Mcdonalds vs Subway(4ps)

McDonalds vs Subway (Marketing Mix)

Marketing’s aim is to target markets and figure out the needs of consumers in that specific market then to satisfy those needs. A businesses use of marketing and more specifically the marketing mix is essential to its success. The marketing mix is split into the 7ps which are; place, product, promotion, price, people, physical evidence and process. However, the main elements are the 4ps which are; price, product, place and promotion. Businesses need to decide what strategy in each P will be appropriate for their target market.

The fast food industry is one of the most profitable industries in the world with McDonalds and

Subway leading the way. If I were to ask you, which company is bigger? the answer would almost definitely be “McDonalds” but what most people don’t realise is while McDonalds do have a larger market share and are more valuable than subway by around 67 billion (Statista, 2016). Subway are a fierce competitor with over a 1000 more stores than McDonalds worldwide and while they do have their similarities with regards to their use of the marketing, both companies have different strategies with each element of the mix.

PRICE is one of the most crucial elements of the marketing mix, the price the amount the consumers will pay for the product. Price is one the Ps where we see the major difference in strategy between McDonalds and Subway.

With regards to McDonalds, their pricing strategy is very similar to most other fast food places such as Burger king or KFC due to the similarity of quality in food product. McDonalds pricing strategy is low pricing as the raw materials used to make the food are all low quality. McDonalds also clearly use bundle pricing which most fast food places use, the idea of bundle pricing is to offering more than one product as a reduced price. For example, a happy meal which includes a small drink and fries with a cheeseburger costs £2.49 (Mcdonalds, 2016). A small drink, fries and cheeseburger bought individually would cost £2.77 so there is a significant reduction in price which encourages customers to buy more than one product thus increasing revenue.

(If your eyesight is poor & you can’t see any writing on this image, that’s unfortunate)

McDonalds also use psychological pricing which makes the customer think products are significantly cheaper when they are not like £0.99 for a cheeseburger. You may say that no one falls for that strategy of pricing anymore or it may be slightly outdated but we are all guilty of feeding into to psychological pricing, otherwise why does almost every business do it? This element of McDonalds marketing mix shows how important price bundling and psychological pricing is.

https://www.youtube.com/watch?v=pvF4kFPE8U4

In comparison to other fast food places, Subway is premium priced. Subway can afford to set higher prices than McDonalds due to the fact they use higher quality

ingredients, while McDonalds claim to use high quality ingredients its very unlikely that is true.

Subway have every right to set higher prices due the distinct difference in quality compared to McDonalds food products and even if Subway do not use high quality ingredients. The quantity of the sandwich and the lower calorie intake justifies their prices.

While both chains use psychological and bundle pricing like most fast food places. Their main pricing strategies are completely different. While Subway may be higher quality, they don’t offer many products or meals below £3 (Subway, 2016) and their general lack of low-cost menus may steer customers away. Subway also do not change their prices very often whereas McDonalds consistently reduce the cost of some of their products. For example, in 2015 the cheeseburger went from £1.09 to £0.99 on the Savers menu in order to attract more customers who want to save but also want a quick snack (Mcdonalds, 2016).

However, the fact that subway use premium pricing has its advantages over McDonalds. High prices are often associated with high quality to customers highlighting while Subway may be more expensive, customers are willing to spend extra in the belief of better quality than McDonalds.

Both pricing strategies work for each business but I do believe Subways high quality image is slightly exaggerated, Fast Food is Fast Food so it’s still just as greasy and cheap as McDonalds. ‘Maybe slightly better quality’.

PRODUCT is another key element of the marketing mix as the product is the main part of the business, “Without the right product, it is unlikely that marketers will be able to satisfy their customers and persuade them to become repeat buyers” (Dibb, et al., 2016). Finding and creating the right products to fulfil the needs of consumers is the most important element of the marketing mix.

McDonalds effectiveness of the product marketing mix is one of the key reasons they are top of the fast food industry. Their product portfolio has such a large and diverse range of products. They sell hamburgers, sandwiches, chicken, fish, drinks, breakfast, salads and desserts. McDonalds cater for any type of customer and the depth of their product range means they can target any market segment, this gives them the opportunity to expand and grow like have been doing for years. McDonalds have “Mc” in front of many of their products such as the egg Mcmuffin or Mcflurry, its gives people the belief that the specific product is exclusive and makes it difficult for competitors like Subway to imitate.

Furthermore, McDonalds offer different international menu items to suit each countries consumer preference. For example, beer is part of the menu in Germany and they also sell many different types of soup in Asia.

While McDonalds use of the marketing mix for product is most likely the best in the world in any business industry, not just the food industry. There are obesity figures which project “65 million more obese adults in the USA and 11 million more obese adults in the UK by 2030” (Y Claire Wang, 2011). Due to many statics and even more current one, people are becoming more health conscious. While McDonalds have sold wraps and salad in recent years, changes have not been as significant enough and is steering away from its main menu to healthy eating worth it. I doubt even with those changes in products McDonalds will ever be seen as healthy.

Subways main product is a submarine sandwich or as most people call it, ‘a sub’. Subways unique product element of the marketing mix is the do it yourself approach. While Subways product range may not be as large as McDonalds, Subway give customers to the option to customize their sandwich different breads and non-vegetarian/vegetarian options to fill your sub. The fact that customers can create their own sub sets subway above their competitors in that sense as they sell their products according to customers wants. Subways health nutrition within their products in comparison to other fast food places is key and is what makes them competitive.

There is a lack of identity and product awareness among customers with Subway, whereas McDonalds have the Mc in front of some of their products which increases product awareness, apart from customization and health it’s hard to see what sets them apart from McDonalds, in terms of product. Both businesses have a similar range of products but just in different ways. For example, while McDonalds generally have more products on offer, Subway offer more sandwich combinations. Overall McDonalds do have a larger product range which gives customers more choice than Subway. McDonalds cater to everyone while there’s a lack of kid’s choices or options in Subway, Subway are not very diverse with International menus either.

However, McDonalds attempts to beat Subway in customer perception of their products or brand as a whole did not and will not work. For example, McDonalds executives felt the wraps took too long to assemble so they were remove of the menu in many several American states and that the salad was still congested with added fat.

The element of healthier fast food should be the main thing for Subway products in order to continue to compete. While McDonalds attempts to improve the nutritional benefits of their products is brave, I think it may be a waste of time and money. Will McDonalds ever be seen as healthy? The answer is highly unlikely so they should focus on improving the main products they already have.

PROMOTION is also a key element of the marketing mix as people need to hear or see the product. Increased brand awareness = Increased sales. Consumers need to know about a product or service before they can decide to buy so good promotion will entice people.

McDonalds their products in many different ways, they several advertising methods such as; billboards, tv commercials, posters, radio and online media. McDonalds almost cover all advertising methods to attract more customers and continue to find new promotional platforms.

One of the ways McDonalds promote their products is with the brand mascot Ronald McDonald the clown which the company say “is second only to Santa Claus in terms of [brand] recognition … 96% of all schoolchildren in the United States of America recognize Ronald (Mcdonalds, 2016).” The Mascot increases brand awareness as it gets people attention and is a memorable figure for the business, Ronald McDonald was even used for various adverts. McDonalds use of Ronald to promote their products resonates with children because its highly unlikely kids will remember a billboard or radio advert. Kids want a fun mascot and something that is entertaining, the popularity of the figure even led to merchandise increasing profits as well as brand awareness.

https://www.youtube.com/watch?v=EBleMuK5WKo

McDonalds also provide free toys in their happy meals, this encourages kids to push for McDonalds when they are given a choice of fast food places due to the entertainment that toy provides them and many want to build a collection. McDonalds promotion to young kids creates a brand loyalty at such an early age which will most likely result in more future customers who trust in the business. “A high degree of consumer loyalty is probably the greatest asset marketers can possess” (Muthukrishnan, 2015). These toys provide an emotional attachment too which is key to overall success of the business.

In 2010 a woman in California tried to sue McDonalds in order for them to stop selling toys with happy meals as she felt it was an abuse of children’s vulnerability (The Associated Press, 2012). This shows the value of McDonalds promotions through toys, Oh and her lawsuit was dismissed.

Slogans a key element of the promotion mix, not only should a slogan be memorable and catchy but it helps if it has an emotional attachment. McDonalds “I’m lovin it” represents everything thing needed for a successful slogan, it’s; memorable, catchy, short and it has emotional attachment as its telling customers you’re going to enjoy what you’re eating. The slogan also translates well in most other countries unlike KFCs “finger lickin good” which translated to “We will eat your fingers off in Chinese”. McDonalds are adapting to an increased number of consumers who care about the effect of packaging on the planet.  The business has set a goal to source 100% fibre-based packaging from certified or recycled (McDonalds, 2016). sources by 2020, they are promoting good ethics which results in a great image or reputation for McDonalds in terms of packaging.

McDonalds have a large number of sponsorship deals or promotional partners and celebrity endorsements such as;

·      Fifa World Cup

·      Nascar

·      National Basketball League(NBA)

·      Olympics

·      National Football League(Nfl)

·      Several football teams

·      Michael Jordan

·      Kobe Bryant

·      Justin Timberlake

Subway use a number of strategies when promoting, one of their key ways is television adverts using celebrities but not just any celebrities. Subway use athletes to promote their product such as; Olympian Michael Phelps, football legend Pele, American football player Robert Griffin III and NBA player Blake Griffin. This is key to Subways promotions as they consumers to see the health benefits and the lower calorie intake from their products compared to other fast food brands. Their use of sports stars exemplifies that perception the want from consumers because majority of athletes are healthy and fit which make them suitable as representation of Subway.  Subways slogan “Eat fresh” is also appropriate for what they are trying to promote as it emphasises all the products are freshly baked and cooked with high quality ingredients.

Subway also used to have a brand ambassador called Jared Fogle who became the brand poster boy due to the fact he 240 pounds eating only subway. He appeared in several commercials and was heavily involved in their promotion activities up until 2008. He was not in mainly America as the “Subway guy” and this did help subways sales as people could actually relate to him due to the fact he was just a normal person who used Subway to lose weight emphasising the benefits of eating Subway to potential customers. However, in 2010 he was involved in very serious legal cases which brought negative press to Subway and while there are no reports to show it damaged their sales, it definitely damaged their brand image.

Subway commercials tend to be quite funny and entertaining. They might not necessarily attract children but for most people the adverts are memorable and catch your attention. Their use of funny adverts increase brand awareness but at the same time, I believe a lot of people just laugh at the adverts the forget the brand name or the products being advertised. Subway are also highly socially responsible as their website describes their goals to be nutritional and environmental leaders within the industry, their website also talks about their use of sustainable sourcing (Subway, 2016)

Both companies do have similarities with the way they use the promotion element of the marketing mix. Both businesses did or do have brand ambassadors, while Ronald and Jared from Subway are clearly targeted at different market segment they both were figures used in the promotional activities of the business. Even though Jared did not turn out completely well for Subway he still benefited their promotion plan and increased brand awareness. Ronald McDonald also benefited the business for attracting kids, However, I believe that his role is now outdated and the fact he is a clown is quite creepy for most kids. I think that must be the reason for McDonalds lack of use with Ronald for the past few years, ‘surprisingly’ kids don’t exactly love clowns nowadays. Both businesses slogans are suitable and emphasise they type of products they sell.

Conversely one big difference between McDonalds and Subway is McDonalds promote to kids whereas Subway don’t much to attract kids. Subways lack of promotion towards the kid’s segment is because of their menu, there’s a distinct lack of child meals like the McDonalds happy meal, fruit, fruit juice, fish fingers or milk. Therefore, Subways promotion element does cover most segments of the market like McDonalds does.

Another difference in each companies use of the marketing mix is with their celebrity endorsements. Subways endorsements are relative to the products they sell, their use of sports stars provides more of a purpose due to their healthy image whereas McDonalds celebrity endorsement are not specifically related to the products they sell.

https://www.youtube.com/watch?v=r2zuQcVfPkI

https://www.youtube.com/watch?v=jRqB59G5c2Y

Subways adverts are funnier and take a more comedic format whereas McDonalds adverts seem to be more cinematic and emotional. Subways adverts are a lot more direct because of how much they show their products within the advert. For example, the Subway advert shown above, the man is thinking about what choice to make as their trying to show the range of products available to potential customers whereas McDonalds adverts are more indirect as they have already build brand awareness through other promotion methods. For example, the McDonalds advert I’ve used as an example shows they don’t really show off their products apart from the Big Mac at the end.

PLACE is crucial, the business has to position itself in a location where there will be potential customers. A business could have a great product or service but if the location is not easily accessible to customers it will not be profitable.

Subway have 44,875 stores worldwide whereas McDonalds have 36,525, having more stores means Subway have a better geographical presence and can expand quicker. The main reason for McDonalds having less stores is that their franchise is more expensive to buy than Subway and McDonalds building tend to be significantly bigger therefore they need more land if a new store requires building permission.

Both companies have stores worldwide located in shopping centers, high streets, and airports. Both businesses spread their stores evenly throughout cities. There is McDonalds or Subway nearly everywhere you look in most developed countries and where’s there’s not McDonalds or Subway, there’s probably one coming soon.

One of the differences between the businesses when it comes to place is that Subway tend to prioritise premium areas where the income of consumers is higher than average. For example, near large business offices or more upper class shopping centres whereas McDonalds can put their business anywhere. The reason Subway do this is because premium areas tend to have more health conscious people and Subway promote their brand as a healthy option in comparison to other fast food. Most McDonalds have a drive thru service whereas Subway don’t have such a service in the UK. Drive thrus make it more convenient and quicker for customers to receive their food, Drive thrus are increasingly becoming more valuable to consumers due to an increase in worldwide vehicle use, people are becoming more time-constrained and lazy.” Research from Essex University has identified fitness levels have declined by a rate of 0.95% per year – twice the rate of the global average of 0.43%” (Sandercock, 2015), this fact shows that people are becoming more sedentary and drive thru accommodates this change.

However, even though Subway may want to capitalise on that it would be difficult to implement drive thrus due to the process of selling their products. Subway would only be able to handle one order at once as customers have to continuously report back on what ingredients they want. There is also a question on Subway implementing drive thrus as slightly hypocritical as they promote a healthy lifestyle but then are providing, as some would say a lazy option for customers.

McDonalds provide a number of digital play areas in some of its restaurants as another incentive to attract more children whereas Subway don’t have any sort of facility. The main reason for this is the size available to Subway, their stores tend to be significantly smaller than McDonalds especially in the UK meaning they cannot accommodate anything else apart from chairs and tables.

Refrences

Dibb, S., Simkin, L., Pride, W. M. & Ferrell, O., 2016. Marketing: Concepts and Strategies. s.l.:MTS Limited.

Mcdonalds, 2016. Prices. [Online]
Available at: http://www.mcdonalds.co.uk/ukhome.html

McDonalds, 2016. Sustainability. [Online]
Available at: http://corporate.mcdonalds.com/mcd/sustainability/sourcing/priority-products.html
[Accessed November 2016].

Muthukrishnan, A. V., 2015. Persistent Preferences in Market Place Choices: Brand Loyalty, Choice Inertia, and Something in Between. Foundations and Trends® in Marketing, 9(1), pp. 1-82.

Sandercock, D. G., 2015. Britains Sedentary Adults, s.l.: The Guardian.

Statista, 2015. Market share of leading brands in the United States fast food industry in 2015. [Online]
Available at: https://www.statista.com/statistics/196611/market-share-of-fast-food-restaurant-corporations-in-the-us/
[Accessed November 2016].

Statista, 2016. Market share of leading brands in the United States fast food industry in 2015. [Online]
Available at: https://www.statista.com/statistics/196611/market-share-of-fast-food-restaurant-corporations-in-the-us/
[Accessed November 2016].

Subway, 2016. About us: Social Responsibility. [Online]
Available at: http://www.subway.com/en-gb/aboutus/socialresponsibility
[Accessed November 2016].

Subway, 2016. Menu & Prices. Subway. [Online]
Available at: http://www.subway.com/en-gb
[Accessed November 2016].

The Associated Press, 2012. USA Today. [Online]
Available at: http://usatoday30.usatoday.com/money/industries/food/story/2012-04-05/mcdonalds-happy-meals-toys-lawsuit/54040390/1
[Accessed November 2016].

Y Claire Wang, K. M. T. M. S. L. G. M. B., 2011. Health and economic burden of the projected obesity trends in the USA and the UK, s.l.: Lancet.

Bibliography

Dibb, S., Simkin, L., Pride, W. M. & Ferrell, O., 2016. Marketing: Concepts and Strategies. s.l.:MTS Limited.

Mcdonalds, 2016.. [Online]
Available at: http://www.mcdonalds.co.uk/ukhome.html

Subway, 2016.. Subway. [Online]
Available at: http://www.subway.com/en-gb
[Accessed November 2016].