Marketing. It is the one thing that all businesses rely on to establish their operations and grow them. Without it a company can plateau and lose relevance in the eyes of the consumer.
Marketing ranges from the simple task of putting out a sign; to more expensive and complex multi platform campaigns that include television, radio, print, and the world wide web. The goal is always to build brand recognition and attract new customers. It seems to be a fairly straightforward way of thinking, but perhaps less so in Canada's mortgage industry.
Mortgage brokers across the country rely heavily on referral relationships to drive their business. While brand recognition is important, the broker will most often market themselves as an individual service provider, some even foregoing the brand they are associated with all together.
The question that needs to be answered is why do they do this?
We need to look at why the big brands do their marketing the way they do, and how they drive a marketing budget, then we can answer the above question.
For the most part large brands will market themselves to drive consumer recognition, which in turn will hopefully result in greater business for their franchisees. The budget is almost always driven through a marketing levy in place on top of any royalty that is charged. The funds raised for marketing are then pooled and used to do large campaign buys and, in some cases, cover the cost of hiring a famous national brand ambassador. They do an excellent job of building the brand to the general public and in theory as a result will direct the consumer to the franchisees when seeking a mortgage.
The unfortunate reality is that while these campaigns do achieve building the brand into a household name, they rarely result in measurable results for the franchise or their independent mortgage brokers. In my almost 30 years in the industry I have rarely spoken with a franchisee that has seen a significant, measurable, uptick in their business because of national marketing campaigns. This does not just apply to mortgages, but also in the real estate industry that has the same basic structure of franchisees and real estate professionals that are independent contractors.
The shift in the marketplace from traditional television, radio, and print to the online world has only further muddied the waters as companies focus their considerable marketing might to the internet. The goal of the marketing remains the same, to build brand. The challenge is that because the consumer is loyal to the independent contractor, you need to attract more recruits to hang their banner under the brand in order to grow. The result is that marketing ends up becoming as much about franchise sales and recruitment as it does about building brand and driving revenue. It is far easier for a brand to grow by focusing on franchise sales then it is the costly avenue of consumer marketing. It also makes sense to a large degree because the customer is not loyal to the brand, they are loyal to the independent contractor they work with.
The result is that franchisees and their independent contractors are often frustrated by the cost they bear in the marketing levy, and the lack of marketing that they personally receive. Most brands are structured in such a way that the marketing levy is not factored into the standard royalty costs because they are unwilling to spend from those royalties which would negatively impact the bottom line. Traditional online marketing is expensive, and to try to take an existing strategy and turn it on its head to focus on the individual franchises is near impossible, especially when you consider that there are no territorial divisions in place. If you have locations within blocks of each other, or in some cases even in the same building, the option to do laser focused marketing campaigns for each franchise is a non-starter.
So, that means that with the focus still squarely targeted on franchise sales and recruitment, existing network members are starting to become frustrated with the current marketing schemes. They are asking themselves, why pay for something that doesn't directly contribute to my growth? As a result, most mortgage professionals spend a significant amount of money marketing themselves as individuals. They recognize the value in the spend, and they realistically have little choice if they want to grow their book of business.
The brands, in order to try to remain relevant to their networks are shifting funds from the marketing levies to training and events. Still all of it designed for recruitment because it gives the franchisor bragging rights in the industry with the ability to say "look at what we provide". Training and events are important of this there is no doubt, but these events are all designed to teach the mortgage professional how to grow their business themselves through their own activities and marketing. This would seem counterintuitive to paying the marketing levy in the first place.
The mortgage industry in Canada has established the current models over decades and they have been designed to create vast profits for the brand owners. Much of it at the cost of their franchisees and the independent contractor. Royalties, marketing levies, and somewhat high costs to attend events (designed to be profit centres), means that the true cost of association with the brand is often far more than what it appears to be on the surface.
Common thought is that the royalty should be used to provide the basic needs of the network, basic training should be offered as a part of that - including sales and marketing training.
While some events and training will need to bear a cost to the participants, it should not be designed in such a way as to be a financial burden in the name of driving profit. Some network members, because of intense pressure from the franchisor, spend thousands of dollars every year on events and training. As is true in most industries, only about 20% of attendees realize direct value or even recoup their costs to attend the event in the first place.
Marketing levies should be used to drive business to the network, because in assisting the franchises and their brokers to grow, the brand grows too. It becomes an 'all ships rise with the tide' scenario.
Franchising is supposed to be designed to provide the franchisee and their teams with the tools and resource they need to grow. This builds the brand and increases revenue for the franchisor and as is proven in the industry, it also creates brand loyalty in the network and for the consumer in the long term.
When anyone is looking at joining a brand as a franchisee, one of the most important things to look at is what the franchisor will do to directly assist you in growth. That includes programs designed specifically for referrals, and perhaps most importantly marketing for the franchise. Defined territories provide more bang for the buck in marketing, and enable focused programs that are tailored to the area the franchise serves. These programs should be professionally managed and preferably by outside agencies that can be held highly accountable for the results of the marketing conducted.
As a franchisee you should also have a say in the marketing that is provided to your area. While the brand will have standardized marketing, being able to contribute a bit of your own flavour that is relevant to your community only increases the impact of the campaigns.
Remember, when you buy a franchise you are making an investment in your future, and in the brand itself. You have the right to expect that your franchisor is directly supporting your business so you can flourish. Look for a company that works with you and doesn't overburden you or your teams with additional costs.
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