What is the marketing strategy behind Subway dropping their foot longs to $5?

5 Responses to “What is the marketing strategy behind Subway dropping their foot longs to $5?”

1. Thomas E says:

   April 18, 2010 at 7:34 am

   In a word, sort of.

   Actually, that’s two words, but I don’t think that Subway is necessarily trying to sink the competition as it is get people into their stores. The REAL money is not made from the subs; the REAL money is made from the chips, cookies, and drinks. Ever price a subway cookie? They charge $1.29 for three cookies that cost them about 10 cents – TOTAL – to make.

   And I actually worked in a place that sold fountain drinks. The markup there is at LEAST 100%.
   References :
2. anonimitie says:

   April 18, 2010 at 8:07 am

   It’s competing on price and is the worst possible strategy. They ought to continue differentiating themselves from their competition to convince people that their sandwiches are worth the premium.

   A price war results in the all competitors dropping prices, losing margin, and eventually noone making a profit.
   References :
3. spacekowboy1965 says:

   April 18, 2010 at 8:47 am

   Subway suxs $5 dollars is too much for a freaking sandwiche you can go to Burger King , Wendys , Mcdonalds or Whataburger and get whole meal for $5
   References :
4. Zxypher says:

   April 18, 2010 at 9:13 am

   Anonimitie has the right idea, but the idea of dropping prices creates a smaller profit margin for competitors. They have to compete with a strategy successful company who can sacrifice a profit drop. In turn they drop their prices and take a loss in profit they may not be able to afford. Subway has already placed markups in the other products to cover such a price drop. And they make a good profit on their sandwiches. With portion control and cheap condiments, it would actually cost less for one to make this sandwich at home the way they want. Let alone the bulk buying discount they get. The price for a sandwich being made there is about $2.00. Even taking into consideration operation costs going in to make it. Think about when they have 2 for $2 6-inch specials. It now costs $4 for a foot long on that specific day. Basically, the first company to do a price drop in their category is the company who can afford adjusting profit margins downward toward the base line they have predetermined highly successful. In turn the profit margin will raise again because of sales going up. They will, in the end, be making more money. More sales will cover the cost of operations during the dead hours, where maybe 5 sandwiches an hour are sold.
   References :
5. endorphin_boy415 says:

   April 18, 2010 at 9:20 am

   There are several reasons why a company will temporarily lower its prices, and there are arguments pro and co as to whether or not such a strategy is effective. Here are a couple of reasons:

   1. A marketer may be trying to reach customers who have never tried their product before. They are hoping that once they try the product or service they’ll be back. Loyal customers will appreciate the temporary savings – they aren’t going anywhere.

   2. The marketer may be just reasserting its clout in the market. Not every competitor will be able to follow suit with a major price break, and they may temporarily lose customers. If the price break is maintained long enough, however, it could be damaging to smaller competitors who cannot compete on the basis of price.

   3. Sometimes, a marketer will find itself adopting strategies in response to the demand of its franchisees. I can’t say that this is the case with Subway, but in some cases, if the franchisees feel as though the marketing isn’t working, they may insist on drastic measures. They may even be willing to forfeit full profit margins in return for increased store traffic. That’s when you might see something like the $5 Foot Long Offer go into effect.

   4. Also, many advertisers will promote an blockbuster offer such as this hoping to draw customers into the store. Once there, however, they hope the customer may actually purchase something else. Auto dealers do this all the time: promote a less expensive vehicle with the hope that its low price attracts potential customers, then leave it to their sales people to "up sell" the customer to a better, more expensive model.

   These ploys are usually only temporary, and if they don’t achieve their goal of earning new loyal customers, they can prove to be costly in the long term.

   As the other person noted, however, even in light of this sales promotion, Subway is still making a huge profit off the ancillary items: soft drinks, chips, cookies, etc. They aren’t going broke, I assure you.
   References :