The Secret to Selling the $5 Footlong

The $5 Footlong is a sandwich. As its name implies, it's a rather large sandwich: 12 inches of meat and other ingredients - made to the customer's order - quickly and efficiently. And yes, all for $5.

The $5 Footlong is a product of the Subway fast food restaurant chain which is known for its subs (short for 'submarine' sandwiches as they are known in some parts of the world, 'hoagies' in others). It also sells chips and soft drinks, the occasional cookie, but not much else. It is both huge - owning or franchising possibly the largest number of outlets in America - and quite profitable.

Subway has effectively harnessed the power of television to sell its products. For years, it touted the dramatic weight-loss of a young guy named Jared Fogle - a real person, as it turned out - who dieted on Subway products. This coincided with the growing interest in more healthful and less caloric fast food. It was masterful. But with the financial crisis and recession, even Subway's customers had to cut back, which is where the $5 Footlong came in. It was a lot of food for a little money. And instead of a short -term promotion, it turned into a multi-billion brand.

Subway's strategy was and is to listen to the core matters about which its customers' care, turn those into easily understood stories and then relentlessly pound them on mass media. It eschews the net and mobile - for the moment - because the company believes that its products sell better when they are promoted 'wider' - to a larger audience - and because it believes those products look better on a bigger screen than a littler one. It has worked for them and in its essentials, may be an instructive in understanding the relative strengths of advertising what product features consumers want on TV, the net and mobile in this era. JL

Suzanne Vranica reports in the Wall Street Journal:

There is more science than ever, but marketing is still art greatly informed by science. The $5 Footlong was originally envisioned as a four-week promotion, and it turned into a multibillion-dollar brand.

Most companies that ran ads during the Super Bowl on Feb. 2 shelled out roughly $4 million for 30 seconds of ad time, which sold out in December.

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But not Subway, the sandwich chain owned by Doctor's Associates Inc. Tony Pace, Subway's chief marketing officer, held off buying and was able to purchase a slot the Friday before the game, after an advertiser dropped out.

Not only did Mr. Pace get good positioning for his ad—in the second quarter of the game, well before the lopsided score prompted the record viewership to tail off a bit—he also says he paid less than the going rate, though he won't say how much.

It was a move that reflected Mr. Pace's emphasis on being nimble and keeping ahead of the competition. It's a big task in the fast-food business, which is littered with massive ad budgets, bruising price wars and copycat marketing.

On top of those challenges, Mr. Pace has to juggle the many marketing channels that have emerged in recent years, from Facebook to Pinterest, and craft campaigns that suit the vagaries of tablets and smartphones.

Staying ahead, he says, is "all about testing and learning."

Mr. Pace talked with us about the competitive landscape in the fast-food business, the rise of social media and the challenges facing chief marketing officers today. Here are edited excerpts of that conversation.

Eye on Profits

WSJ: What are some of the specific challenges of running marketing at Subway?

MR. PACE: Because we are a retail business, you're always trying to drive daily business but also build a brand for the long term. It's the classic balancing act. You can drive sales, but you can only take profits to the bank, so you have to make sure you are driving sales in a profitable manner.

WSJ: How do you do that in a category besieged by price wars?

MR. PACE: Value is always part of the equation in quick-service restaurants. Everybody talks price, but marketing value is just as important. When we launched $5 Footlongs, I had a lot of colleagues with experience in the category tell me it would never work, because the price was too high. Obviously, they were wrong, because we have sold billions of them at this point.

WSJ: When the controversy about the $5 Footlong sandwich being short spilled over into social media, how did you handle it?

MR. PACE: First, anybody who says they can predict how these things move around social media clearly hasn't been paying attention, because you cannot predict it. The question is, where can you appropriately influence the conversation? And how do you do it in a manner that is forthright and positive for the brand? In that instance, we used a number of different things, such as public relations and social media. We kept focusing on the things we do and we told people we were redoubling our efforts in that area, and that is what we did. You always want to make sure you are delivering on your brand promise to consumers.

Test and Learn

WSJ: What is the biggest challenge that chief marketing officers face today?

MR. PACE: There are so many different streams of data and information, and you have to synthesize them into simple actions that make sense for your business and your brand. That is one of the biggest challenges.

WSJ: What about the challenges for chief marketing officers in the fast-food industry?

MR. PACE: Figuring out what are the real economic circumstances out there. Things like gasoline price increases or fluctuations in home heating costs can greatly affect how much discretionary spending consumers have. You have to be keenly attentive to that, because it can impact your business almost immediately and you have to respond quickly.

WSJ: Given the massive change happening in advertising, are chief marketing officers equipped to handle the job today?

MR. PACE: I think there is a lot of learning as it happens going on. More than ever you need to be in the test-and-learn mode, because you can't wait for a general consensus to emerge on what is working and what isn't, because you may be late.

WSJ: How do you stay sharp in the constantly changing environment?

MR. PACE: It's something that I probably could do a better job on, but people say I am a voracious reader. I consume a lot of different things to make sure I am aware of what is going on.

I also experiment. I don't think you have to be the first, but you have to be early enough so you can figure out if it makes sense for you. It's especially important if we are working with new-media platforms such as Tumblr and Instagram.

Knowledge and Art

WSJ: Not many chief marketing officers have been able to transition to CEO. Why?

MR. PACE: I don't think marketing is viewed with the respect it deserves. Good long-term marketing takes a lot of skill and knowledge, and it takes appropriate risk-taking. We have been through this period, the Great Recession, where people were focused on cutting costs and right-sizing, but at the end of the day any enterprise needs to grow its top line, and to do that you have to have good marketing.

Organizations are now focused on financial reporting and compliance issues, but my sense is an astute board would say we need even more sensitivity to customers. You need somebody who knows marketing.

WSJ: Advertising is becoming a lot more about science. Does art still have a role in this business?

MR. PACE: There is more science than ever, but marketing is still art greatly informed by science. We've had wonderful success with the $5 Footlong. It was originally envisioned as a four-week promotion, and it turned into a multibillion-dollar brand. That wouldn't have happened without the artfulness of creativity.

WSJ: What is broken in marketing nowadays?

MR. PACE: The assessment of what is an emerging trend versus what are really just short-term blips. Everybody is chasing the new technologies all the time, but you have to remember that the long-established benchmarks of marketing remain the same despite the fact the channels are different.

You want to test stuff that you think has potential early. We were one of the first to put an ad on Facebook's logout screen; that worked well for us. Many of the new things are low-cost, so it's good to try them early and get the experience.

WSJ: What are the biggest myths in marketing today?

MR. PACE: There is plenty of data, but big data doesn't mean you get big insights. Companies have to sift through the data and come up with hypotheses and test them. The most needed skill set is people who can synthesize lots of data into actionable next steps and programs.

Moving People

WSJ: TV advertising is under siege as digital media companies such as Google try to grab TV ad dollars. Is TV still king?

MR. PACE: TV has proved its effectiveness. In our business you can see results pretty quickly with television. We have seen some good results with digital, too, but being able deliver a message that can move people emotionally is critical.

WSJ: What do the companies that sell ad space in online videos have to do to get more ad dollars?

MR. PACE: Offer audience guarantees. A couple of years back, I was put off by a request by an online-video company that said you have to spend a certain amount of dollars, and they were reluctant to give an audience guarantee. That was surprising, because audience guarantees are the currency of the media and marketing business. They are starting to change, but you have to make sure you get it.

WSJ: Why has it taken so long for ad dollars to flow to mobile ads?

MR. PACE: Size of screen matters. What have we seen in the consumer-electronics space for years? Everybody wants the biggest screen they can get. Is an ad message more persuasive on a really big screen? Personally, I think it is. Do I have a data stream that confirms that it is? Maybe not. But if I can show a giant Footlong sandwich in all its glory on a big screen, that is more powerful than when I see it on my phone.