In March of 2008, Subway launched a value deal nationwide that already had explosive success in a number of the chain’s South Florida stores. The introduction of the $5 footlong deal across the U.S. was intended to be an answer to the $1 value menus of industry standard-bearers such as McDonald’s and Wendy’s and a new direction for the brand in the wake of its advertising success with Jared Fogle.
Subway could never have predicted that the $5 footlong deal would turn the restaurant industry on its head. Nor could the company have known that it would help to redefine a term that was no longer just a word atop a menuboard, but a deal-breaking catchphrase of the tough economic times: value.
Indeed, “value” has understandably become the buzzword of the recession for restaurants, thrusting quick-service chains like Subway to the fore of the battleground for penny-pinching customers. But the maniacal push by restaurants for lower prices and recession-busting menu items—which has included chains like KFC, Dairy Queen, and Sonic rolling out value menus during the recession—has left the true definition of “value” blurred.
“I think for a long time everybody thought that in the quick-service restaurant space, value had to be $1, and you could only do stuff for $1,” says Tony Pace, senior vice president and chief marketing officer of the Subway Franchisee Advertising Fund Trust. “I think that what we’ve been able to do with $5 footlongs is show that price is obviously a very important part of the equation, but so is what you’re offering.”
From the time Taco Bell introduced its value menu in 1988 and Wendy’s rolled out its Super Value Menu in 1989, up to when McDonald’s launched its Dollar Menu in 2002, value in quick service defined itself as being a $1—or close to it—price point. With the recession delivering new deal-seeking consumers to the segment, though, brands like Subway are finding that value has become something much more multidimensional.
Rafi Mohammed, a pricing expert and author of the book The Art of Pricing, agrees with Pace that value is not merely a matter of being inexpensive.
“I think that the word is misused, and when people talk about value, they think about it in terms of giving people the lowest price,” Mohammed says. “From a consumer’s standpoint, it’s about an evaluation between what they get and what the price is.”
Across the spectrum of the quick-service industry, different chains have different ideas of what they consider to be the definition of “value.” But when adding up various opinions of major industry players, it is clear that the value equation seems to be comprised of no fewer than four components: price, quality, quantity, and flexibility.