Seeking sales in new markets: the best practices for the development of untapped markets provide a repeatable path to market penetration.(IFA'S 51st ANNUAL CONVENTION)

Whether your firm is a newly minted franchise or has hundreds of units in operation, at some point, it will need to enter new and perhaps distant geographic markets. With no units to illustrate the concept in the new market, no local track record and minimal brand recognition, a firm will need to identify local prospects and convince them that the concept will thrive in a market in which it has little or no experience.

Franchise companies expand into new markets for many different reasons including a lack of opportunities in markets that have already been developed, the emergence of qualified leads in a new area or simply the desire to become a multi-regional or national brand. Whatever the motivation for new market entry, there are many challenges to consider. The ability to enter new markets is also influenced by the types of franchisees the franchise is targeting, whether it is single-unit franchisees or large multi-unit operators. For many franchise organizations, the speed at which each new market is developed is also vital, as franchisees will perform better as consumer awareness increases relative to local competitors which already exist.

Regardless of your particular situation, the savvy franchise understands that best practices for the development of untapped markets provide a repeatable path to market penetration.

To Market, To Market

The most successful franchises invariably enter markets according to a designed plan. And only rarely will luck alter those plans. The most savvy franchise firms know that if they receive a lead from Timbuktu, they are better off sending a rejection letter than pursuing a franchise prospect that they cannot properly support (unless, of course, they already have units in Timbuk-One and Timbuk-Three, making it a part of their established growth plan).

Thus, the best franchise companies will develop growth strategies that account for market-specific factors. In highly-competitive markets, the franchise might need to develop a significant market presence quickly. Real estate costs may influence the financial qualification standards applied to candidates. Market demographics, climate, competitors and customs could alter the demand curve-influencing pricing and or revenues. And of course, support, logistics and supply channel issues will need to be addressed before a market development strategy is finalized. For younger franchises, this usually means choosing new markets that are closer to home.

These markets are more easily serviced-allowing the organization to provide franchisees with an increased level of support, a better chance of success, and, ultimately, resulting in improved franchisee validation. Because they are closer, the costs to service these markets will also be reduced. Lower airfares, less time wasted in travel, and an improved ability to leverage existing staff will all help improve franchise financial performance. Logistical and supply chain issues will require less in the way of adaptation--and leveraging off existing suppliers can help the franchise system realize improved purchasing economies. The real estate and construction process is simplified and the company can leverage its local market knowledge. And, of course, the brand will likely have more recognition in nearby markets than it would in distant venues--both among franchisees and potential customers.

Even larger franchises are generally well-advised to grow outward in concentric circles for many of these same reasons.

Finding Franchisees

Once your brand has chosen the specific markets that it is looking to penetrate, it is incumbent upon the franchise to develop a localized marketing plan that will help identify the best candidates in that market. And in today's electronic age, narrowing down your prospects has never been easier.

Virtually every search engine offers the ability to geo-target your pay-per-click advertising by metro area. And since your franchise will only be bidding on a limited number of markets, it can increase its pay-per-click bid in those targeted markets to obtain the top position within the search results. In addition to the major search engines, there are companies like Reach Local.com and Yodle.com that focus specifically on locally targeted Internet campaigns. And many of the franchise portals today have the ability to geo-target, although it is generally limited to the state level rather than metro markets.

Both public relations and local print advertising can easily be localized as well. Often, by combining print and public relations with an event in the market (such as an "Opportunity Day"), a franchise company will improve its visibility and response. To the extent that a franchise has a well-defined target audience, a direct contact strategy can be used to further leverage these local media.

And, of course, just because this is a new market is no reason to ignore referral strategies. When franchises are working through logistical and supply channel issues with its vendors, they should be sure to ask who they think would be a good fit for them in a particular market, especially if the company is looking for conversion candidates or candidates with a particular profile. Assuming that the franchise sells a good amount of a vendor's products, it will be well motivated to provide the names of people that it would like the franchise to convert, especially since the vendor hopes to become a designated supplier to that candidate in the process.

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If the company has a real estate specific franchise, another great source of referrals involves networking with the landlords of properties in which it might be interested. Likewise, consider networking with some of the experienced real estate brokers in the area. To the extent that your organization is looking for an experienced candidate, it should be able to tell which operators are growing, which have a good reputation, and, if your franchise is luck> may be willing to make an introduction. In fact, some landlords may even be willing to put a banner on a vacant space announcing that an opportunity exists for your brand at that location. Landlord cooperation has improved as the real estate market has continued to soften in this economy.

The Medium and the Message

Once your organization has determined how it will reach candidates, it will need to understand the message it needs to convey. Regardless of whether the franchise is a large established one or newer to the process, it needs to understand that its first franchisees in a new market will likely have a different profile than the last franchisees to join.

Those with a business school background probably remember the classic consumer adoption bell curve. On the far left of the curve was the 2.5 percent of the market classified as innovators, who were traditionally considered the risk takers relative to any new product or service, followed closely by the only slightly more conservative early adopters who were responsible for the next 13.5 percent of buying behavior. The rest of the bell curve--the early majority, the late majority and the laggards--will rarely be the first one to purchase anything, let alone a franchise.

Knowing this provides franchises an advantage in targeting new markets. For example, if the brand has sold 100 franchises in a local market, but is now targeting a more distant market, start by understanding that the distant buyer is likely to be significantly more risk-oriented than the 100th franchisee. The last franchisee in your first market, likely a so-called laggard under the standard marketing jargon, probably was much more suspicious and tradition-bound than the first buyer in your new market. Your messaging needs to be different depending upon your audience.

When targeting early market franchisees, profile them as pioneers. But remember, while they are at a different point on the risk-reward curve than the laggards, incremental risk always carries the need for incremental reward if it is to sell. Thus, consider emphasizing that they are getting in on the ground floor of a particular opportunity and will have the opportunity to secure a prime territory, the best locations, and likely the most intense support.

Especially in pioneer franchise sales, the key is to appeal to the emotional gratification that the candidate will receive from the purchase rather than focusing on the more tangible, but perhaps less emotionally alluring, aspects of the value proposition. In other words, if you talk to your pioneers about how great your operations manuals are, you will lose them at "hello."

While the organization will certainly want to use their pioneer status (and yes, they will be emotionally in tune with the pioneer tag) to your advantage, the franchise will also want to be careful to weave its success story and its credibility into the message. And while this is often something that can be done with the brand story, in this instance, it is often the media that best conveys the message.

While some start-up franchises may get by without professionally-designed marketing materials, when your organization is asking someone to invest their life's savings in a business that he has never before seen, the franchise marketing materials need to convey credibility.

Promotional videos are one particularly valuable tool when a franchise system chooses to enter distant markets. For many concepts, they can convey the excitement of a business and introduce the franchise support team and the franchise's support services in a way that will drive home the value provided by the distant franchise. Quality brochures and Web sites will also serve to drive home the message of a franchise system.

While developing new markets poses many challenges, it is worth remembering that newness to a market can be a selling point in and of itself, especially to those candidates who think of themselves as pioneers capable of taking a proven concept to a new market.

Mark Siebert is the chief executive officer of the iFranchise Group, a management consulting firm specializing in franchising and franchise marketing. The 26 consultants at the iFranchise Group have over 450 years of combined experience and have worked with nearly one-half of the nation's top 200 franchisors. Siebert can be reached at 708-957-2300 or info@ifranchise.net.