Harvard Case - Subway: Problems with Place, Product, and Price
"Subway: Problems with Place, Product, and Price" Harvard business case study is written by Fabrizio Di Muro. It deals with the challenges in the field of Marketing. The case study is 10 page(s) long and it was first published on : Dec 4, 2020
At Fern Fort University, we recommend a comprehensive revitalization strategy for Subway focusing on enhancing the customer experience, redefining its brand positioning, and driving innovation through a multi-pronged approach. This strategy will address the declining sales and customer dissatisfaction by focusing on key areas like product quality, menu innovation, digital marketing, and strategic partnerships.
2. Background
Subway, once a dominant force in the fast-food industry, has faced declining sales and customer dissatisfaction in recent years. The case study highlights key challenges:
- Product: Customers perceive Subway's offerings as unhealthy and lacking innovation compared to competitors.
- Place: The franchise model, while historically successful, has led to inconsistencies in quality and service across locations.
- Price: Subway's pricing strategy is perceived as not offering value for money, especially in comparison to other fast-food options.
The case study focuses on the challenges faced by Subway's CEO, Don Fertman, who is tasked with revitalizing the brand and regaining market share.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Brand Recognition: Subway enjoys strong brand recognition and a loyal customer base.
- Global Presence: Its extensive network of franchises offers a wide reach.
- Customization: Subway's 'build your own' concept allows for personalized orders.
- Healthy Image: Despite recent criticism, Subway still holds a healthier image than many competitors.
Weaknesses:
- Product Quality: Concerns about ingredient quality and consistency across locations.
- Menu Innovation: Lack of excitement and new offerings compared to competitors.
- Pricing Strategy: Perceived as overpriced compared to value offered.
- Franchise Model: Inconsistency in service and quality across locations.
Opportunities:
- Digital Marketing: Leverage social media and online platforms to reach new customers.
- Product Innovation: Introduce new, healthier, and more appealing menu items.
- Strategic Partnerships: Collaborate with other brands for cross-promotions and menu offerings.
- Focus on Sustainability: Adopt environmentally friendly practices and communicate them to customers.
Threats:
- Competition: Intense competition from other fast-food chains offering innovative and value-driven options.
- Changing Consumer Preferences: Shifting consumer preferences towards healthier and more sustainable options.
- Economic Factors: Fluctuations in the economy can impact consumer spending on fast food.
- Negative Publicity: Negative media coverage can damage brand image and customer perception.
Consumer Behavior Analysis:
- Health Consciousness: Consumers are increasingly health-conscious and seek healthier food options.
- Value for Money: Consumers are price-sensitive and expect value for their money.
- Convenience: Consumers value convenience and seek quick and easy meal options.
- Variety and Innovation: Consumers crave variety and new product offerings.
Competitive Analysis:
- McDonald's: Dominant player with a strong brand image, focus on value, and extensive menu offerings.
- Burger King: Known for its value-driven offerings and innovative menu items.
- Chick-fil-A: Strong focus on customer service and a limited but popular menu.
- Chipotle: Offers a healthier and more customizable menu with a focus on fresh ingredients.
Marketing Mix (4Ps):
- Product: Redefine the product offering by focusing on healthier, more appealing, and innovative options.
- Price: Develop a pricing strategy that offers value for money and aligns with consumer expectations.
- Place: Improve the customer experience across locations by focusing on cleanliness, service, and consistency.
- Promotion: Develop a comprehensive marketing strategy leveraging digital marketing, social media, and strategic partnerships.
4. Recommendations
1. Revitalize the Product Offering:
- Product Innovation: Introduce a new line of healthier and more appealing menu items, focusing on fresh ingredients and innovative flavor combinations.
- Ingredient Quality: Source higher quality ingredients and ensure consistency across locations.
- Menu Segmentation: Offer a wider range of options to cater to different customer preferences, including vegetarian, vegan, and gluten-free choices.
- Limited Time Offers (LTOs): Introduce seasonal and limited-time offerings to drive excitement and attract new customers.
2. Redefine the Brand Positioning:
- Focus on Health and Sustainability: Communicate Subway's commitment to healthier options and environmentally friendly practices.
- Emphasize Customization: Highlight Subway's unique 'build your own' concept as a key differentiator.
- Modernize Brand Image: Refresh the brand identity with a more modern and appealing look and feel.
- Target Specific Market Segments: Develop targeted marketing campaigns to reach specific customer segments, such as health-conscious individuals, families, and millennials.
3. Enhance the Customer Experience:
- Improve Service Quality: Train employees on customer service best practices and ensure consistency across locations.
- Cleanliness and Aesthetics: Maintain a clean and inviting environment in all restaurants.
- Digital Ordering and Payment: Implement a seamless digital ordering and payment system for increased convenience.
- Loyalty Programs: Develop a loyalty program to reward repeat customers and encourage repeat business.
4. Leverage Digital Marketing:
- Social Media Marketing: Develop engaging social media content to connect with customers and build brand awareness.
- Influencer Marketing: Partner with relevant influencers to promote new products and reach target audiences.
- Search Engine Optimization (SEO): Optimize website and content for search engines to drive online traffic.
- Targeted Advertising: Utilize digital advertising platforms to reach specific customer segments.
5. Strategic Partnerships:
- Co-Branding: Partner with other brands to offer exclusive menu items and cross-promote products.
- Community Engagement: Support local initiatives and events to build positive brand associations.
- Delivery Partnerships: Partner with delivery platforms to offer convenient delivery options.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Subway's current situation, considering its strengths, weaknesses, opportunities, and threats. They are also aligned with the evolving consumer preferences for healthier, more convenient, and value-driven food options.
The recommendations address the key challenges identified in the case study, including product quality, menu innovation, pricing strategy, and customer experience. They are designed to enhance Subway's brand image, increase customer satisfaction, and drive sales growth.
Assumptions:
- Consumers are willing to pay a premium for healthier and more innovative food options.
- Subway can successfully implement its revitalization strategy and improve its product quality and customer experience.
- The digital marketing strategies will be effective in reaching target audiences and driving sales.
- Strategic partnerships will be mutually beneficial and contribute to Subway's growth.
6. Conclusion
Subway faces significant challenges in the competitive fast-food industry. However, by implementing a comprehensive revitalization strategy that focuses on product innovation, brand repositioning, customer experience enhancement, and digital marketing, Subway can regain its market share and achieve long-term success. The key to success lies in understanding and responding to the evolving needs and preferences of consumers.
7. Discussion
Alternatives:
- Cost-cutting measures: While cost-cutting can improve profitability in the short term, it may negatively impact product quality and customer experience.
- Focus solely on digital marketing: While digital marketing is crucial, it should be combined with other strategies to achieve holistic brand revitalization.
- Merging with another company: This option could be considered, but it would require careful consideration of the potential benefits and risks.
Risks:
- Implementation challenges: Successfully implementing the revitalization strategy requires significant investment and organizational change.
- Competition: The fast-food industry is highly competitive, and Subway needs to be vigilant in responding to competitor actions.
- Consumer acceptance: There is no guarantee that consumers will embrace the new product offerings and brand positioning.
Key Assumptions:
- The assumptions outlined in the 'Basis of Recommendations' section are crucial to the success of the revitalization strategy.
8. Next Steps
Timeline:
- Year 1: Implement product innovation, refine brand positioning, and enhance customer experience.
- Year 2: Expand digital marketing efforts, develop strategic partnerships, and monitor results.
- Year 3: Evaluate the success of the revitalization strategy and make adjustments as needed.
Key Milestones:
- Launch of new menu items: Within 6 months.
- Implementation of digital marketing strategy: Within 3 months.
- Establishment of strategic partnerships: Within 1 year.
- Regular monitoring of customer satisfaction and sales performance: Ongoing.
By following these recommendations and implementing the revitalization strategy effectively, Subway can address its challenges, regain its competitive edge, and achieve long-term success in the fast-food industry.
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Case Description
Subway had been a dominant player in the submarine sandwich category since its inception in 1965. By 2011, the company had surpassed McDonald's as the world's largest restaurant chain. However, the emergence of strong competition and a number of issues-mostly related to its products, place, and price-had caused the company to struggle since 2014. The company's franchise system was poorly designed and operated, product quality had slipped, the company had not kept up with industry and dietary trends, and the arrest of the company's key spokesperson had a negative effect on the company's profits. Revenues declined from 2014 to 2019, and 2,376 stores were closed between 2016 and 2018. Subway needed to turn itself around. How could Subway's chief executive officer resolve the company's product-, place-, and price-related issues to help reverse its fortunes?
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