Franchising & Socializing

I spent last weekend at the International Franchise Association's 50th Annual Convention.  This terrific gathering of the leaders within the franchising world is always an opportunity to have meaningful conversations about the industry and gather feedback on how the mashup of small and large business is progressing. 

As their franchisees go, so go the franchisor and its apparent that while some sectors are beginning to stabalize, others are still very much struggling.   Franchises with less immediately essential products, such as home improvement, are still struggling, looking for a stimulus to break the reduced spending status quo many homeowners have taken.  Others are using a variety of marketing & promotional tactics to maintain manageable sales levels.   This ranges from more aggressive retention efforts to more strategic use of coupons and discounts.

Being in the coupon business, the former, certainly is in our sweet spot and it's well documented that coupon usage, both traditional in direct mail, newspapers, and circulars as well as online & mobile, are growing at paces to levels that haven't been seen in years.   It's also becoming fairly well documented that this is the new norm.

As a mater of fact, we sponsored the opening luncheon and showed this short promotional video that calls out some interesting factoids.   The one that received the most response is that the term "coupons" is searched on Google more than "Britney Spears".

Besides the fact that all the attendees are very willing to share experiences & help one another within the franchising "brotherhood", The IFA Convention is very education focused.  Attending several of the technology tracks & round tables, it was interesting to note that there were NO sessions dedicated to "Search"  SEO and SEM were not present and accounted for.  Instead the focus was on "Social".  Social Networking, Social Media, Social Marketing, Social Social Social.  I would characterize the pulse of the attendees as is with most marketers: "We know social media is important, we're struggling to understand it, we don't know how to measure it, we're watching our competitors and we're trying to figure it out."

What adds a twist to this is that in many cases, the franchisee may be ahead of the franchisor is establishing an online footprint (and thus reputation).   Since it's so easy to create a Facebook fan page, a Twitter account, or any other online listing, there are many franchisees who are attempting to brand themselves outside of the franchisor's social & online media strategy, which may ave not completely established it.

While many franchisors are working on establishing their social media policy for their franchisees, the jeannie is out of the bottle in some cases and in others, the legal agreement between franchisor and franchisee was written before all of this became common place, so there are no established rules outside of use of brand or trademark restrictions.

That said, there are shining examples of franchised brands that "get it" and are effectively using social media (and online marketing in general).  Case in point is the relatively small and regional frozen dessert franchise, Tasti D-Lite.  Besides becoming a cultural icon, gaining free product placement or mentions in popular television shows such as "30 Rock" and a favorite among celebs, they are utilzing online media to support their loyalty card program as well as virally grow sampling opportunities to build new customers.   One of their most innovative tactics is tying their loyalty card into Twitter and location-based service & game, Foursquare.

Based on what saw last week, I believe we'll see incredible growth and investment in social media by the franchise community over the next year.   But will we see anything really innovative like Tasti D-Lite?

The other takeaway I want to share is the impact that support from the federal goverment would have on the economy if only they would open up credit to small businesses (franchise or not).   It's estimated that for every Billion dollars in small business loans, 34,100 sustainable jobs would be created and generate $3.6 billion in economic output.   It would only take $434 billion dollars to create enough jobs to hire all the unemployed people in the United States.

Now how much did we loan Wall Street and the Auto industry?

At the Conference, IFA President, Matt Shay said franchise businesses have been severely impacted by the lack of access to credit, which was down 40 percent in 2009 causing the industry to lose over 400,000 jobs last year.  While slow growth in 2010 is expected, the demand for lending to franchised businesses will not be met.   A $3.4 billion shortfall in lending to franchise businesses in 2010 will result in 134,000 jobs not created and $13.9 billion in economic output lost, according to data released by the International Franchise Association Educational Foundation.

“IFA appreciates the efforts to date by the President and Congress to support many of our recommendations to improve credit access,” Shay said.  “But, now is the time to put that support into action.  For example, immediately raising the SBA 7(a) loan program limit from $2 million to $5 million will help to create between 450,000 and 650,000 new jobs.”

If you're in the franchising business or even thinking about it, you should get involved in the IFA and mark your calendar for their 2011 Convention in Las Vegas next February.

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I Think Before I Spend

It seems that every week there's more relevant data released about increased coupon usage in the US (and occasionally internationally) due to the economy

What I'm more interested in are leading indicators of what's going to happen after the eventual recovery.  Will this new found value consciousness continue?  What generational impact does this severe downturn have on future generations?  Since 80% of us were born after World War II, is this the Great Depression of our generation?

John Gerzema, Chief Insights Officer for Young & Rubicam, in his talk about the post-crisis consumer which he calls "The Great Unwind", shows very impressive data and arguments that is a must watch if you want to understand where consumerism is headed.  The good news is that consumerism isn't dead.  It's just changing from mindless to mindful and "value driven".



In addition here's some more data and evidence that indicates the past 18 months may have permanent impact of how consumers shop and thus how brands must market:

TNS Retail Forward research shows that 95% of Americans have modified their shopping behavior in some way in reaction to the recession.

Data Monitor's July report indicated that 56% of US consumers feel that their lifestyle has been impacted by the recession. Suddenly, they have been forced to re-evaluate their spending, including where they do their grocery shopping as well as their in-store choices.

44% of US shoppers are frequent buyers of private label products. Many are now likely to consider private label products to be on a par, if not better than market leading brands across sectors

For 72% of US shoppers, lower prices have a high amount of influence over where people do their shopping. Nevertheless, the quality of products sold similar influence over their (changeable) grocery shopping destinations. This is symptomatic of the intensifying value-consciousness across FMCG product sectors.

In May, 50-year old financial planning firm, First Command Financial Services' Behavior Index research revealed that more Americans have permanently reduced spending "pointing to a more frugal consumer environment after the recession is over" and is "about the birth of a new way of life" said Command Financial Services CEO, Scott Spiker.  

Consistent with Gerzema's data that shows the turnaround of Americans' saving rate, First Command data indicates that the "feel good" has shifted from consumption to "cutting spending and saving more not just because they have to but because it makes them feel better".  

In First Command's July update, Spiker said that while financial attitudes and behaviors are rebounding from the Fall 2008 lows, "Americans are turning away from unchecked consumerism and embracing the traditional values of personal responsibility and self-reliance"



Finally, First Command's October update continues to indicate spending limitationse with "Fifty seven percent of survey respondents say(ing) they plan to spend less on holiday gifts again this year. Consumers say they will set a maximum dollar amount on gifts (42 percent), give fewer gifts to each person (41 percent) and give gifts to fewer people (39 percent).


I can see this in my own spending and those of my son, our friends and our neighbors.   I truly believe that we as a society will be much more value conscious going forward.  Not that we won't spend.  We'll just spend in a more thoughtful way with brands and retailers that match our thinking.


What are YOU thinking?

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Who's Using Coupons? The Affluent.

Nielsen research has just released data that may surprise some, but not those of us that work within the Coupon industry:

Of the 1.6 billion coupons were redeemed in the first half of 2009 (an increase of 23% YOY), more affluent consumers ($70k+) are considered the super heavy coupon users.

As one would expect, larger households with a female head of household 54 years old and younger are serious coupon users.

Consumers living in affluent suburban areas (defined as including annual income of over $94k living in a suburban ring of metropolitan areas) are also serious coupon users. Nielsen's defined "middle class metropolitan fringes and secondary cities with single family homes & a mix of while & blue collar jobs" also falls into the serious coupon user category.

As we would expect, the recession has driven lighter coupon users in 2008 to become heavier users in 2009.

While this data is from Nielsen's Homescan Panel and typically focuses on consumer packaged good purchases, I would argue that this trend crosses to all coupons, including those for non-grocery purchases and online purchases.

Todd Hale, Nielsen's Senior Vice President for Consumer & Shopper Insights, commented on the data, "while some might think that the fervent coupon clippers are only interested in a good deal, our research shows that this was the only group to show an INCREASE in overall purchases, with or without a coupon, suggesting real benefits to companies deploying coupons in their marketing mix".

"Coupons are back in vogue"

Time Magazine's "Cheapskate Blog" covers this data summarizing it by saying that people who make "decent money" are big time coupon users.

This data confirms what I've observed in the 12 years I've been involved in the coupon industry. What's surprising to me is the number of businesses that either don't understand the power of coupons and how to deploy a strategy around them to significantly grow their sales, or feel that offering a "coupon" has a negative impact to their image.

Want to read more about coupons? Here are all the articles & blog posts that I've found of interest this year.

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