Living on the Edge: Evaluating the ROI on Customer-Focused Technology

The other night I told one of my daughters, who is in college, that I was going to the IFA convention and would be gone about a week.

She asked me why even have conferences, and why business people travel anymore, because with all the technology out there people can communicate almost like it was in person (we Skyped with her for the last five months when she was in Argentina).

I explained to her that face-to-face is not the same as screen-to-screen. And even if it were, behavior changes slowly (although I didn't say the latter point with conviction as there are lots of examples of how technology has changed things rather quickly, right, Kodak?).

However, that got me thinking about her point in a franchising context. The return on investment (ROI) for travel was the underlying theme of the recently released movie, "Up in the Air." While I believe the ROI in a business-to-business setting can be more easily assessed (FRANdata has been doing it for years relative to business travel and conferences), what about at the consumer level? That's a more difficult question.

I am differentiating here between technology that is directly for the benefit of the consumer and technology that we use to run our businesses (such as POS and credit/debit equipment). Broadly stated, how can technology aimed at the consumer experience be evaluated?

I'll come back to that question shortly, but first let's look at the array of cool new technology stuff coming out. For retail stores, there are the things we've all seen already, such as electronic menu boards, flat-screen TVs broadcasting whatever channels will attract and retain customers, interactive game consoles, and WiFi. Then there's the stuff we haven't seen yet, such as customer recognition software that integrates with menu boards. For example, there is license plate recognition software for drive-through lines that customizes menu boards and provides welcoming information to repeat customers. Essentially, this is giving retail customers an experience akin to the upgraded traveler check-in lines at the airport. For those of us who travel a lot, we can easily appreciate what that might do for our willingness to frequent such establishments. There's even more interesting electronic integration ahead, based on what we've been exposed to with technology clients looking to enter the franchise space with their tech products.

So if a lot of really new and exciting technology is coming, how do you evaluate whether it is worth investing in? Multi-unit operators have a distinct advantage in evaluating new consumer experience technology because they can test it at one or more units and compare it with other units (or with previous results at the test units).

For instance, in the case of license plate recognition software integrated with menu boards, the cost of putting that in place should change the amount of vehicle traffic going past the drive-through window. (It may increase traffic or it may put a "big brother" scare into unsuspecting customers and decrease sales, at least if customers aren't made aware of it ahead of time.) With other units as the control group, the volume of drive-through window sales can be isolated against weather, day of the week, time of day, and other variables that influence sales by comparing them with other units in the vicinity. That's a big multi-unit operator advantage. From there, an ROI calculation is pretty straightforward.

In the work we have done for technology companies recently, we've found quite a range of views among both multi-unit operators and franchisors. Some franchisors want to push any edge that will increase system-wide sales; others are sensitive to the potential backlash from franchisees that might follow such a requirement. However, almost all franchisors and franchisees are united on one point: If the ROI is strong, they will support/do it.

That brings me back to the leadership point that multi-unit operators have in such debates. Like the chain stores that can test various enhancements and assess the results, multi-unit operators have a leadership opportunity for such tests. The smart franchisors should be willing participants (including financial support) for such testing. And since all multi-unit operators are, by definition, smart operators, they all have the opportunity to lead.

Lest all you multi-unit operators without retail locations think this doesn't apply to you, think again. Package delivery companies already employ hand-held computers for deliveries. What if service providers to residential customers had equipment that showed the service history and other information a customer might find of value? When you start seeing all the cool technology that's out there (and yet to come), you can start seeing ways customers may find it useful--and the franchisees who apply it might gain a distinct advantage in the battle for customer satisfaction and retention.

Darrell Johnson is president and CEO of FRANdata, an independent research company supplying information and analysis for the franchising sector since 1989. He can be reached at 703-740-4700 or djohnson@frandata.com.