In today’s complex world, it’s always refreshing to write about simple brands and this description is meant in a very flattering way. Subway is a beautifully simple and successful brand that is confronting a very un-simple problem.
But first, some of the reasons why this sandwich store has become the world’s largest retail chain (by number of outlets):
– it delivers excellent value for money
– it is ubiquitous and therefore accessible to almost everybody
– it offers fast service
– it benefits from a positive healthy living image
– it has huge diversity of appeal
– it encourages personalization in product
– it is consistent wherever you find one
And as if this wasn’t enough, the really nice thing about Subway is that it’s a sandwich shop. Plain and simple. It has no airs and graces, it has no attitude, no controversies, it’s not showy or sophisticated.
From a business perspective, it’s profitable, it’s growing fast through its franchise model and is actively expanding into new areas such as breakfast.
So what’s the problem? I hear you say. Well in the summer of 2008, Subway introduced a new product called “The Five Dollar Footlong” – a 12” sub that sells for $5. Within 12 months of launching nationally, the $5 Footlong has become, what we call in Sterling Brands, a “catalytic product”. By this, we mean a product that is disproportionately associated with the brand, has a transforming effect on the base business and results in a torrent of competitive responses.
But it could also change the hard-earned perceptions of the brand in ways that are not altogether positive – for example:
– the footlong is in effect a supersized sub and anything “supersized” (the footlong typically contains 560 calories) becomes a potential target for the health lobby…so there’s a corporate reputation management issue for Subway to consider in addition to the apparent inconsistency with the chains “healthy living” positioning
– the footlong has also attracted the attention of the fast food chains in a big way because of how it has helped shape and re-define value in the minds of consumers…so whereas Subway has historically been ‘tolerated’ by the the McDonald’s and Burger Kings, it would be our view that Subway is now firmly in their sights
Don’t get me wrong – I understand the trade-off here between the huge upside in sales and the unknown potential downside damage to the brand. And in recessionary times, I suspect that many of us would have made the same decision.
But the issue here centers around brand success and Subway will need to be at the top of their game if they are to maintain the current sales-success of the footlong and avoid a longer-term, damaging assault from both the health lobby and the big guns in fast food.
I wish them well because Subway is a brave company and they deserve continued success but the footlong entry does potentially hand the competition the initiative…we’ll just have to see if anybody takes up the baton.
Simon Williams
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