Start your franchise journey with profiling

The first step to increase value from your franchise should be making a profile of your customers.

Profiling is needed to evaluate market potential, develop appropriately balanced franchise territory areas, identify where to locate new outlets, identify hot spots to target sales effort, and to help you tailor your communications in terms of improved relevancy to increase sales.

Profiling your customers refers to identifying the characteristics that differentiate your customers from people who are unlikely to ever buy your product or have need of your service. It goes deeper though to differentiate your best and most loyal customers – those who buy more frequently, place higher value orders and are open to other offers – from the rest. Not all customers are ideal – some will purchase infrequently, won't spend a great deal of money or have little loyalty, yet will take a lot of your selling time.

One approach to profiling is to first segment – or group – customers by their value to the business, then append external profile data – census, lifestyle, market data or business/consumer geo-demographics – to enrich customer understanding. To do this we first statistically analyse a franchise owner’s customer trading data to determine how much people spend, how often they buy, what they buy, where they live, their life stage, what attracted them to your company, etc., then compute a score to identify the ‘best’ type of customer.

Then, using the postcode, we add external ‘profile’ data, which allows us to accurately describe what your best customers look like. After this, using geographic analysis techniques, we can position your existing customers on a map and develop what is termed a ‘heat map’ to identify where geographically to find more of them.

So, what does this information allow you to do? For starters, if you are moving into franchising or thinking of expanding into a new geographic area, by applying some mathematics and a ‘weighting’ to take account of known competition and the brand life stage, you can estimate what a specific geographic area may deliver in terms of sales potential. Add to this your knowledge of the effort needed to sell your product or service and a realistic estimate of how many prospects a franchise owner could cope with, and this information can be used as the basis to compute a set of ‘right-sized’ exclusive or non-exclusive franchise territories, balanced by opportunity and drive time.

Territories created in this way will deliver economic benefits to the franchisor, prevent franchise owners being located too close to one another or located in unsuitable areas, and ensure each franchise owner has sufficient territory to generate a revenue stream without undue competition.

If you operate a location based model, then choosing the right site to open your franchise outlet has as much to do about the demographic profile of your customers as it does the physical location of the store. With accurate customer profiles, the right analytical resource, tools and data – including competitor locations, traffic patterns, parking, high target market density – you will be able to determine how many outlets or branches you can open in an existing market, where you should expand your network, which outlets should be closed or consolidated. You will also be able to select the outlet, branch or other business locations that are profitable and contribute strongly to your overall network.

Lastly, customer profiles enable you to target the right people using the right media and channel to get across your marketing and sales messages.

Written by Graham Barlow, Managing Director of Tech4T