The Problem: The advent of social media and the Internet of Things has fundamentally transformed how consumers interact with the Retail industry. There is a large stream of consumer-specific data that is being unleashed that is relevant and actionable to the retail industry well beyond the conventional focus on Point-of-Sale systems transaction data and the Supply Chain data coming from warehouse-to-shelf automation. Consumers are sharing how they feel, what they think and the retail industry has woken up and started to notice something major. Predictive Analytics can dramatically improve predictions of continued customer loyalty metrics, ROI on tailored, individualized marketing spends and forecast of purchase intent…


The Paradigm Shift: The advent of digital stores and the profound influence of and other 100% online retailers have not changed the facts that most retail business is local business. There is plenty of room for local presence, local merchandising and local marketing in order to win customer business every day of the year. However, a cohesive digital marketing strategy is clearly seen as critical to the success of all retail businesses today, even local brick-n- mortar B2B businesses. Further, there is a rapid recognition that we are rapidly moving beyond the applicability of a Net Promoter Score and customer trust and customer loyalty are more critical today than before in this world of increasing choices for customers worldwide.

OSG conducted a recent study with Franchise Well, LLC where we asked some retailers, franchise consultants and franchisors in the US about five critical questions they face in 2016. The results of the poll show some interesting trends that the authors have offered some perspectives on as part of this white paper.

A. The Strategic Priority:

The regulatory climate globally around retail is dynamic and paying close attention to some of the new issues swirling with the US Government and the American Labor Review Board in recent times. Specific questions are being asked about the Franchise model and on the degree of influence and control that franchisors truly have on specific employment benefits that many franchisees offer. Not all retail is franchising of course and the specific nuance around independent business owners buying and owning franchise stores is different from some franchise-owned stores and larger fully owned retail establishments worldwide.

There has also been active debate around the minimum wage rate with some states beginning to offer higher minimum wages that are comparable to countries that are part of the European Union and the developed countries of the world. There are other strategic concerns that a Retail establishment faces that are part of the scope of this first question that was asked

What is your number one worry as a franchisor in 2016?

Poll Results:

‘Co-employment” pressures from D.C = 8%

Rising minimum wages in the marketplace = 8%

Increased competition from new players entering the market = 8%

Winning consumer mind-share wars in the marketplace = 75%

Other worries = 0%

The results are telling that despite all the other strategic concerns, the retail industry remains highly focused on customer centricity and finding out how to win the battle for consumer mindshare. We personally expected there to be higher concerns on the co-employment issue and also the raging minimum wage debate going on in the USA at this time. We do feel that some of the retailers are watching the regulatory climate closely and even with some consternation. We also feel that the retail industry is watching the dynamics of the Seattle retailers closely given the recent hike in minimum wage there and its impact on local retail market competitiveness and employment.

What is also interesting is the clarity of the response with new competitors not rising to a level of debate as much as addressing the consumer challenge in their local served markets. This does speak to operational excellence as the most controllable way to compete in the market


B. The Revenue Priority

What is your number one revenue generating priority for the year?

Poll Results:

Recruiting new new franchisees in the year  = 21%

Making existing franchisees even more successful = 57%

Reinforcing/changing the brand image of the franchise = 7%

Differentiating the franchise brand vs. the competition = 14%

Other priorities = 0%

How does a retailer grow? Clearly market expansion is an important consideration given the changing global demographics and the impact of technology. Retail is after all one of the cornerstone industry sectors when it comes to entrepreneurship. We feel that a growing group of millennials is embracing the idea of opening new businesses globally and this is critical especially in developing countries where small business ownership is the best way to create jobs in local economies. There is a rise also in female-owned and minority-owned businesses that is critical to note.

The results of the poll were interesting to say the least. If one combines the brand reinforcing and differentiation strategies with existing franchisees, an overwhelming 80% of the respondents seemed to indicate that making their existing business partners more successful is the best way to grow their business. Retailers are more cautious today with their global expansion aspirations about moving into developing countries.


C. The Budget Priority:

The relevance of the brand is critical in this dynamic market where the millennials are forcing us to change our messages. They are more environmentally conscious, very savvy netizens who need to see responsible corporations doing their fair share of local market investment in addition to harvesting the market potential. They pick up on global trends fast and retailers are adapting quickly to focus on harnessing the fast-moving trends before the next one takes over

What do you see as your number one objective in 2016 in order to grow revenues/profits?

Poll Results:

Introduce new products & services to our franchisees to sell = 0%

Improve Marketing campaign that reinforces the brand image = 53%

Launch Customer loyalty campaigns to secure quality referral = 13%

Increase promotional activities to enhance sales volume= 27%

Other objectives= 7%

We found the responses to be very telling. Rather than focus on new products and services, these respondents clearly prefer strong marketing campaigns and promotions tied to loyalty metrics as the focus in 2016. It is true that some of the leading retailers in the world become less relevant each year while some of the others become more relevant. Evolution is critical and the only way to stay relevant in Retail and/or relevant in Franchising is by meeting customer needs more efficiently each year. With margins under pressure, retail establishments are finding innovative ways to improve marketing campaign return on investments. While omni-channel marketing optimization is critical to success, the respondents seemed to indicate that local receptiveness to corporate marketing initiative continues to be a challenge for larger retail establishments. There were other participants who particularly emphasized that the information was not being operationalized well at local store levels.


D. The Customer Priority

The most precious commodity in retail is customer mindshare. Capturing it even for a fleeting moment is lucrative, especially if it translates into a profitable transaction. Retaining their mindshare is the battleground. While the respondents to the polls shared multiple concerns for this question, the critical consensus of 40% of the response was around short-term “make the numbers” tendencies where retailers may prioritize revenues over customer satisfaction. We heard about local businesses even in the same business not honoring each other’s promotions and coupons as an issue. While no retailer will agree that they deliberately produce low cost products or services to cater to their customers, the customer’s perception of low quality products and services is a strong issue that merits serious conversation since both the scale of measurement and the consumer are not in control of the retailer. This is a tough one.

What is the number one complaint that you get from customers about your franchisees?

Poll Results:

Franchisees don’t honor coupon of another local franchisee = 13%

Franchisees don’t focus on high quality products & services  = 25%

Franchisees try to oversell customers & loose trust in the market = 6%

Franchisees prioritize revenues over customer satisfaction = 38%

Other complaints = 19%

Addressing a persistent customer demand while conceding that while it increases costs, the revenues will come may seem like a leap of faith that many retailers may not want to make. But some of these demands are stunningly simple to reverse. The best example of this is now the famous McDonald’s breakfast time change, which has led to significantly favorable market response and growth for the franchises. This is not a new product or offering from McDonald’s but rather an acknowledgement that they will offer the popular breakfast meals all day, which consumers had been demanding for years. Simple and powerful, we think this is customer-centricity at its best.


E. The Retail Tech Priority

We asked the respondents if they have seen the stunning rise of the Amazon Prime program7 as something they would emulate. We talked about the great proliferation of the mobile apps where every retailer now has an Apple and Android app for pretty much everything from finding the nearest store, scheduling the net appointments and benefiting from promotional incentives. What would their true focus be this year? The results are stunning and a clear consensus emerges. The retailers all want to have an even deeper behavioral analytical layer to understand their customer base better. Ass the old adage goes- the more things change, the more they stay the same.

These turbulent and exciting times where words like Big Data, Cognitive Computing, Digital Marketing Analysis, etc. are thrown around, the basic drive is to use and leverage these technologies to understand what makes us tick. In the end, the best way to win us is nothing more than personalizing and tailoring solutions for each of us and to ensure we have a great customer experience.

What trends in retail products/services marketing are you watching most closely in 2016?

Poll Results:

‘Amazon Prime’ programs with special access to deals = 6%

Mobile productivity apps to find & contact customers = 25%

Mobile e-pay Apps for customers to e-pay for products = 0%

Deep consumer analytics to understand needs & behavior = 63%

Other retail trends = 6%


Summary: The findings of these polls and the discussions with these retailers seemed to highlight the need for a critical strategy that seems #1 in their minds. Behavioral Analytics that understand customer values, behaviors, actions and triggers are critical. Behavioral Analytics drive customer-centricity and will be critical to fostering customer loyalty and cultivating a community of passionate users. This is the panacea that retail businesses seek today to stay relevant in the retail businesses of today and tomorrow.


About the Supporting Author

Dr. Ben Litalien, CFE, Doctor of Management in Franchising

  • 25 Years of Franchise Experience, U.S. Franchise Manager, ExxonMobil On the Run Convenience Stores
  • Franchisor of Frullati Café, Flying Colors and Antone’s Po’boy’s & Deli
  • Certified Franchise Executive, Principal, Franchise Well Consulting
  • Professor at Georgetown University, UMUC and SNHU



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