Essay on Subway Sandwich Shops Situation Analysis
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Subway Sandwich Shops Situation Analysis
Subway Sandwich, as presented in the Case Study presented in the Marketing Management MGT 551 class, is an undisputed market leader in a segment that is “firmly established as a nationwide food item for which there is plenty of room in all areas” (University of Phoenix, 2008). However, with a growing competition, changing consumer trends and increased product specialization, Subway’s real strategic marketing challenge is to be able to develop and maintain a differential advantage while sustaining sales growths and profitability.
Subway Sandwich effectively competes with other fast-food restaurants by including and promoting healthier meals into its menu, as demonstrated by singling out its…show more content…
With its aggressive global growth strategy, Subway was able to reach in 2006 $11.3 Billions in revenues from its franchises around the World. Subway’s marketing strategy remains the promotion of health through fresh ingredients, while still targeting young adults (16-39 years old) as its main consumers (Subway, 2008).
The profile for Subway’s present and potential consumers consists in the following factors:
Subway’s international expansion reached 28,000 outlets in 86 countries in 2007. Their strategy consists in “low start-up costs, ease of operations and healthier menus” (Anderson, 2007), which makes it attractive to franchisees around the World to adopt the concept. Subway primarily targets booming sandwich markets such as United Kingdoms, Germany and other Western Countries with increasing obesity problems.
Subway exercises an aggressive growth strategy by expanding globally, but also nationally in non-traditional locations such as college campuses, hospitals, gas stations, military bases, for example. Geographical saturation is believed to play a great part in Subway’s marketing plan to make customers perceive them as number one fast food chain (Chamis, 2001). Although saturation affects other regional Subway franchises, it boosts the sales and revenues of the entire chain, which is detrimental
An American restaurant franchise, Subway restaurant is primarily concerned with the production and sale of sandwiches, salads, cookies and pizzas (Subway website). Subway was established in 1965 by theDoctor's Associates, Inc. (DAI) (Subway Guide, 2011). Subways' main outlets are located in Milford, Connecticut although its operations are distributed across the globe. Major locations include Europe, Australia, New Zealand, Latin America and Ireland (Subway website). Subway in Australia began as a single shop in Perth where young people were mostly targeted. Subway has been singled out as the only fast-food restaurant chain that offers healthy food due to the diligent care they put on ensuring that their foods do not cause health problems such as obesity and heart diseases (Subway website). While the company has generally been performing well, competition in the industry has increased greatly which highly threatens the company's continuity. As noted by Harper, Mullins and Orville (2006), there is dire need for the company to come up with more innovative strategies in order to reduce chances of being overtaken by competitors. This paper presents the various marketing strategies for use by the company in staying ahead of competition.
B. Marketing objectives
There are various marketing objectives that this plan will seek to accomplish as follows:
1. To ensure that Subway becomes the most preferred restaurant in Australia, characterized by a market share of more than a third.
2. To select the target market which the company will aim at satisfying in order to become profitable.
3. To come up with effective market positioning strategies to enable Subway restaurant effectively compete in the market.
4. To determine the best product mix strategies for the restaurant chain (Subway) to use in achieving maximum returns.
5. To establish price strategies to be used by Subway to gain competitive advantage
6. To determine how the supply chain will be integrated in order to reap maximum benefits for Subway in Australia
C. Marketing Strategies
Target Markets and Positioning
How do customers and organizations go about buying, using and disposing of our products?
The purchasing decision is a process that involves a significant level of activities by the consumer, aimed at getting full information about a product and its substitutes (Lamb, Hair & McDaniel, 2008). Before customers and organizations go about buying our products therefore, they are likely to consider a number of factors that may affect their decision to purchase such as the price, quality, availability of the product, price of competing products, customer service provided and availability of discounts among other factors (Kotler, 2003).
The buying process by customers and organizations can be illustrated using the buying proforma. Lyndon (2008) designed the buying proforma to assist marketers in developing a thorough understanding of customers during the process of developing a market plan. The buying proforma for Subway Restaurant can be presented as follows:
The above proforma indicates that the restaurant must be able to meet the customers' needs in order for them to make a decision to buy from the restaurant. Further, it is notable that there are many internal and external factors that influence the buying decision of customers making purchases at Subway Restaurant.
The customers go about using our products for the desired purpose but only if these products meet their needs. Customer satisfaction is therefore a major priority for the restaurant as this determines its ability to enhance the use of the products (Keegan & Green, 2011). Customers are likely to dispose or stop using our products if they do not meet the required standards according to them (Keegan & Green, 2011). In a similar manner, this is defined by a number of external and internal influences as well as the availability of better substitutes which is why Subway must be keen on ensuring that the products provided to customers are of high quality and provide maximum satisfaction.
2. What is the best way to segment our markets (consumer, business, or both)?
In order to effectively meet the needs of the consumers, it is highly imperative to segment the market so as to establish the different needs that customers have. Effective segmentation of the market ensures that the company cansatisfy its customers better through identifying the needs for each group (Kurtz, MacKenzie & Snow, 2009). According to Dibb and Lyndon (1993), it is imperative to effectively choose the market segment to target, understand what they value and then develop products to cater for their needs. The best way for Subway Australia to segment its market is both by consumer and business segmentation. It is notable that Subway makes a significant number of sales to both markets hence the reason why it should strive to satisfy the needs of each market.
Which segments should we select to target?
Effective segmentation of the market ensures that the company cansatisfy its customers better through identifying the needs for each group (Cohen & Mazzeo, 2004). According to Dibb and Lyndon (1993), it is imperative to effectively choose the market segment to target, understand what they value and then develop products to cater for their needs. The sandwich market mostly tends to attract individuals with tight schedules who wish to grab a snack on their way or and social individuals who like to meet after work or during their leisure time to enjoy a good moment with their friends. Sandwich is also a great office snack which individuals may take during tea break or any other time of their choice. In consideration of the above, Subway Australia needs to target the middle-aged working population, college and university students as well as the older generation. In the business segmentation, Subway should target companies which consist of a significant number of employees working within the office.
How will we position our product for our market(s)?
Market positioning plays a significant role in enhancing the perceived image of a product (Dibb & Lyndon, 1993). This is because the consumers' view of the company's product and its position in the market as opposed to competitors' is highly critical for business success. Subway Australia has to position its product in such a way that it becomes the most popular restaurant in the country. This will not only be enhanced through ensuring that restaurants are located in strategic places but also through ensuring that the product meets the customers' needs and seeks to surpass competitors through providing unique products and providing superior quality (Holcombe, 2009). Positioning the business will also entail conducting constant research in order to determine customers' changing needs and preferences
2. Product Strategies
What is our core product? Actual product? Augmented product
Delicious Sandwiches and salads
Efficient customer service and discount offers
What product line/product mix strategies should we use?
The product mix approaches taken by a business to a large extent determines its probability of success (Lamb, Hair & McDaniel, 2008). Subway must therefore be very keen in ensuring that these strategies are set effectively and used to enhance the success of the restaurant. The product mix will consist of effective branding, labeling and packaging in order to ensure that Subway's products can be easily identified from other products (Upshaw, 1995). The use of quality as a product mix strategy will also be emphasized because quality actually determines the probability of customers purchasing from the restaurant.
How should we package and brand our product?
Product packaging and branding play the role of identifying the product as well as attracting customers' attention. Subway will ensure that its products are packaged in such a way that they are attractive to the eye and that they can leave a lasting impression on the consumers. This insinuates that the sight of a package from Subway will immediately trigger the restaurant's image in the customers' mind thus creating a lasting impression on the consumers (Upshaw, 1995). This is the essence of creating a brand because customers tend to associate the brand with particular qualities that may prove effective in enhancing customer loyalty.
The product should be packaged in an attractive package that has the brand name Subway and a slogan illustrating the commitment of the restaurant towards delivering quality products. It should also have the contact details of the restaurant and inform the customers of the delivery services offered by the restaurant. Branding is not all about having a brand name because it also encompasses the provision of the services that customers want; provision of high quality products; and efficient customer service. These ensure that customers can identify with the brand and thus create followership for the restaurant's products. Subway must therefore seek to enhance effective customer care while providing high quality products for the customers.
How can attention to service quality enhance our success?
Service quality especially in a food-related business is of great relevance in enhancing business success. According to Kotler (2003), customer satisfaction is imperative and every business must aim at meeting their customers' needs effectively. This is because customers are not only interested in obtaining the products but their purchasing decisions are highly influenced by the kind of service that they obtain (Hollensen, 2011). According to Doole and Lowe (2008), the buying process is a complicated process in which the consumer considers a significant number of factors and failure to get satisfaction from either of the product's features could lead the customer to purchase from a competitor. Increased attention at Subway will definitely improve the chances of success through attracting customers to the restaurant. As noted by Hollensen (2011), customers are more likely to seek products and services from a business where they received pleasant customer service as opposed to where the customer service was poor.
Employees at the restaurants should be required to treat the customers with utmost respect by greeting and welcoming them to the restaurant before asking them what they would like to have. The employees must also ensure that the service is as fast as possible and that customers are not kept waiting for more than ten minutes before they are served. The restaurant management must also ensure that every item in the menu is available in order to avoid situations in which customers are required to keep changing what they will eat because their choice is not available. In addition, the restaurants must be kept clean at all times so that the atmosphere appears pleasant for the customers to relax from. This insinuates that the tables should be cleared as soon as customers are through with them in order to allow other customers to occupy a clean environment. Employees working at the restaurant need to keep smiling to customers whenever they are serving them as this shows that they are happy to serve them. Using the above tactics, the service quality at Subway is expected to improve significantly and thus enhance the popularity of the restaurants.
3. Pricing Strategies
What price should we charge for our product? What pricing tactics should we use?
The price to be charged for Subway products will mostly be dictated by the cost of production as well as comparison to other restaurants. The demand for the products will also dictate the pricing strategies to be used at Subway. As noted by Keegan and Green (2011), demand dictates price and a higher demand also attracts a higher price. Caution should however be taken to avoid circumstances where the price is too high for customers to afford thus driving down demand.
One of the most effective pricing strategies that the restaurant could use is the use of single-pricing strategy. This involves the use of standard price; thus retaining a form of single-price identity where customers pay one price for a certain line of products (Doole & Lowe, 2008). An example would be to price all sandwiches at a single price such that customers are assured of one price whenever they come into a Subway restaurant. Customers would be required to pay a single price for each product picked from a particular selection.
The single-price strategy has been considered effective because it gives customers the notion that they will save when they purchase all products at one price, yet some products may ordinarily be more expensive than the set price (Books LLC, 2010; Doole & Lowe, 2008). This has worked well in single-price outlets such as dollar shops and pound shops where every item goes for a single price such as Poundland, UK (Books LLC, 2010). This can also be justified by the success of the $5 footlongs offered by Subway and which have been highly successful due to the constant $5 price which customers were assured of paying (Subway website).
The second price strategy that is expected to promote sales at the company is the use of discounts and offers. It is notable that the price of a product significantly impacts on the customers' purchasing decision and that the customers are more likely to be attracted by discounted prices (Keegan & Green, 2011). This is because each consumer wishes to save and thus spare the extra cash to buy something else. Subway will therefore seek to outdo competitors through providing lower prices for their products. Lower prices work by attracting more customers in such a way that even when less profit is expected per unit thus enhancing overall productivity since more quantity is purchased. This should however be done cautiously to avoid making avoidable losses. This will involve giving promotional vouchers to regular customers such that they can come with their friends and enjoy Subway products. Vouchers should be given to regular customers, offering them discounts the next time they visit the restaurant. Discounted prices may also be offered for customers who make their orders over the internet, thus attracting this group of customers.
4. Promotional Strategies
How do we develop a consistent message about our product? How do we best generate buzz?
Developing a consistent message about the product begins with ensuring consistency in quality of the company's product in the first place. This ensures that there is a single identity of the product and that the customers will always associate the restaurant with that quality. Generating a buzz for the company's product will involve effective strategic marketing which may involve giving free samples during direct marketing exercises in order for customers to know how our products taste like. Given the delicious products that Subway sells, a sales promotion in which the customers are given the products to taste is basically expected to create a buzz over the product and consequently create a stream of consumers coming to the restaurant for more. If the quality, quantity and price of our products are maintained, it is possible for Subway to maintain a consistent message that customers can identify with.
What approaches to advertising, public relations, and sales promotion should we use?
It is highly important that the approaches used in advertising and sales are highly appealing to the customers (Kotler, 2003). This is because the kind of image created in the customers' minds following our advertisements is expected to have a significant impact on their buying decisions. The same applies to how public relations and sales promotions are conducted.
The main approaches apart from the usual word of mouth advertising, Subway will utilize media advertising which will include newspaper, radio and television advertisement. Highly appealing advertisements will be sent out to the various media; with a description of the products, their quality and where they can be accessed. It will be important to mention the health benefits that Subway sandwiches and other products are expected to provide the customer. Such advertising is expected to have a significant impact because many people are likely to watch TV, listen to radio or read the newspapers (Smith, 2008). The use of advertising leaflets is also a good approach to advertise Subway across Australia. The restaurant can hire sales representatives to distribute leaflets with relevant information on the restaurant's products in colleges and companies. This may be accompanied by promotional offers and discounts in order to attract people to the restaurant. The customers for example may be promised a discount for the restaurant's products if they show up with the leaflet given to them. The other option is the use of billboards and other forms of mobile advertising such as moving trucks with advertisements on the restaurant. Huge billboards placed on the side of the roads are likely to attract a significant level of attention leading to increased popularity of the restaurant.
The internet has opened great opportunities for businesses to market their products because of the increasing use of internet around the world. In Australia, there were 9.1 million active internet subscribers in 2009. Among people over the age of 16; 90% were sending and receiving mail, 41% could access audio and video content; 35 percent used instant messaging; 22 percent were active participants in interactive chatrooms while 21% could access radio through the internet. Subway should ensure optimal use of their website to advertise the company's products and also ensure that various internet websites provide links to the website thus increasing the flow of customers into the restaurant's site. Social media marketing in particular should be given a high level of consideration due to the increasing popularity of social networks among the youth and middle aged individuals who are main customers at Subway.
The relevance of social media marketing in contemporary organizations is indubitable and it has been predicted that the internet and social networking could be the future of business. In the recent past, there has been a significant growth in the use of social media in business interaction; a factor which has mostly been attributed to popularity of the internet and increasing use of computers and mobile phones. Social media has definitely changed the face of business and as noted by Kaplan and Haenlein (2010), it is the way to go for companies that desire cheap and effective marketing techniques that double up as customer service and brand awareness platforms. Social networks such as Facebook, Twitter and YouTube would be highly effective in advertising the restaurant.
It is highly imperative for the restaurant to maintain a positive public relations image. This is because failure to do so would compromise the customers' view on the organization thus leading to a distorted image and consequent reduction in the number of customers (Johnson, Scholes & Whittington, 2008). In order to enhance effective public relations, the restaurant will ensure that there is constant communication with customers in order to ensure that their needs are being effectively met. Any complaints against the restaurant will be treated with utmost urgency and all emerging issues should be addressed in order to prevent any legal suits or cases of defamation (Johnson, Scholes & Whittington, 2008).
Further, the company will work with the community in order to ensure that there are good relations and that the restaurant's activities do not pose any harm to the community. Examples include environmental conservation efforts and community social responsibility (CSR). According to Upshaw (1995), companies that engage in CSR are likely to attract a large number of customers as opposed to those that do not. This is because such companies appear to be concerned about the welfare of their communities and customers and are thus likely to attract more support from customers which gives them a competitive edge.
Sales promotions will be highly important in enhancing the customer base for Subway restaurant. This is because they entice customers into buying a company's products through making offers and price discounts which are expected to appeal to them (Smith, 2008). Once the customers have responded to the sales promotion through purchasing the products, they are more likely to purchase the products in future because they are now familiar with them. Subway will go about conducting sales promotions in four ways. These include giving discount vouchers, free gifts, price discounts and loyalty rewards. The discount vouchers and loyalty rewards will be given to the regular customers at the restaurants such that they can enjoy lower prices during their next visit to the restaurant or get free meals at particular times in the year. The restaurants for example can offer free meals for their customers on their birthday. This is a sales promotion tool that is likely to make the customers feel appreciated and thus encourage customer loyalty.
Such customers are also expected to share such information with their friends such that they will add to the customer base significantly. The next approach to sales promotion will be through the use of free gifts. According to Smith (2008), customers are highly fond of free gifts because they often present them with an opportunity to test a product as well as have the benefit of a product without actually paying for it. Subway could employ salespersons to give out free samples from the restaurant for customers to sample. This could be conducted on busy streets, outside grocery stores and supermarkets, school settings and particular companies with permission from the administration. Free samples would give the customers an opportunity for customers to taste the restaurant's products and thus attract them to buy more from the restaurant whenever the need arises. This way, the number of customers is expected to rise. The other means is to use price discounts which offer customers the same product for a relatively lower price (Hollensen, 2011). An incentive will be placed on this approach so as to limit the number of beneficiaries and thus maintain profitability. Accordingly, the customers who order from the internet are the only ones who are expected to benefit from the price discounts. This is meant to increase the number of people making orders from the internet in order to maximize capacity at the restaurants.
What role should a sales force play in the marketing communications plan?
The sales people play a very vital role in the marketing communications plan because they are the people on the ground and are actually responsible for the implementation of the plan. Sales people play the following roles:
Implementing the marketing communications plan
Sales persons act as vessels in the marketing communications plan and are often used in the process of enhancing the company's product awareness (Smith, 2008). Basically, it is the sales persons who will go around distributing brochures and company advertisement material in locations such as trade shows.
Identifying customer needs
During the marketing communication plan exercise, the salesperson plays the role of identifying customer needs through listening to their views on the company's products (Hollensen, 2011). Sales persons take the opportunity to ask customers what they would like the company to provide for them.
Obtaining customer feedback
Customer feedback is highly important to the company as it helps to establish what the company could do to improve their position in the market.
Identifying challenges in selling the product in the market
The sales force is able to identify the various features of the company products that consumers do not find appealing (Kurtz, MacKenzie and Snow, 2009). They could also establish the accessibility of the products to consumers and thus report if there are any challenges in accessing the products.
How should direct marketing be used?
Direct marketing is highly effective in advertising because it ensures that there is a direct link between the company and the consumers. This is because it involves direct interaction between the sales force and the consumers as opposed to the use of traditional formal advertising channels such as TV, newspaper and radio (Kurtz, MacKenzie & Snow, 2009). Subway needs to use direct marketing through the use of fliers, street advertising, door to door advertising, couponing, email marketing and telemarketing. These are approaches that help the sales team to interact directly with the consumers such that they are in a position to seek clarification and ask questions (Lamb, Hair & McDaniel, 2008). The sales team should distribute fliers in companies and colleges during breaks when students and employees are out relaxing. Information contained in the flier should be as exhaustive as possible; indicating the type of product, price, discounts and location of the restaurant. Fliers can also be distributed during door to door advertising exercises. The use of email and telemarketing offers a great opportunity for direct marketing which can result in increased customer base. This would mostly involve collecting customer information (emails and phone numbers) which can then be used to post advertisements to potential customers and inform existing customers of new discounts.
5. Supply Chain Strategies
How do we get our product to consumers in the best and most efficient manner?
The most effective manner in which we can deliver our products to consumers is through direct sales at the restaurant. This however limits customers who are willing to purchase our products but who are not in a position to reach the restaurants. One of the most effective ways in which we can deliver the products is through door to door delivery. This would mostly work well in organizational settings where company employees are likely to order bulk supplies. The prospective customer institutions can be asked to provide their order to the restaurants which can then be delivered to the offices using the restaurant vans. Domestic orders can also be placed and delivery made through less consuming means of transport such as motorbikes. Customers may either place their orders through telephone or through the internet. There should be a set time by which all orders should have reached the restaurants in order to effectively arrange for deliveries. The other method that the company can use to reach customers effectively is through the use of retail outlets which are near the consumers. Subway could have customized refrigerators where they can stock their products for consumers to purchase. This would not only reach customers who are not in a position to reach the restaurant but also enhance sales during customer shopping sprees. Customers in such outlets are actually likely to buy in bulk for home use thus increasing sales.
What types of retailers, if any, should we work with to sell our product?
As identified above, the use of retailers would aid the business in reaching out customers who are unable to reach the restaurants. The best types of retailers that the restaurant should work with include supermarkets, institutional shops such as college tuck-shops and company shops, grocery stores, petrol stations and street shops. These outlets provide convenient locations for customers to access Subway's products as people shop and go about their businesses. Supermarkets are expected to have a significant number of customers and so are grocery stores and therefore the business is expected to benefit significantly from selling its products there. Shops and petrol stations are also expected to generate a huge amount of sales, given the population that obtains provisions from them. The use of school and company tuck shops is particularly effective because many students and employees often seek day-time snacks to eat during their free time.
How do we integrate supply chain elements to maximize the value we offer to our customers and other stakeholders?
The ability of the company to offer great value to consumers is highly dependent on the nature of the supply chain. The restaurant chain will integrate the supply chain elements through ensuring that there is a direct communication link between the suppliers, the restaurants and consumers. This will ensure that the suppliers are able to supply products that customers require. The restaurant will seek to cut on costs through bulk purchasing such that its bargaining power will increase, allowing the chain to buy ingredients at affordable prices (Johnson, Scholes & Whittington, 2008). Accordingly, Subway will benefit from the economies of scale and thus be in a position to supply products to customers at a cheaper price while benefiting from additional profits. Increased profitability will also mean more earnings for the owners of the restaurant outlets.
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