Question

1. Discuss forms of franchising?

2. Discuss why marketers value shopper marketing? Give practical examples.

Answer 1

Q1.

Franchising is a mode of business expansion in which the franchisor i.e. the owner of a product or a service involves into the process of distribution through affiliated dealers known as franchisees. Some of the costs involved in obtaining a franchise generally includes an initial fees and ongoing royalties to the franchisor, however the benefits to a franchisee can be measured in terms of established trademark, a proven system of operations and training along with greater advantages in terms of economies of scale as compared to under a business that needs to be started from scratch.

Various forms of franchising models include:

1. Job Franchise: It is a home-based as well as a low investment model where in a person alone wants to start and run the business. This kind of business generally requires the franchisee to purchase minimal equipment, limited stock and at times a vehicle. Some of the important examples of job franchise model include corporate event planning, travel agencies, house-cleaning services, real estate services, babysitting services, etc.

2. Product Franchise: Also known as “Distribution Franchise” this model is majorly based upon supplier-dealer relationships wherein a franchisee distributes the products of the main franchisor. It is a process where the franchisor licenses the trademark but the system for running the business is not completely provided to the franchisees. The model of product franchise represents the highest proportion of total sales under the domain of retail sector. Product Franchise generally deals with large products such as spare parts, electrical items like appliances, motorcycles, computers and laptops, etc.

3. Business Franchise: Just like the product franchise model, under a business format franchise model too the franchisee gets the franchisor’s trademark but along with that, it also gets the complete system to operate the business and market the respective product or service. In this format, the franchisee is offered a detailed plan and all procedures on each aspect of the business along with the initial and ongoing training and support. This is the most popular form of franchise and about 70 plus industries around the globe follows this model such as fitness and wellness, fast-food, consumer durables, etc.

4. Investment Franchise: All the large-scale projects which require heavy capital investments such as telecommunication, hotel chains, big retails brands etc. fall in the category of investment franchise model. In this format, the money is usually invested by the franchisee where either their own management team or the franchisor is engaged in the business operations and produces a return on their investment and capital gain on exit.

5. Conversion Franchise: This model involves the process of converting independent businesses in the same industry into franchise units. The trademark along with marketing and advertising programs, training system and critical client service standards are all adopted by the franchisee. Under this format the franchisor has a lot of potential of rapid growth in terms of units and royalty fee income. Some of the common examples of industries following this type of model include electricians, florists, real-estate brokers, etc.

Q2.

A technique/strategy that focuses on the customer at the point of purchase is known as Shoppers Marketing. This type of marketing is characterized by making last minute appeals to customers at the very same moment when they are actually prepared to buy something. This kind of last minute appeal could be into various forms depending upon the product and retailer. Shoppers marketing try to make an immediate impact and directly influence the consumer behavior, which is not usually possible in case of other strategies like print, radio, or TV ads which can linger in the minds of customers for months and extends the sales cycle. Two groups which majorly focus on this type of marketing include:

o Manufacturers whose goal is to maximize the probability that customers will pick their product over another when presented with both on a shelf. In order to influence the customers manufacturers will consider the price, packaging, and special arrangements with retailers to make their product stand out.

o Retailers, which are the other group, generally emphasize a store rather than a product. Their main goals is to influence customers to choose their retail store over another, spend as much money as possible, and continue to keep giving them business. They focus mainly on location, signage, store plan, lighting, along with a range of other factors when trying to refine the shopping experience.

This form of marketing uses a wide range of marketing strategies to make a precise, but a significant impact on the customer. It can be considered as one of the leading drivers of sales because it targets customers when they are most willing to spend money. Some of the examples include:

1. Maxwell House: This coffeemaker initiated a huge shopper marketing campaign in order to promote its new brew. About 2 million coffee cups were distributed as samples with a coupon for the coffee in 8000 plus retail outlets. The redemption rate for the coupons was the highest the company had ever experienced.

2. Wall Mart: The retailer has worked with manufacturers of cold/flue medicines to design in store ads encouraging customers to “stock up” on medicine and tissues before the flu season hit. This was due to the retailer’s observation that when people are sick, they often don’t want to navigate a gigantic store to buy medicine. Hence, the smart shoppers marketing technique helped them to boost their medicine sales.