More consumers are purchasing sandwiches today, which meant that the Subway sandwich chain was able to open 872 new stores in 2011. It also means that the market has expanded, and other restaurant chains are hoping to grab a slice of the pie.
And speaking of pies … Pizza Hut is the top challenger to Subway’s sandwich dominance. In a recent advertising campaign, it takes on Subway’s $5 foot-long campaign directly with the launch of its P’Zolo, a new $3 sandwich. It focuses directly on the $5 foot-long promise by featuring a person who can buy two P’Zolos for nearly the same price. Tag lines emphasize the comparison, noting “Say so long to the footlong” and “More bang for your 5 bucks.” In addition to the televised spots, Pizza Hut plans to place advertisements on subway trains and even hand out free P’Zolos to hungry commuters at certain stops.
The fast-food industry lost 4,500 restaurants last year. Pizza Hut is currently the largest pizza chain, ahead of Domino’s, Little Caesar’s, and Papa John’s, but it also recognizes how tenuous this position can be. Subway ranks second in fast-food sales overall, behind only McDonald’s.
In addition, Pizza Hut plans to target the sandwich market, which features a large proportion of its existing target audience: young adult men. It has updated its brand theme to “Make it great.” Furthermore, its P’Zolo campaign includes a game on Pizza Hut’s Facebook page that should appeal to these connected consumers. But the $5 Foot-long at Subway is a $4 billion brand, ranking ninth on a list of top fast-food items. The P’Zolo campaign, as well as the sandwich itself, is going to need to be pretty great to give Subway a run for its money.
- What are the risks for Pizza Hut of expanding into the sandwich market?
- How should Subway respond to Pizza Hut?
source: Stuart Elliott, “Pizza Hut Tries the Sandwich Market Again,” The New York Times, May 31, 2012.
I think Pizza Hut is smart to try and compete with Subway on price. Subway clearly has a competitive advantage as far as customer excellence is concerned because they make the sandwich for you and the advantage in locational excellence considering Subway has more stores worldwide than McDonald’s. However, if Pizza Hut can successfully create a competitive advantage with product excellence this could be an interesting competition. Pizza Hut’s marketing strategy does seem like it could successfully persuade customer’s that their product is of higher value. It will be interesting how this plays out.
When reading this article, a few things stuck out to me. First of all, I wondered if Pizza Hut has two reasons for pursuing the sandwich market. Obviously they see an area where they can grow their business, but I also think that Subway recently adding pizza to its menu may have something to do with it. Is this a retaliation by Pizza Hut towards Subway? Or is it just them trying to expand into a growing market? I’m not so sure it’s not a little of both. I think Pizza Hut has a few risks in implementing these P’zolos. First of all, Pizza Hut is known for its pizza, not its sandwiches, so if people don’t trust that the new sandwiches are any good, Pizza Hut is potentially wasting money on advertising and implementing the Pzolo that could be spent elsewhere. However, I think it may be a necessary decision, because Pizza Hut is not personally a place I will eat at with its current offerings, so a change may do some goods. After reading this article I am tempted to test out this Pzolo to see if it is any good. In response to this, I don’t think Subway has to do anything just yet. Subway is an established chain, and seems to have loyal customers (I have a few friends who will drive out of their way to get it) and I don’t think the Pzolo should change anything. My prediction on this is the Pzolo will flop and Subway will continue to grow.
Vickrum N. said:
It will be interesting to see how Pizza Hut further brands their subs vs. the famous 5 dollar foot longs from subway. In my opinion, the extreme popularity of Subway sandwiches comes from the quick customization and wide variety of choices they offer their customers. If Pizza Hut wants to truly get a chunk of the sandwich sales industry, they must be prepared to offer a sub with many choices, sauces, and toppings that will appeal to the customer in a visually inviting way. Furthermore, the layout for toppings and condiments for the subs should be put forth in a manner that customers will be able to quickly see their food made just how they want it. Whether this is accomplished by a menu display or a live display of the toppings will be interesting to see. Lastly, Pizza Hut must ensure they receive positive word of mouth effect after the release of the P’zolo. This will make it or break if for the future of Pizza Hut’s sandwich approach, as brand value and loyalty are all a function of the initial reaction of the customers – this is almost always applicable when a well established company increases product breadth in a dramatic new way.