You know there are "right" customers and "wrong" customers and while you may not (yet) know how to tell them apart before they become your customer, you know that the "wrong" customers deliver the least value and create the majority of problems in your business.

Who is a customer?

Customers (or clients), by the way, are not just the people who buy your products and services. They also include your employees, and if you're a franchisor, they include your franchisees.

Be careful of expert advice!

So I read a passage on a blog that provided "some helpful hints on how you can spot a great franchise marketing system" and the first hint was this:

Customers are brought in the doors. This is what every business boils down to in the end, whether or not the marketing system brings in the customers. After all, that is where you make your profits.

Taking the express train to bankruptcy

And I thought to myself: Or that is where you lose your profits, your money and ultimately your business!

It's not enough to drive customers through the doors of a franchise, or any business. You've got to drive the "right" customers through the doors! Most businesses, and most marketing systems, do not fulfill that objective. And that's one reason why franchises struggle and fail.

So don't be fooled into thinking that a good franchise is one where "the marketing system" drives customers to the door!

Happy franchisees make the most money

To wit: Some years ago the new CEO of a major retail franchisor asked me to help his franchisees attract more customers and ultimately generate higher revenues so that (a) the franchisees would earn (and keep) more money, and (b) the franchisees would pay higher royalties. Since the beginning of franchising, franchisors have known that franchisees who make and keep the most money are the happiest franchisees!

So I spent several weeks working with a few franchisees to find out more about their customers. Here's what we discovered:

It cost the "average" franchisee $100 to get a new customer to come through the door (that included marketing costs and the required fee for the franchise advertising fund).
The "average" customer spent about $10.
No one knew if the customer would return - ever.
If the customer did return - no one could predict when or how often.
The "average" franchisee did little to nothing to bring the customer back again repeatedly (and you may be surprised to find out why).

Busy, busy, busy going out of business!

So while it appeared "the marketing system" was doing its job, e.g. the franchisees were busy serving customers throughout the day, in reality "the marketing system" was slowly running the franchisees out of business (and perhaps into an early grave)!

That and the fact that the franchisees were so busy, busy, busy taking care of all the customers "the marketing system" provided that they had no time to do the things that would have insured getting the maximum benefit out of their customers, i.e. increasing sales, increasing frequency, building rapport with key customers, gathering referrals, etc.

Who caused that fire?

As one franchisee told me, "From the time I open the door in the morning until I close it at the end of a long day, I don't have time to do anything but put out fires."

Upon examination, most of the "fires" were caused by customers and employees. Occasionally, even though they didn't know it, the franchisee caused some of the fires!

Blame it on the franchisor, of course

You can be sure the franchisor got blamed for the majority of the challenges the franchisees faced. Frankly, I would take the side of the franchisees on that issue (though it does no good to blame anyone, but rather to accept responsibility). The franchisor could have done a better job sooner! In other words, the CEO that hired me had only recently arrived at the company. To his credit, he quickly assessed "the marketing system" and knew that it was broken. However, this company had been operating for many years prior to hiring this CEO. Where were the marketing folks all those years? Where was the company's leadership?

Why doesn't this system work?

So what was wrong with "the marketing system" at this company?

Simply, it was producing the "wrong" customers for the franchisees!

Even among customers there are stars

Through our continued research we further discovered that not all customers were created equal! Some spent more money than others and never, ever complained or started a "fire"! Of course, those were "the right" customers.

Problem was, "the marketing system" produced too few "right" customers.

Revealing more about "right" customers

Without giving away too much information (and revealing the company), here's more of what we discovered about the "right" retail customers for this franchise business. They:

spent about twice as much as the average customer
returned 3 to 4 times a week
owned a business, which existed within 3.5 miles of the franchise location
were males (64%) and females (36%)
had partners in their business (46%); most often, a spouse
were between the ages of 32 and 62

Remember garbage in, garbage out?

Wow! With just that information alone we could create a new marketing system that would target the "right" customers! All others were probably "wrong" for the business. The all-important "marketing system" was targeting "all others"!

Ultimately, with the help of the company's advertising agency, we created a new marketing system that achieved the goals established by the CEO and supported by the Franchise Advisory Council.

Careful of the advice you get

So I shiver when I see "advice" that implies a good franchise is one with a "marketing system" that "brings in the customers."

That's true only if the customers are "right" customers. If they're "wrong" customers, franchisees can plan on owning and operating a business filled with headaches, challenges, issues, "fires" and, ultimately, not enough money. And franchisors can plan on hearing lots of complaints and never enough royalty dollars!

And why would you want either scenario when it's much simpler, easier, more efficient and responsible to just fix "the marketing system"?

John Hayes has worked in the franchise community as a consultant, franchisee and franchisor since 1979. He is the author of several franchise-related book, author and speaker, is teaching Capture & Keep Customers. Details are at his blog, FranchiseMastermind.com.

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