Relationship Marketing and Franchising

Strategic relationship marketing advice for franchises.

By Gerhard van Wyk

Relationship marketing is defined as ‘interaction within a network of relationships, or establishing, maintaining and enhancing relationships with customers and other partners, at a profit, so that the objectives of the parties are met through a mutual exchange and fulfilment of promises’ (Jooste et al, 2009).

Key aspects of relationship marketing

Franchises hoping to employ a relationship marketing strategy should consider the various stages that exist in any business relationship. The relationship stages, comprising an establishment phase, a maintenance phase, an enhancement phase and in some cases a termination phase, signify that these relationships are ongoing.

Establishing mutually beneficial and profitable relationships that address the needs of the other party, requires trust and commitment. Franchises should strive to develop profitable relationships, yet distinguishing their profitable customers from the rest is one of their greatest challenges.

Relationships are strategic and as it affects the allocation of resources it should not be operated in isolation, but should be aligned with the strategies of the franchise.

Do all franchises need a relationship-building strategy?

In short, no. Some types of businesses would gain no benefit from such a strategy:

• Franchises selling large volumes of low-value products.
• Franchises that have no direct relationship with the end consumer.
• Franchises that have a low value associated with each customer over their lifetime.
• Franchises that have a high customer mix.

The benefits of relationship building for franchises

• Know your customers – The better you know your customers, the more effective you can be in meeting their needs.
• Creating value – Creating value is a way of establishing competitive advantage in the marketplace, however, the franchise’s approach to managing the value exchange with its customers is also critical.
• Customer retention – While some franchises prefer to focus on attracting new customers rather than customer retention, it has been suggested that attracting new customers costs five times more than retaining existing customers. Research also suggests that increasing customer retention by five percent per annum increases profitability by as much as 60 percent in year five.
• Improving customer loyalty – By investing in relationships franchises can move customers up the relationship ladder and build on their brand loyalty to encourage growth, profit and more value for the franchise.

Franchise relationship characteristics

• Longevity – Establishing a relationship is a long-term commitment not to be pursued with short-term gains in mind.
• Trust – Trust refers to your belief in the reliability and integrity of the other party.
• Collaboration – This refers to working together to create value for the benefit of both parties.


The cost of relationship marketing

It is important to remember that developing relationships takes time, money and resources. Establishing and building relationships is not an instantaneous process and relationship marketing is a strategy that requires a commitment to a lifetime association with another. The investment in any asset, however, creates an expectation of return. As this is a long-term investment, expectations of returns from this strategy need to be realistic.


vanwykg@mweb.co.za
+27 71 481 9956