Web Exclusive | December 2011 | By Daniel P. Smith

Wendy’s, Subway Slash Prices

Recent efforts by the two brands show quick serves are trying to fill a pricing void.

On December 1, Subway rattled the quick-service world when it announced its latest promotional offer: $2 six-inch subs.

As a “Customer Appreciation Month” promotion, the $2 December-only deal may be Subway’s boldest play yet in the pricing wars to compete with other chains’ value menus.

“[Subway is] clearly trying to take the focus off of what people can get for $1,” says pricing consultant Leslie Kerr, founder of Boston-based Intellaprice.

While Subway’s popular $5 footlong program already hits on value messaging, it still features items that are five times the cost of dollar-menu entreés, such as McDonald’s McDouble and Burger King’s Junior Whopper.

"For Subway, who can't get into the 99-cent battle, this is the next best thing. The $2 price point is definitely a way to get to the other end of that barbell,” Kerr says, referring to pricing strategy that has premium-priced products on one side of the menu and price-conscious offerings on the other.

Concocting the right price mix is becoming increasingly critical to attract diners in today’s economic climate.

Already in the popular $1 space with its My 99¢ Everyday Value Menu, Wendy’s introduced its Dave’s Hot ‘N Juicy premium hamburger lineup in September, a line that initially featured three burgers in the $4–$5 range.

But last month, the new W hamburger, featuring a pair of 2.25-ounce patties, two slices of cheese, a signature sauce, onions, lettuce, and crinkle-cut pickles, made its debut. At $2.99, the W fits a price niche between the premium Hot ‘N Juicy line and the 99-cent deals. The hope, a company representative says, is that customers see value in the W and step up the pricing ladder.

“When you can cover all price points, there are simply more opportunities and choices for value to the consumer,” says Wendy’s spokesman Denny Lynch.

Although Lynch acknowledges that it's too early to determine the W’s success, he says other brands need to take advantage of the new mid-tier-pricing strategy.

“When you can cover all price points, there are simply more opportunities and choices for value to the consumer.”

“We can’t all live at 99 cents, especially considering where food costs are going,” Lynch says. “We have to be able to present a strategic menu that offers value and does so beyond the 99-cent price point.”

Subway chief marketing officer Tony Pace says consumers will see the $2 offering for what it is: a show of gratitude during the holiday season.

“At the end of the day, we know it’s a compelling price point,” Pace says of the offer, which is only available with the Meatball Marinara and Cold Cut Combo sandwiches. “To be able to say to customers ‘we’re on your side’ is important to us.”

Pace says company leaders view the December deal as a goodwill builder and traffic driver during a traditionally challenging month.

The company’s $2 deal is similar to its famous $5 footlong, which also began as a limited-time offer. While the $5 footlongs have grown into a $4 billion brand, Pace says, the company intends to respect the $2 deal’s month-long shelf life.

“We will stop this deal at the end of December, though we will come back to the customer-appreciation theme again,” Pace says.

Ultimately, Kerr says, the value for both Subway and Wendy’s extends beyond offering price variety to consumers and strengthening the barbell.

“I look at all of these as marketing plays,” she says. “The $2 deal, the W burger—these are new news and give people something to talk about. Regardless of what people buy, these offerings can get people in the door, and that's effective, too.”


Subway franchisees are losing money and are not happy about it!

With 5 store in Richmond, I can say that our customer count and AUV have increased . In some stores by 25 to 30% up while labor cost has remain the same. O n the flip side our upsell efforts have worked ( chips, drinks, double meats and extra cheese). The inital results are telling me that my profits have increased. In this tough ecomony our HQ have made the right decision. Thanks Subway team.

Subway brand will vanish by 2020 better get out of it before that, I bet.Did you get me?

Just don't buy Subway, at any cost. Subway is sponsoring BET's Sportsman of the Year, "Michael Vick". Do you want your money to go to a company who is responsible for the cruel deaths of hundreds of dogs? Hit them in the pocket.

While SUBWAY sponsored the BET "Sportsman of the Year award" it had no say whatsoever on who the recipiant was. The sponsorsip was also set up prior to the Vick story coming to light. I doubt an international powerhouse and leading Brand such as SUBWAY would knowing sponsor and risk their reputation if they knew someone like Michael Vick was to rec. the award.

>If sales are up by 20 to 30 % and labor cost have not increased with this promotion your wait times and speed of service must be horrendous and gone out the window.

Sadly, if you can't sell more value, you have to cut prices. The article suggests that the $5.00 foot long promotion struggles against the dollar menu at McDonald's, but that's only happens when the product can be put in a category with a dollar menu. And in that regard, if you cannot differentiate your product enough to overcome that hurdle, then maybe you should cut your prices. But cut them enough to matter. Even at $3.00, they are still 3X more expensive than McDonald's.Maybe they can mental anchor their guests a little and put things in perspective...

i purchased in new york the 2.00 sandwich from subway , hardly any meat inside, not worth going there.

I hadn't been to Wendy's in a long time, as they really lost their way a few years ago - when in fact I have always loved Wendy's burgers. I went in to try the W burger - it's good - but I didn't think it was big enough for the money... I could have eaten another one. Well, they got me to come back in, but I don't think I'll be going back as there are so many alternatives now that are so good, like Hardee's Thickburgers and McDonald's Angus Deluxe. As far as Subway, they still OWN the health halo, it's theirs to lose, and when they drop prices it makes a lot of people happy.

ya know i ordered that cold cut.. which is suppose to be a variety of meats ..pretty sure it was all baloney though.. To me it seems you really have to play the game. get the sanwich that is on sale or whatever other wise you end up over paying ..

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