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Marketing Strategy in Subway

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Contributed By: Hiba Moeen

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Executive Summary

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Subway is positioned as a fast food chain that serves fresh food to its target audience mainly comprises of young individuals focused towards healthy diet. Since, 1989, it is one of the fastest growing fast food chains in the world and takes credit of becoming a direct competitor for Pizza Hut. Its advertising slogan or most precisely put, its tagline is, Eat Fresh highlighting the actual positioning the business has maintained. Having served customers at an international level, Subway, aims at value being served rather than having a transactional relationship. Moreover, their sandwiches are served based on size mentioned on the menu and consumers can opt for a value addition through customization. Below the line promotional strategies have been used and competitions have being devised based various games such as Scrabble. Similarly, both hard sell and soft sell approaches have been used to market the product. Background Subway took its journey from a single outlet in Perth and now has a target market of young Australian consumers that is more nutrition conscious and focuses on having healthy food as opposed to burgers or fries. It happens to be the undisputed market leader in the category of sandwiches while it has a competitive edge over others in terms of having ten times more locations than any other brand. By the year, 1993, Subway had opened up 8,400 stores with most of them being in North America that made it the number two fast food chain in the United States with Pizza Hut being on number one (McDonald, 1998). Subway has expanded everywhere one can think of with outlets in hospitals, bus terminals, colleges, stores and railway stations etcetera. In order to fetch fresh ingredients for the menu, Subway has allowed its franchisees to opt

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Marketing Maniacs: Marketing Strategy in Subway

for their own suppliers while maintaining their tagline, Eat Fresh. The total franchise fee is $ 10,000 to $ 15,000 while the investment costs can go as high as $225,000 depending on the outlet and its location. Product Line According to the Australian Bureau of Statistics, Australias median age is 36.8 years with 18.4% of total population under the age of 15 years. At the same time, the youngest population has a median age of 21.4 years. Therefore, Subways segmentation and target market devised are quite appropriate according to population trends. A majority of population lives in Sydney, Perth, Brisbane and Melbourne where Subway has a higher potential to advertise and get most of ultimate consumers from. Figure 1 shows the percentages of age groups in Australia.

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Labels Business Analysis (1)

Figure 1

Kudler Foods (1) Problem Statement (1)

Source: Australian Bureau of Statistics http://www.abs.gov.au/

Blog Archive 2012 (2) 2011 (12) 2010 (18) November (2) October (1) Marketing Strategy in Subway September (1) August (2) March (1) February (2) January (9)

According to Economy Watch (2010), Australia has a growing economy despite the recent global crisis and recession almost every country became a prey to, last year alone the GDP was estimated to be $ 920 billion and a continuous economic growth has been spurred since the last 18 years which is attributed to commodity exports. Moreover, Australias growth is expected to reach its peak at 3.4% by 2012. Thus, the macroeconomic environment is conducive to business growth, according to the product line devised and more stress being laid on breakfast menu to break from the clutter, Subway is no doubt planning on strategies to avoid the product life cycle from reaching its saturation point. The idea of nutritional food and going green has become more of a trend amidst global warming. The product life cycle shows the stance of these outlets as they grew from scratch in 1987. Maturity was reached in the early 90s when it become the number two fast food chain (McDonald, 1998).

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Figure 2 In order to maintain its competitive stance with competitors such as Dunkin Doughnuts, the franchise has devised its own breakfast menu starting from Chicago (Ad Age, 2010). Though $5 a cup of coffee isnt much of a skimmed price for consumers, Subway is criticized for not bringing about a difference to the target audience. Having sandwich as opposed to a doughnut is something very rare to be seen as mentioned by Bryson (2010). Thus, a need needs to be created than facilitated. Subway is much renowned for its Submarine Sandwiches and had introduced its seasoned bread in 2001 (Wilkinson, 1999). Later in 2003, the product was co branded with Coca Cola as being the beverage to be served alongside their core products as compared to an option of either Pepsi or Coke previously on the menu. Other than this, cookies and muffins can also be bought that are available in a variety of flavors. The outlets mould themselves according to the country they operate in order to facilitate a cultural connect, for example, franchise outlets serves halal food in all Muslim countries. Recently, coffee brands are being opted for as a co branding option to serve as breakfast deal. On the other hand, Subway is recently also being criticized for its bread high on fructose syrup content. The socio economic environment in Australia is quite welcoming for the positioning strategy of Subway in terms of going green and with the younger generation opting for health related food while the immigrant population simply adds up to the target market. Similarly, Australia is well located near growing markets and enjoys a growing percentage of GDP which hasnt gone in the negative in spite of the global recession, in 2008 alone the rate was 3.3% with a burgeoning stance (Wilkinson, 1999). However, the percentage of labour force growth rate has declined due to aging population is further expected to go down at the rate of 0.5 % by 2015, similarly population growth rate is also expected to go steep (1.0%) while still being above the population growth rate (Economy Watch, 2010). Hence, with less labor available Subway should focus on how to attract quality employees with more outlets being opened up. Farming and mining contributed to Australias 80% exports about two decades ago, however, now the image is changing slowly and gradually as cultural shifts in attitudes are being witnessed and the country is more open to imports of services and goods. Australia until a few decades ago had isolated the its economy from international markets to let an equal distribution of wealth prevail, however, with this shift observed Subway could be said to be in a win win situation with taking advantage of the manufacturing end in this country. Advertising Campaign Marketers choose colors for their brands very carefully while devising brand logos as colors speak out for the brand. For instance, the dark green color represents health and environment. Al Ries and Laura Ries in their book, The 22 Immutable Laws of Branding (2000) emphasize much upon the color chosen for brands while explaining it through their Law of Color. There

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are five primary colors to opt from that make the logo appear strong, these are; green, yellow, blue red and orange. Green like the color blue is peaceful and calm and shows freshness and hence the dark green color in the logo denotes environment and health (Williams, 2007). Similarly, yellow being also in use is neutral color while being the brightest also as its between the ranges of wavelength that could be detected by human eyes (Ries, 2000). For this reason it also is used for cautious signs. White indicates purity. Therefore, the colors, white, dark green and yellow combine together for the logo to show purity, environment (its goes along the tagline, Eat Fresh) and attract consumers. Thus, it is the overall mood that the marketers have established ever since the brands growth. Subway targets more of the younger generation aiming at nutrition consciousness, these would include empty nest 1 and 2 (singles and newly married people) and full nest 1 and full nest 2 (family with young children and that with grownups still living with parents). With respect to the tagline and strategies in use, Subway utilizes a psychographic segmentation strategy with a clear focus on attitudes, interests and opinions (AIO) and lifestyles (Yeshin, 2005). Thus the younger generation is status and principle oriented with emphasis being laid on healthy food. At the same time behavioristic segmentation is being utilized thus making it hybrid (Curtis and Emerson, 1999). The market is divided according to the loyalty of customers and benefits it has been seeking. As suggested by Myhal (2008), a companys business relationships are based on three layers of relationship, namely, resource ties, activity links and actor bonds. Intangible factors such as knowledge and technology etcetera are the resource ties that link the buyer and supplier together. Actor bonds are those that bring about a two way communication through connection among the two parties while both form a perception of each other thus establishing a bond, in simple words, it is the exchange value that is created between the company and the end consumer through mutual benefit. Similarly, activity links are those that can be established through various ways as the relationship develops, these could be administrative and the commercial tasks based on the plan devised. These three layers together help in retaining the ultimate target market and thus generate a good rapport and deduce main proportion of profit from (Wilkinson, 1999). Subway also focuses on hard sell approach in terms of the functional benefits and attributes of the menu being offered while the soft sell approach is inclined towards the nutritional value gained and often gets to be criticized for the hefty amounts spent for ad campaigns and promotions (Ad Age, 2010). In the year 2002, the outlets low fat sandwiches were promoted showing Mark Blackwell having lost 42 kilograms after a year of Subway consumption, thereby, elaborating much upon the functional attribute. Later Subway started its in game text campaign accompanied by custom creating and text messaging to attract game lovers (Figure 3, see appendix). They could select the games they wanted to run their ads in as well as channels and find out the targeting details. Figure 4 emphasizes upon Subway Eat Fresh print campaign showing a stalk of wheat with their sandwiches sprouting out. The multi grain bread is a new addition to their product line.

Conclusion & Recommendation Australia is enriched with immigrants, especially students more towards the younger age spectrum, therefore, it would be advisable to focus on market development strategies, thereby expanding the market and targeting new segments (Kotler and Armstrong, 2005) such as Muslims through the introduction of Halal Menu. At present the Muslim population in Australia is 1% and is further expected to grow (Yusuf, 2008).With more immigrants entering into the country, catering to religions would add up to the competitive advantage resulting in a penetrated market. For instance, if product lines are to be devised for Muslim customers then a segmented price strategy would be advisable with price penetration to start off with (Broderick, 1999). This would help build a relational value and not just margins generated through a particular segment only. For strategies to develop, it is imperative that key accounts and the nature of business with each are identified by vendors (Ojasalo, 2001). It must be noted which are the accounts of strategic importance and would have the same position in the portfolio in the long run, therefore, ingredient suppliers would focus on retaining key accounts in terms of most business gained, however, it is advisable to have various suppliers in order to operate as per

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just in time as far as freshness is concerned. These steps thus include identification, analyzing, and development of operational level capabilities. Subway should focus more on its strategic brands without any attempt at value addition to the core recipe to serve as a branded energizer as it would distract the target audience. However, new product lines could be added to gain more market share with respect to immigrants and ethnicities. An attempt at diversification should not be reverted away from. Lastly, it should be able to create more awareness about its breakfast offerings to stand out from competition or to create a need for sandwiches to be served as breakfast.

References

1. Anonymous, (2009), Population by Age and Sex, Regions of Australia, 2009, Avaliableat:http://www.abs.gov.au/ausstats/abs@.nsf/Products/3235.0~2009~Main+F eatures~Australian+Capital+Territory?OpenDocument Accessed: August 4, 2010. 2. Anonymous, (2010), Australian Economy, Economy Watch, Economy, Investments and Finance Reports. Available at: http://www.economywatch.com/world_economy/australia/ Accessed: August 5, 2010. 3. Brady, N., (2004), In Search of Market Orientation: An Experiment in Key Account Management, Marketing Intelligence and Planning, Vol. 22, No. 2, pp. 4 10. 4. Broderick, A.J. (1999), Role Theory and the Management of Service Encounters, The Service Industries Journal, Vol. 19 No. 2, pp. 117-32. 5. Bryson, E., (2010), Subway Breakfast Experience Not Exactly a Wake-up Call, Advertising Age, NewYork. 6. Emerson. C. J., and Curtis. M. G., (1999), Buyer-Seller Customer 7. Satisfaction: The Influence of The Environment and Customer Service, Journal of Business and Industrial Marketing, Vol. 14 No. 5, MCB University Press, pp. 12 20. 8. Kotler, P. and Armstrong, G., (2005), Principles of Marketing, Prentice Hall of India, New Dehli. pp. 333 350. 9. Ries, A. and Ries, L., (2000), The 22 Immutable Laws of Branding, Harper Collins Publishers, London. pp. 135 140. 10. Myhal (2008), Retaining Customers through Relationship Quality: A Services Business Marketing Case, Journal of Services Marketing, Vol. 6, No. 22, pp. 18 25. 11. Ojasalo. J., (2001), Key Account Management at Company and Individual Levels in Business-to-Business Relationships, Journal of Business and Industrial Marketing, Vol. 16 No. 3 2001, pp. 10 18. 12. Wilkinson, C.C., (1999), Multicultural Marketing in Australia: Synergy in Diversity, Journal of International Marketing, JSTOR, Vol. 7, No. 3, pp. 10 20. 13. Williams, J., (2007), Yours Brands True Colors, Entrepreneur. Available at: http://www.entrepreneur.com/marketing/branding/imageandbrandingcolumnistjohnwilli ams/article175428.html Accessed: August 4, 2010 14. Yeshin. T., (2005), Advertising, Cengage Learning EMEA, pp. 112 140. 15. Yusuf, F., (2008), Demography of Muslims in Australia, Journal of biosocial science, Cambridge University Press, Vol. 22, No. 1, pp. 6 15. Posted by Marketing Maniacs at 3:54 AM
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