There have been a number of recent articles in the trade press regarding strategies that have been used effectively by companies to increase their sales during a recession. For example, this recent article in the New York Times about Firehouse Subs is particularly interesting.
It goes without saying that Firehouse Subs is in a competitive space, specializing in submarine-style sandwiches. The recession hit the company particularly hard; it was losing money and market share (you think Subway's $5 footlong had anything to do with that?) and it needed to find a way to boost its sales. The company's first idea was to give back — that's right, give back — part of the money its franchisees paid to Firehouse Subs for local and national advertising. The thought was that franchisees would be able to use that money to advertise more effectively than the company could. This is similar to the self-regulated local advertising requirement many franchisors already include in their contracts — with the key difference being that the Firehouse Subs agreements did not build that requirement in from the start.
Unfortunately, that didn't work. Part of the problem seems to have stemmed from Firehouse Sub's decision not to enforce or track the spending, and part from the lack of efficiency that results from having each individual franchisee spend their advertising dollars separately (as opposed to the franchisor spending from a central pool of dollars paid in by all franchisees). So the company rethought its strategy and decided instead to ask the franchisees to increase their advertising contributions, from three percent to five percent, which would again be collected and spent by the franchisor. The company gave its franchisees the option to participate, with about two thirds of the system agreeing to pay the higher fee. The company used the money to work with an advertising agency that came up with a creative campaign highlighting the system's food quality and portion sizes.
The bold strategy worked. Firehouse Subs reports (in a follow up article) that, within weeks of the campaign's launch, sales in the markets that used the new ads jumped from a negative six percent (as compared to the previous year) to a positive eleven percent – a stunning turnaround within a relatively short period of time.
The Firehouse Subs story is a good example of how companies can, in fact, increase sales — even in tough financial times. Inspiring reading, to be sure.