Kobie Marketing

Toggle Mobile Navigation

  • Read our feedRSS Feed
  • Find us onFacebook
  • Twitter
  • LinkedIn

Subway, Quiznos Battle For Customer Loyalty

The quick-serve restaurant space is as fiercely competitive as it gets, and there is no place to hide as each category seems to have two top competitors fighting it out for dominance and consumer attention.

Nationally, McDonald’s squares off against Burger King. Regionally there are many examples, but my recent trip to the Northeast highlighted the Dunkin’ Donuts vs. Tim Horton’s coffee shop battle. Starbucks is ever-present and is facing multiple competitors depending on the geography in which they appear. Panera Bread, Dunkin’ Donuts, Tim Horton’s, even McDonald’s each makes a strong case for coffee in the morning.

In the sandwich segment, the fight is between Subway and Quiznos. If there is a third important competitor, it’s difficult to identify just one. Subway is the more established and well penetrated chain with about 8X the number of locations as Quiznos. It has also reported more revenue growth over recent quarters while Quiznos has registered declines.

For the most part, Subway has been leading its media campaigns with price. They invented the $5 sub and eventually Quiznos responded. More recently, I have seen $4 subs at Subway and I have to wonder if prepared sandwiches will go the way of mobile minutes, i.e. a downward price spiral leading to nearly giving them away in exchange for long term contracts or the opportunity to sell ancillary products.

Of course, there will never be a “2 year term” obligating consumers to eat at either Subway or Quiznos, but with sandwich prices falling precipitously, maybe the game is to get folks in the door with cheap sandwich specials to sell more sodas, salads, chips and cookies.

One accepted tenet of Loyalty Marketing is that it can be an effective tie-breaker in a market offering a product or service which has become a commodity. With price competition heating up and each chain offering “toasted” subs, the introduction of the Subway Card and Quiznos Q Club is a sensible tactic.

The trouble with each restaurant loyalty program is the lack of a clear value proposition that is compelling enough to trigger program enrollment.

  1. While detailed reviews applaud Subway’s program for its integration of payment, loyalty, and CRM in one plastic device, other reviews point out the lack of a clear value proposition, calling Subway Card a “clunky loyalty program”.
  2. In a recent Battle of the Brands article published in Direct Marketing News, I noted that  Subway’s “Big L” loyalty program offered a clear, if somewhat weak value proposition, allowing customers to earn a free cookie after multiple visits. While Subway’s message is clear, they present a speed-bump to enrollment and engagement as customers must purchase a prepaid card in order to earn perks and force people to carry yet another plastic card in their wallet or on their keychain.
  3. The real issue with each program is how they communicate value through their principal customer engagement channel, the micro-sites created for each program. Visit the MySubwayCard site and the Quiznos Q Club site and you are presented with offers of discounts and coupons delivered via email, while the essence of a frequency or loyalty program remain unclear.

Reviewing these two programs, it reminds me that a disciplined approach to creating loyalty strategy will always lead to better results. Three key best practices come to mind in this case:

  1. The consumer value proposition must be clearly communicated and able to be instantly understood by customers. The first moment of truth in customer engagement is understanding how and what I can earn as a customer and the second is recognizing “what’s in it for me” in terms of available rewards.
  2. Business objectives are the starting point of any planning process and even the most ardent love-affair with technology has to be deferred until other basic strategy foundations are created. Combining payment, loyalty, and “CRM” on one card is great, but if customers don’t understand the program value, the investment in technology can be lost.
  3. Creating programs that are tender-neutral opens up many doors. In the past year, Starbucks, Dunkin’s Donuts and now Subway have centered their loyalty programs on prepaid cards. There are financial benefits to each enterprise using the prepaid card, but the device can inhibit program enrollment and engagement.

Author: Bram Hechtkopf

Bram leads the “marketing of Kobie Marketing.” He consults with current and prospective clients on new business opportunities, helping to develop customer retention and loyalty marketing strategies and solutions that drive increased retention and spend. Following in the footsteps of his father, Kobie’s founder, Bram is eager to continue Kobie’s vision of technology and data analytics as enablers of leading-edge marketing executions for world-class customer loyalty initiatives. Bram has consulted with a wide array of leading brands including AMC Entertainment, TGI Friday’s, BJ’s Restaurants, Verizon, Bank of America, RBC, Flagstar Bank, JPMC, Sagicor, Coca-Cola, Cox Enterprises, Ruby Tuesday, Hawaiian Airlines, and Royal Caribbean Cruise Lines. Prior to Kobie, Bram worked with the Human Capital Transaction Advisory Services practice for Ernst & Young, LLP, where he developed and presented analyses and recommendations on executive incentive and equity plan design and due diligence findings to senior management and the Board of Directors of Fortune 1000 clients. Prior to Ernst & Young, Bram worked with Towers Perrin in Manhattan as a consultant specializing in incentive plan design for executives and sales forces. Bram received his Bachelor of Business Administration degree with honors from the Goizueta Business School at Emory University with a concentration in Marketing and Information Technology.

Did you enjoy this post? You can read more of Bram's posts, view Bram's bio, or share this post with a friend:

Leave a Reply