reason, the biggest threat franchisees face is usually from established competitors rather than innovative new market entrants. Here, knowing your enemy is helpful, as then you can demonstrate your unique selling points to customers. If you know your competition’s strengths and weaknesses, you can take advantage of this information too. It may be that you have a stronger range of products or are able to tailor your offering to keep the competition out.
Although it’s essential to sell an excellent product, just building a better mousetrap isn’t always how business is won or maintained long term. People buy from people they like and if you get along well with your customers they are more likely to continue purchasing your products or services. This is where relationships built with customers over time develops loyalty.
Spending time with customers and talking to them will help you understand what is important to them - and that may not be obvious. For example, they may prefer an early morning delivery or want to hear about what is selling best in the current marketplace. Talking to customers gives you the chance to establish their needs more accurately, which may also provide the opportunity to introduce new products or added value services to them. In this way, upselling an existing client is much easier than finding a new one. Also, taking time to understand their own concerns helps you satisfy their needs, so why would they start looking elsewhere?
An example of this is when we were recently challenged by the Budgens store conversion team to create a new retail display fixture to help maximise in-store space. The requirements were pretty specific - a shallow display was needed to make sure the aisle walkway remained one metre wide, so customers had plenty of room to browse greetings cards without blocking the aisle. This also ensured disability access was maintained. On the other hand, the display fixture also needed to present the greetings cards to their best advantage to maximise potential sales.
We spent several months developing ideas and finally came up with a solution that met Budgens’ needs - a neat, shallow display fixture that presented stock to its optimum advantage. We also developed another similar design for forecourts. This new lower gondola end display fixture version meant we could increase the existing 30-pocket display to a 60-pocket option. In this way potential sales were increased with no cost to the retailer. Our customers loved it.
Because we understand the challenge our retail customers face of maintaining sales by offering the best possible range in restricted retail space, yet at the same time maintaining stock availability, we were able to go above and beyond when it came to meeting their expectations. It is having these types of relationships with customers that sets you apart from the competition.
The good news about franchising is that you are not on your own to develop and nurture these important customer relationships. You will receive training and ongoing support and help from business development managers to ensure your offering and the delivery of your solution is better than the competition.
It is also important to remember that customer relationships exist on different levels. For example, you may be in touch with a store manager if you deliver to the retail sector, but your franchise business development manager may be building relationships with an area manager or someone higher up the chain. In addition, staff from your franchisors’ head office may be liaising with national account managers and even have relationships on a global scale. Working together as a team helps cement and develop these relationships.
Unique selling points
However, good business relationships should not begin and end with customers. Consider how improving relations with suppliers, your franchisor and fellow franchisees could all contribute to giving you the edge in an increasingly competitive marketplace.
For new market entrants, your franchisor will be constantly developing new strategies to promote the franchise’s unique selling points. It is in its best interests that, as a franchisee, you are successful. You have a whole franchise company behind you and this wealth of experience means you are far more likely to succeed in the face of fierce competition than starting out alone.
And when it comes to established players, your franchisor will already know where its strengths and weaknesses lie and will be happy to share this information with you.