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Standardisation of the Selling Process in Franchising

A Take on Sales Funnel Management

Written by B. A. Ekblom, U. Göransson

Paper category

Master Thesis

Subject

Business Administration>Marketing & Sales

Year

2016

Abstract

Thesis: This article discusses the two opposing extremes of franchise standardization and sales dynamics to find a turning point in order to reduce the uncertainty of franchisees in sales and improve sales performance. Based on theory and practice, a conceptual framework was developed to study the sales process of a specific franchise network. The research was conducted in the form of a customized sales report within six weeks, taking into account the sales funnel concept and performance indicators in the sales process. Analyze the received quantitative data through descriptive statistics and logistic regression to discover which changes in the sales process and which practices will produce higher performance. The results show that, compared to strict standardization, prioritization guidelines regarding activities and selection as a salesperson have advantages. Defining the sales funnel and participating in monitoring the sales process itself has proven to be a way to reduce uncertainty, because franchisees and franchisees essentially have a deeper understanding of the process. The expanded knowledge gained from this research has both practical and theoretical significance, and expands the knowledge about sales standardization and the appropriateness of the sales funnel and its management to deal with the gap between sales standardization and flexibility in the franchise environment. Dilemma. Franchising is a form of business based on the exchange of rights and knowledge stipulated in the contract to obtain royalties and profit shares under specific operating conditions. Franchisees have the right to operate and sell their products or services under the franchisor's brand, and benefit from prescribed procedures and technologies (PardodelVal et al., 2014). Therefore, the principle of the concept is to replicate tested businesses in new market areas through standardized procurement, marketing and product development activities and customer service standards (Chiou & Droge, 2015; PardodelVal et al., 2014). The standardization allows economies of scale and scope and reduces the cost of controlling franchisees. In addition to cost minimization, the continuity and innovation of brand image are the main reasons for standardization and uniformity discussed in the franchise literature (Chiou & Droge, 2015; Pardodel Val et al., 2014). Standardization supports a common perception of brand image, which is a major benefit of franchising because it reduces the uncertainty of franchisees’ achievements. Standardization is good for innovation because it helps to spread new ideas and discoveries throughout the network. In addition, Chiou and Droge (2015) believe that directly improving sales performance and indirectly improving satisfaction are the advantages of standardization, especially in the growth phase of franchise networks. Despite these advantages, standardization can also have negative effects, such as products or services that are not suitable for the local market, reduced innovation rates due to hindered entrepreneurial behavior, and negative effects on franchisee satisfaction (Chiou & Droge, 2015). Franchisees have direct contact with customers, so they have the opportunity to gain specific knowledge of the local market. Focusing on the differentiated nature of these markets and adapting to them can improve performance and benefit the entire network (PardodelVal et al., 2014). Therefore, franchisees need some flexibility to identify and implement local adaptation measures and generate innovative ideas (Chiou & Droge, 2015). In addition to the benefits obtained from localized operations, it also claims that a certain degree of flexibility can maintain the satisfaction and enthusiasm of franchisees and make them part of the network (Cochet et al., 2008). The act of balancing the benefits of standardization and control with the benefits of flexibility (PardodelVal et al., 2014) is considered one of the most difficult management challenges faced by franchisees (Chiou & Droge, 2015). Essentially, the franchisor’s need for standardization and the franchisee’s need for flexibility must be confused in order to benefit from both. According to Kaufmann and Eroglu (1999), there are two types of elements that must be balanced in different ways. On the one hand, for the franchise network to remain effective and thereby constitute a competitive advantage, it must have core elements. The importance of these elements and the fact that these advantages will increase if shared throughout the network indicate that they should be subject to greater standardization and control by the franchisor. On the other hand, there are some peripheral elements that can be arranged and modified more flexibly by each franchisee to adapt to specific situations and benefit from related interests. In addition to economic benefits and competitive advantages, the benefits of adapting to local market differences, and the incentives for franchisees' opportunistic behavior, the life cycle of franchise networks plays an important role in the assessment between standardization and flexibility. The more mature the franchise network, the less need for standardization (Kaufmann & Eroglu, 1999). Over time, as franchisees become more experienced and have a deeper understanding of the business and local market, uncertainty will decrease. In addition, restrictions on their freedom of operation increasingly threaten their entrepreneurial spirit. Although standardization has greater relevance in the growth phase when franchisees have higher acceptance of the introduced standards and require standardized training programs and guidelines, standardization is always part of the business form, not only for image development and economies of scale. Vital franchisee sales performance Read Less