SUBWAY

ASSESSMENT 1

MMK101 Trimester 1 2020

Segmentation, Targeting,
Differentiation and Positioning
Strategy

Student Name:
Student Number:
TABLE OF CONTENTS

Section1: Background.........................................................1

1.1 Industry overview..................................................................

1.2 Company Description..............................................................
1.3 Competitors Description..........................................................
1.4 Subways current market offerings............................................
1.5 CURRENT target market for subway in Australia.........................
1.6 Proposed new market product..................................................
Section 2: Market Segmentation...........................................7

2.1 Segmentation Table................................................................

2.1 Justification of chosen segments..............................................
Section3: MARKET TARGETING AND CUSTOMER PROFILE........9

3.1 Our target segment................................................................

3.2 Justification for proposed target market....................................
3.3 Table of reasons for target market in relation to the 3 targeting
criteria’s.....................................................................................
3.4 Customer profile...................................................................
Section4: DIFFERENTIATION & POSITIONING.......................11

4.1 DIFFERENTIATION BASES......................................................

4.3 Value proposition to the market..............................................
...............................................................................................
4.4 Positioning statement............................................................
4.5 Positioning map....................................................................
section 5: REFERENCES list.........................................................

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 Section1: Background

1.1 INDUSTRY OVERVIEW

Subway is in the Fast food and Takeaway Food services industry, labour
costs in this industry are a notable part of daily running of the business.
Employees undergo various tasks like, customer service. food making,
assembly, clearly tables etc. Wages are then affected by the total number
of employees, the minimum wage and the company’s trading hours. When
it comes to the industry, they primarily offer fast food, such as burgers,
sandwiches, pizza, and takeaway. Consumers are beginning to divert to
looking for healthier alternatives, this has begun to transform the Fast
Food and Takeaway Food Services industry. Thus, industry operators are
starting to offer a variety of healthier, premium choices. It is estimated
that revenue will rise at an annualised 3.3% over the five years through
2018-2019, to $20.1 billion. As demands for healthier fast foods are
rising, we are seeing a decline in traditional fast foods in the market
share. The industry faces competition from a range of already made meals
offered by grocery stores to restaurants and cafes which are giving this
industry a run for its money. Restaurants are a growing channel of
competition for this industry over the past five years, as restaurants
expand their market offerings to include a variety of foods that where
once only produced by fast-food operators. The increase in consumers
demanding top notch industry products has elevated profit margins over
the past five years. Also, as industry operators are trying more to control
food waste and are having restrictive cost controls has further supported
profit margins reports (Bao Vuong 2019, p2, 5, 7, 29)

When it comes to store count in Australia subway is the largest food

franchise within the fast food and takeaway services industry but in terms
of growth rate subway has seen a decline over the years from having
1444 stores in 2015 which dropped to 1131 and according to research
firm Technomic, was 9.2% drop reports (Cara Waters,2019).
1.2 COMPANY DESCRIPTION
Having more than 14085 subway outlets in 73 countries (12000 just in
the U.S.A) and exotic locations like the Bahamas, Bolivia, Cyprus, Iceland,
Paraguay, Russia, and Venezuela, Fred Deluca and Peter Buck’s
collaboration has become one of the largest and most successful
submarine sandwich franchise in the world. Just after McDonald’s, Subway
is the second largest International restaurant chain. Subway presents
their menu for better alternative than the menu’s presented by fast food
and they have seized a great part of the market with offering sandwiches
with low fat or gluten free. Subway evolution from the 1960s-70s was due
Fred Deluca, born in Brooklyn in the late 1940s a time when Harry S.
Truman was president and Dr Peter Buck who was a family friend and was
a nuclear physicist. On a summer barbecue these two struck up a
conversation about a well-liked sandwich shop nearby Dr Peter Bucks
hometown of which the community had come to enjoy. This struck an
idea in DeLuca to start a store serving submarine sandwiches, a food item
gaining significant traction. They both came up with a business plan and
with an investment loan of $1000 from Buck the two became partners. On
August 25, 1965, Pete’s Super Submarines opened in Bridgeport, one
could choose their toppings of choice and the condiments. The shops’
location was not ideal but allowed for easy commuting for DeLuca form
his work in the hardware store. The shop itself had extraordinarily little
fanfare and customers but this did not stop the two and they continued to
discuss business strategies, having graduated university at Bridgeport in
September 1971 with a B.S in psychology. So having to balance studies
and the shop he never so the popularity of the shop rise for years. But
rather than giving up and forgoing the partnership they decided on
another course of action and opened a second shop in 1966 which should
surely increase awareness to customers about their shop and steer in
more customers. Then they decided to open a third shop little did they
know that 3 would be their lucky number as the third shop was in a highly
convenient and obvious site. As their business was taking off now, they
found their store name a bit cumbersome thus it was renamed Subway
which was take from the New York City’s early underground railways. In
1974 the partners had reached a 10-year alliance and according to their
business plan they were meant to have 32 submarine shops, but they only
had half that number. So, they decided to follow a different avenue which
DeLuca believed franchisee was the new wave of the future and soon he
had convinced a friend to open the first franchise in upstate Wallingford.

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The move was a sound business decision but was also an extreme risk.
With how the economy was at that time with inflation and the dollar
having been devalued twice they just seemed to have the magic touch
and the franchised Subways did well. Thus, from where Subway came
from to what it is now was an evolutionary process and the blood and
tears of two partners that persevered through the hard times. (325 Bic
Drive
Milford, Connecticut 06460 U.S.A.)

1.3 COMPETITORS DESCRIPTION

Major competitor are McDonald’s, KFC, Hungry Jack’s, and Domino’s
Pizza. Research form Roy Morgan had shown that over 17 million
Australians aged 14+(84.5%) buy or eat take away whether from leading
fast-food outlets like McDonald’s, KFC, AND Subway. With over half of
Australians or 52.7% eating more at McDonald’s then 40.8% eating at
KFC, 30.8% at Subway. Jostling closely for Subways third position we
have Hungry Jack’s with 29.0% ordering from there and Domino’s Pizza
with 28.3% (Roy Morgan, 2018)

Reports Top 10 Quick Service Restaurants eat or have take away in an

average six months-12 months to March 2018 (Roy Morgan 2018, p1)

McDonald’s Australia holds a market share of 25.1%, it was established in

1971 and has since expanded to over 970 stores and has over 100000,
employees in Australia. Their market offering has since changed since the
early 2000s with additions such as wraps and salads. This change is
because consumers are looking to be provided healthier fast food with low
sugar and salt contents. It is estimated that revenue is to drop at an
annualised 0.3% over the five years going into December 2019 to an

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amount of $ 5.1 billion. Decrease is due to underperformance and ongoing
competition. While KFC is a subsidiary of the US-based Yum! Brands Inc
which manages over 45000 restaurants in more than 140 countries. The
company was established in 1968 in Australia and currently has over 430
stores and 220 of them are KFC stores. Their revenue is estimated to
grow at an annualised 0.5% over the five years through December 2019,
to an amount of $1.2 billion. They have a market share of 6.0%. Then

Domino’s pizza which is an Australian company and operators as being a

franchiser. Manages locations in Australia, New Zealand, France,
Germany, Belgium the Netherlands, and Japan through a channel of over
2400 Domino’s pizza stores, with 700 stores in Australia. Revenue is
estimated to grow at an annualised 12.8% over the five years through
2018-19, to an amount of $1.0billion. Dominos has a market share of
5.1% in the market reports (Bao Vuong 2019, p24-26). These are the
main competitors to be at the for front of Subways competition.

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1.4 SUBWAYS CURRENT MARKET OFFERINGS

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Looking at subways market offerings, it shown that they have not diverted
from their objective of offering top grade but healthier alternatives for fast
food compared to its competitors. They have also thrown in treats
(cookies) which have become a fan favourite for their customers of all age
groups.

1.5 CURRENT TARGET MARKET FOR SUBWAY IN

AUSTRALIA
Their target market has generally expanded across the board but is more
targeted to age groups of 18-39 by offering more attractive meals for
those into fitness these meals are such as low fat or carb meals of 6
grams or less. But they have begun to pursue the child market now,
revising their meals to be more nutritional by offering carbonated drinks
with vitamin juices and calorie cookies they also offering cartoons like
dory. (KSARDANA, August 8,2016).

1.6 PROPOSED NEW MARKET PRODUCT

Subways new product to be introduced to the market as a market offering
is a healthy desert know as a yoghurt parfait. Subway’s product would
stay in-line with its objectives of delivery healthy fast food.

Offering this product when we compare Subway’s menu vs its

competitors, its identified that when it comes to deserts Subway was
outclassed by its competitors as they offered this in a large variety. But
there is a market that Subway could target and attract with this, keeping
in-line with its core aspect of providing healthy fast food compared to its
competitors, its yoghurt parfait could be the product to just do that. (Bao
Vuong, 2019, p.14) also reports that there has been increased revenue
within the deserts and confectionary segment as it has increased over the
past 5 years and that there has been an increased attractiveness to
choices seen as healthy, like yoghurt and fruit. Which the new product
being introduced to the market incorporates all this with even more
attractiveness in nutrition.

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Section 2: Market Segmentation

2.1 SEGMENTATION TABLE

2.1 JUSTIFICATION OF CHOSEN SEGMENTS

Health-conscious millennials seem to be the best fitting segment to enter
because on a global scale millennial are becoming the driving force for
change it being environment related or health related. Millennials are
realising and seeing the scope of things, how such poor decisions when it
comes to these impacts could have adverse consciousness to them and
the global. A study done by (Nielsen 2015, p4) explains that about half
the global of people (57 %) are broadening their diets to a more natural
and nutritious healthy foods which is up 55% reported from three years
ago. In this study (Nielsen 2015, p9) classified Australia in the Asia-
pacific and showed how the need for sustainable sourced ingredients

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(43%) was greater in Asia—pacific than any place except Latin America
(tie).

Generation Z and Millennials are most willing to pay a premium (Nielsen

Global Health & Wellness Survey 2014, p16)

This image better depicts how the two segments marked with the red and
blue dot have a high percentage of thinking having healthy meals is

especially important. Data shows millennials are more likely to pay

premium for healthier foods compared to other generations expect for
generation Z. (Nielsen 2016, p18) also reports that the sales grew up to
15% in Asia-Pacific for healthy category of food from 2012 and 2014.
These reports further prove as to why these two segments could be good
to introduce to the market my offering them healthy fast desert delicacies
or refreshing but nutritious beverages. As we the baby boomers may more
likely not pay premium for healthy food those still a high percentage of
them that will of 23%. The introduction of this product had to be Victoria
because of its population size which could allow the product to gain

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traction within the market. (Bao Vuong, 2019, p.19) also states that more
populated states make it easier to gain traction as there is a greater
number of consumers to attract. Under psychographic it is imperative for
them to be health conscious and aware of what they ae consuming as it
better directs them in the products they want and allows us to facilitate
that need.

Section3: MARKET TARGETING AND

CUSTOMER PROFILE

3.1 OUR TARGET SEGMENT

Health-conscious millennials.

The product being offered to the market is a yoghurt parfait (desert).

3.2 JUSTIFICATION FOR PROPOSED TARGET

MARKET
Millennials are aged form about 19 to 34 and are generation influenced by
trends and social media or from peer advice. This is a market that can
give an incentive for consuming a much more nutritious meal. (Joei Chan)
explains millennials make one of the largest working generation, who
have played important roles in driving popular trends in culture, business
is always there to grab part of this market. Study by (Joei Chan) on what
millennials eat shows that millennials are into customisation of their
product, how they place convenience as important, a high importance in
nutritional benefits and healthy lifestyle and are more interested in an
open and sustainable brand relationship.

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3.3 TABLE OF REASONS FOR TARGET MARKET IN
RELATION TO THE 3 TARGETING CRITERIA’S

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3.4 CUSTOMER PROFILE

Section4: DIFFERENTIATION &

POSITIONING

4.1 DIFFERENTIATION BASES

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4.3 VALUE PROPOSITION TO THE MARKET

Justification as to our value proposition would be more for the

same. Why? the nutritional value of our product is much healthier
and offers a wider variety of choices for flavour and design, where
one can choose an array of assortments. From having a natural
sweetened product or adding a dash of a bit more sugar. We will
also be offering fresh fruits (natural) for the design of the product.
Compared to our competitors our desserts will set your mind at
ease as you will be sure to know we will be delivery on our quality

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and nutritional benefits. The supply of fresh and organic fruits is
also pricey but will not alter the price for the product

4.4 POSITIONING STATEMENT

To our health-conscious millennials that are looking for or need a
nutritional yet delicious dessert that can be served on the go and that one
could use to treat themselves, Subway will deliver on its word for
providing high grade meals that will offer high grade nutritional benefits
compared to its competitors while offering an array of mouth-watering but
nutritious deserts.

4.5 POSITIONING MAP

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 Explanation about the positioning map diagram:

Considering Subway as healthy and a somewhat wide variety for food offers was
because of how Subway is known for being a better and healthier alternative to
other fast-food services which lines up with Subway objectives. Subway offers a
wide variety of sandwiches compared
Wide to its competitors like KFC, McDonald’s,
and dominos who are offering a wide variety of different types of products and
variety
have a different objective to Subway.
When it came to McDonald’s, KFC, and dominos they are relatively know as

offering much unhealthier foods compared to subway even though reports show
that they have started to incorporate healthier alternatives, especially KFC which
has been tagged by this. Even their objectives are not so aligned with health
Junk
compared to Subway example (KFC) says “Their food is the original fried chickenHealthy
experts, and everything we do celebrates our passion for serving finger-licking
food.” This just shows that their main goal is not about offering healthier
products to the market. In terms of diversification McDonald’s and KFC take the
lead as they are trying to serve different market segments and are offering a
wide array of products to meet these segments. With our new product would

place it on the healthy side while still offering a wide variety for flavours to pick
from and enjoy, when compared to our competitors’ products.

Narrow
variety
SECTION 5: REFERENCES LIST

Bao Vuong, 2019 IBISWorld Industry Report H4512 Fast Food and Takeaway
Food Services in Australia, retrieved 5 April 2021,
https://moodle.deakincollege.edu.au/pluginfile.php/434088/mod_folder/
content/0/Topic%203%20-%20Subway/H4511A%20Restaurants%20in
%20Australia%20Industry%20Report.pdf?forcedownload=1

Cara Waters, 2019, Meat in the sandwich: inside Subway’s shrinking

Australian business’, The Sunday Morning Herald, 11 August,<
https://www.smh.com.au/business/small-business/meat-in-the-sandwich-inside-
subway-s-shrinking-australian-business-20190808-p52f37.html>

Healthy Millennials Driving Change in Australian Food Culture, npd,

retrieved25August,2018https://www.thenpdgroup.com.au/wps/portal/npd/au/

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news/press-releases/healthy-millennials-driving-change-in-australian-food-
culture/

Joei Chan, https://www.linkfluence.com/blog/millennial-food-trends-what-do-

millennials-eat

https://subway.is/en/umsubway/

https://www.referenceforbusiness.com/history2/11/
Subway.html#ixzz6ocSu6JFo

https://www.subway.com/en-au/menunutrition/menu/all

KSARDANA, 2016, So how’s SUBWAY is segmenting, targeting and

positioning its brand to become people first choice? ,Deakin business school, 8
august, retrieved 2 April 2021,
https://mpk732t22016clusterb.wordpress.com/2016/08/08/so-hows-subway-is-
segmenting-targeting-and-positioning-its-brand-to-become-people-first-choice/

Nielsen,2015, We are what we eat, Healthy eating food trends around the
world, retrieved 4 April 2021,<
https://www.nielsen.com/wp-content/uploads/sites/3/2019/04/Nielsen20Global
20Health20and20Wellness20Report20-20January202015-1.pdf>

Nielsen,2015 Generation Z and Millennials are most willing to pay a

premium, retrieved 4 April 2021,
https://www.nielsen.com/wp-content/uploads/sites/3/2019/04/Nielsen20Global
20Health20and20Wellness20Report20-20January202015-1.pdf

Roy Morgan 2018, McDonald’s, KFC & Subway most visited Aussie
restaurants
http://www.roymorgan.com/~/media/files/findings%20pdf/2018/may/7599-
australian-eating-habits-eating-in-out-march-2018.pdf?la=en

staff writer, 2018 Australians are spending $13.6 billion on healthy eating,
report suggests, Spice News, retrieved 31 March 2021,
https://www.spicenews.com.au/uncategorized/australians-are-spending-13-6-
billion-on-healthy-eating-report-suggests/

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