The Discount Dilemma - Industry Blight or Competitive Right?

Having listened to DIPOD Podcast 61 which featured a panel of some leaders (but not all) of the national associations, plus some ex DSA top brass at the Fresh Insight Conference, I was intrigued by one of the questions from the floor about the increase in "5 or 10 lessons for your loose change" type offers and how the panel viewed them. Some interesting views were expressed and the finger seemed to be pointed at the large national schools as the primary source for the growth of this kind of marketing strategy. Further to this there was a discussion on a Facebook forum in which I participated, and this blog is an expansion of that discussion. 

The Big Business Need

The large schools need volume; they want as large a presence around the country for their brand as possible, and as much revenue from franchise fees as they can get. These are perfectly legitimate business principles.

However, when it comes to a marketing strategy using heavy discounting, as the campaigns are usually national and to allow for local price fluctuation they have to go for the lowest denominator, so by default they have to go cheap. The need for volume will perpetuate the deals, and it also makes it seem to many other ADIs that in order to compete that is what they too need to do. In turn, public perception is that lessons should be cheap, and the public generally quite likes that idea.The public perception of driver training was already fairly low on the professional scale - anyone can teach to drive, can't they? - and I fear the proliferation of cheap deals adds to this the idea that those who are qualified will happily do it for peanuts.

It is just my opinion (as is all of this blog), but I think that this industry is caught in a cycle which will not change unless ADIs themselves choose to change it. 



The Small Business Feed

But if ADIs hold the key, then why join a franchise which discounts heavily for the benefit of the franchisor at the cost of the franchisee? Why try to compete on the same level as the big schools if you are just cutting your own throat? As with so much in this industry, the answers and solutions lie in the hands of ADIs. However, whether through fear, herd mentality, market saturation, desperation, poor business skills or understanding, treating the role as a sideline or not actually caring about the wider implications (I haven't been able to think of a positive reason, but that betrays my personal bias on this subject) I don't believe there will be a collective move away from such marketing strategies any time soon. 

One podcast panel member made a very valid point about "value" and selling on that rather than price; as an industry we are perhaps not always the best at doing that effectively, and the national schools seem to target ADIs on "value", and pupils on price. (To be fair, one of the "big 4" promotes a saving rather than a "peanuts" hourly rate on it's website home page).


Mad Idea?

Here is an off the wall suggestion - stop making the point of an ADI franchise to provide pupils. Provide the instructor with a car, the marketing materials, the branding, the training, the support and the guidance to be equipped to find their own customers. Give them the skills to work out how much that business costs them, and what they need to charge to make the business work. Then let them decide if 10 lessons at a loss is a sensible economic strategy in this service sector. I understand that loss leaders are used in widely in other businesses - but generally those businesses have a sales turnover that can afford to take the hit. Here we have an imposed marketing strategy, where the imposer doesn't fund it at all.  

Many will say "I get my own pupils" - great, but do you also get to choose your own local marketing campaigns or opt out of the heavy discounts plastered all over your car or your franchisor's website?

But of course, if the franchisor has a hold on you because they are your primary customer provider you are much less likely to go indi, and their income stream keeps flowing nicely. So, off the wall and down the toilet with that idea.

When is a Franchise not a Franchise?



I have been trying to find a franchise model in other business sectors which actually provides customers on an on-going basis; I'm still looking. I will continue to research this in my spare time; so far what I have found odd is that I can't find any of the large driving school franchises listed as members of the British Franchise Association, and the help sections of the BFA website don't seem to describe franchise operations in a way that fits with the driving school "franchise" modus operandi. In fact, they look to my untrained eye more like an "Agent", to whom ADIs pay agency fees for customers, and it so happens the same "agent" also leases vehicles and offers CPD as a bolt on. I'm no expert though, so I'll be more than happy for someone to prove me wrong. 


Believe it or believe it not, I am not "anti-franchise". They have a legitimate place, and they serve a purpose and need for a reasonable number of ADIs across the nation. I started out on a franchise before I went independent. But I do believe that their quest for volume in a diminishing market has had a detrimental affect on the current perception of this industry. 

Who Cares?

The big schools continue to make their money, and I imagine they don't really give a hoot about how the wider industry perceives them. And why should they? They are doing something that sells, they increase brand awareness and maximising profit is their no.1 priority, as it is for any other business.

ADIs know up front about the large school discount structures, and the companies don't force any ADIs to sign up with them, do they? And independents aren't forced to follow the same strategies either. Ultimately, perhaps this industry has the perception it deserves because so many have followed a path leading to it, and that's the market we now have to operate in?

I for one, steadfastly refuse to trade in lessons for "peanuts". If around another 44,999 ADIs did the same, they would no longer be the industry talking point that they are. Somehow, I think the talking is more likely to continue than not.  



Links

British Franchise Association