The overwhelming majority of healthcare companies that create franchises—or branded portfolios of products and/or services—do so as an afterthought. That is, they launch a few product brands, run into conflicts about how to represent those products to customers, and then layer over the products with a portfolio approach that (more often than not) is based on what they have to sell rather than why customers are buying. “Hey, we have doughnuts and soda and coolers and umbrellas: let’s create a Beach Franchise.” They would love to sell everything in their portfolio, but they ignore the realities that a) people don’t usually bring donuts to the beach, b) the franchise needs more than soda to satisfy people’s beach drinking preferences, and c) their brand of cooler happens to be the worst on the market. People just don’t buy this way no matter how much the company wishes they did.
On the other hand, leadership companies plan franchises early on based on how the market behaves or is trending, and then develop or acquire product/service brands that flesh out the experience they are delivering. They don’t just offer food, beverages and beach items; they offer a branded beach experience—Fun or Relaxation or Comfort—that features the best beach food, beverages, contests, gear, digital programs and so on to truly integrate with how customers are living their lives. What’s the difference between the companies in the first and second paragraphs? The leading companies know the five critical principles around which successful franchises are built.
1. Make sure your company has the institutional will. Companies that seek to use franchises as part of the marketing mix must commit fully to operationalize this model. They must establish a franchise marketing team that has discretion over the marketing teams for the individual brands in the franchise. They must have a budget sizeable enough that the individual brand managers are incentivized to compete for the franchise’s subsidies and cooperation. Without such resources in place at the franchise level, the individual brands will do whatever they please because the company doesn’t have any mechanism for compelling compliance. Trying to “tax” the individual brands so that programs can be fielded at the franchise level will not only fail to generate results, it will also frustrate and anger the brand managers who will contend that they are receiving mixed messages about how their performance will be measured: product sales or company cooperation? These two can often be at odds, especially for flagship brands that deliver hefty profits for the franchise, and seek all the money they can “keep” from other, less successful brands in the franchise.
2. Be smart enough to field branding research. This may sound like a no brainer, but many companies do not bother to do external research with customers about their plans for a franchise. Further, whatever research they do field too often is about the product brands themselves, and not how the brand identities of the company and the individual products reflect customer esteem. Brands are like friendly mirrors: they embody values that are dear to customers so that customers see a flattering reflection of themselves whenever they encounter the brand. Research that focuses on traditional marketing measurements—awareness, share of voice, ranking of product elements—may be helpful in building campaigns and messages, but they hardly scratch the surface of why grouping these brands into a franchise would be welcomed by customers. Discover if customers identify with your company values, and which ones they esteem the most. Understand the equity of your product brands in customers’ minds. Do they leverage any corporate values? Do they share a common value? If combined, is the sum greater than the collective parts? By conducting brand identity research, you can learn the value of each perceptual asset in the portfolio, and use these as building blocks for your franchise.
3. Dare to stand for more than just the products you sell. Back in the 1980s, a relatively small company named Stuart Pharmaceuticals made a commitment to meet a market need in oncology. While chemotoxic brands (those that kill cancer) and chemostatic brands (those that keep cancer from growing), were the main subject of research and development for other companies, Stuart was among the first to realize the potential of hormonal therapies in breast and prostate cancer. (These are called adjuvant therapies, or therapies used to sustain a cure from other agents.) Their first drug brand, Nolvadex (tamoxifen), would go on to become one of the best selling and paradigm-changing brands in the category. However, before its launch, no oncologist had ever heard of Stuart Pharmaceuticals. So their oncology franchise did something that the oncology community sorely needed: it committed to raise awareness about breast cancer, its devastating effect on the population, and the need for early screening. Working with their agencies, they created and promoted Breast Cancer Awareness Day in conjunction with leading doctor and patient societies. Not only did the oncology community become immediately cognizant of Stuart, but they also applauded the fact that the company was investing in more than just promotion for their upcoming drug. Of course, today we all appreciate the phenomenon that has become Breast Cancer Awareness Month. The Stuart oncology franchise went on to launch their portfolio of brands, each with the franchise family suffix: Zoladex, Arimdex, Casodex, and Faslodex. We now know this company as Astra-Zeneca, one of the world’s leading pharmaceutical brands. And they can trace their franchise success to their sage wisdom of daring to stand for more than just the products they sell. They committed to a cause that rallied a nation.
4. Build the franchise around your customers, not your brands. I started off this blog by addressing the need to base the franchise identity around customers and their lives. If I had to name the single greatest error most companies commit in fielding a franchise, it would be failing to abide by this principle. Sure, companies create franchises for good internal reasons: better resource allocation across the portfolio, a better way to position the assets in the portfolio to maximize profits as a whole, a great way to energize and incentivize marketing and sales personnel. However, when it comes to creating an external promise to customers, the franchises that continue to look only inward will ultimately fail. Ethicon, a Johnson & Johnson company, and one of the leading makers and suppliers of products for surgeons and hospitals, learned this lesson well. The quality and reputation of Ethicon’s many brands are an acknowledged aspect of the company’s equity among customers. But healthcare cost containment is perhaps the single greatest ongoing issue facing hospitals. So despite the high esteem hospitals and surgeons have for the Ethicon brand, circumstances compel them to purchase cheaper brands from opportunistic competitors. Sales began to decline for each element in the Ethicon portfolio: sutures, needles, scalpels, structural mesh used to strengthen tissue in certain procedures and so on. Hospitals began awarding contracts for each item to the lowest bidder. But Ethicon knew their customers, and used the principles we have discussed above to right the ship. They discovered that hospitals needed something more than just supplies; they needed to simplify supply management and streamline procedures. If hospitals could do this, they would save much more money than by pinching pennies on the supplies themselves. Ethicon reorganized the company franchise offerings not by the products, but rather by the procedures that surgeons performed: The Hernia Franchise, The Breast Augmentation Franchise, The Bariatric Surgery Franchise. By bundling products and services tailored toward how their customers used them in concert with each other, Ethicon regained its dominance through a customer-centric franchise approach.
5. Recognize that it is a marathon. If ignoring principle number four is the most common error in franchise development, then my last principle here is decidedly the second most common. Don’t start a franchise if your company cannot or will not sustain the effort for a long time. Too many companies have ruined their reputations by forming a franchise while they have brands to support it, only to fold the tent once the brands lose their patents. Customers will never forget such a betrayal. And the next time that the company tries to restart the franchise, or try to start a different one, customers will mistrust your intentions, and avoid engaging with you or your brands. This behavior can be found in companies of all sizes. Large companies that focus on different revenue streams from different therapeutic categories can be distracted from one commitment as they try to foster too many others. Small companies may never amass the muscular resources needed to truly fulfill the promise that is in their hearts. They can all grow fatigued and drop out of the race by not recognizing that their customers are running a marathon, while they were in a sprint.
Franchises can have monumental benefits both internally for employees, as well as externally for customers. But franchises are a long-term venture for only those with the capital and cultural will to truly put together what it takes to thrive. Follow these five principles, and the world will follow you and never stop.