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Subway must travel new route to subsist successfully

Subway must travel new route to subsist successfully

Theresa Howard

Subway, sandwiched between a rock and a hard place, is juggling the challenge of evolving a national brand identity and the individual marketing needs of more than 13,000 franchisees as it re-evaluates media-dollar distribution during the chaos of an agency review.

Some 150 agencies are expected to vie for the account with its estimated $45 million in local and $45 million in national spending that since 1991 has been the responsibility of Hal Riney/Heartland, Chicago. But since the Midwest branch of the West Coast advertising shop took over Subway, which is franchised by New Milford, Conn.-based Doctor’s Associates Inc., the restaurant chain has doubled in size. The company now needs to evolve its marketing to better reflect a stronger, more defined, cohesive national brand.

The brand is no longer a basic ham-and-cheese sandwich, if you will. It now is a complex, towering Italian combo complete with the spice of a little controversy over ad dollars and creative direction.

But Subway’s marketing and advertising challenges are even greater when one mixes in the dynamics of a vast franchise community sensitive to forking over 2.5 percent of sales to an advertising fund, a hypercompetitive landscape that has seen No. 2 Blimpie International expand to 1,500 units and continued expansion. Add to all of that a layered decision-making process that relies on the input of the 12-member Board of Subway Franchisees and a 36-member staff that administers advertising and a unique but multitiered positioning strategy that targets everyone from infants to seniors, and you’ve got yourself a mega-meatball of an account.

The chain embarked on a national advertising program about two years ago with award-winning commercials that showed franchisees talking about products, quality and value as part of the whole Subway experience. The commercials were offbeat and quirky but also fun and effective. “We tried to evolve the campaign, and there was some difference of opinion as to whether or not it was evolving effectively,” said Cindy Eadie, executive director, Subway Franchisee Advertising Fund Trust. “We’ve been experimenting with some different approaches, but we want to make sure what we are doing is the best possible, which is why we are having the review.”

“There is an issue about our direction, where we are going and how the advertising funds should be spent,” said Dick Pilchen, vice president, marketing. “We are still going through growing pains and want to make sure we are using the best possible advertising. We have not shopped around for five years and want to make sure we are giving our franchisees the most bang for their bucks.”

The company finds itself in the unenviable position of competing heavily in the quick-service arena against the heavy-hitting burger and burrito giants but with barely an ounce of the dollar power. While Subway rates as the second-largest restaurant chain in the world, running behind McDonald’s by a few thousand stores, according to NRN’s Top 100 report, its advertising budget is less than one-sixth of that of the burger giant. In 1995 Subway’s advertising budget amounted to $85.4 million, compared with an estimated $489.5 million for McDonald’s, according to research by Competitive Media Reporting, a New York-based research firm that tracks ad spending.

“We have evolved as a company so much over the past few years,” Eadie said. “When we first started working with Hal Riney, we were not even national; we were all local. We are a very different company, and our Board of Directors needs to act with due diligence to ensure we are using ad dollars in the most effective and efficient way possible.”

The company’s latest advertising, which broke last week, centers on “romancing the product,” Pilchen said. “We have to reinforce the good-old sandwich that made Subway famous,” he added, referring to the company’s Classic Italian BMT. Earlier this year the chain began to test, and continues to explore, a value position.

“Back in January we decided to play in the value arena,” Pilchen noted. “But we don’t know yet what our price of admission should be. We dabbled in several price points, and we are still trying to find the threshold, but we have to worry about our operators’ profitability.”

While Subway’s advertising itself is taking a different but possibly temporary direction with product focus, marketing remains steadfastly grassroots. A unique mix of programs extends throughout a vast realm that includes the Internet and a cutting-edge web site, which features “The Amazing Virtual Subway Game,” a sandwich-building game complete with obligatory burps that vary based on the combination of ingredients a player chooses. The chain also maintains a healthy resume of movie tie-ins, most recently with Paramount’s “The Phantom;” a rotating kids program that typically provides an educational premium; and a community give-back program, which most recently sponsored a fund-raising event for the debut of the National Basketball Players Association. However, one of Subway’s most unique promotions kicked off July 4 with its participation in the Mountain Dew Extreme Network promotion, in which millions of kids will receive weekly pages with an 800 number that provides participants with information on special offers and giveaways from Subway, Taco Bell, Pizza Hut and a slew of other participating retail concepts.

There is a lot of meat to the Subway account. Whether it lands back in the hands of incumbent agency Hal Riney or under new direction, the next agency of record faces big challenges. Nonetheless, Subway ought to remain focused on innovative marketing programs, whether local or national, that will help tout its status as the industry’s second-largest brand.

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COPYRIGHT 2008 Gale, Cengage Learning