Sandwich success at Subway

Many times, the best ideas come not from inside headquarters, but from the field. A stellar example of co-created innovation comes from Subway, the ubiquitous sandwich chain, which rang up big numbers – sales of $3.81 billion in the 12 months ending in August – from a couple of round numbers: $5 for a foot-long sub. This successful offering originated not within the food labs of corporate HQ, but instead in a single franchise located within a Miami hospital. The franchisee, Stu Frankel, was seeking a way to boost weekend sales in late 2004. He hit on a simple concept: $5, “not $3.99, not $4.99,” as he later told BusinessWeek, for a sizeable sandwich.

In so doing, Frankel bucked the conventional wisdom of retailers everywhere that a penny somehow seems less to customers than a nice round number. In fact, many people seem sick of pennies, if efforts to retire the nation’s most modest coin are an indicator. Frankel’s combination of good value for a single bill was an immediate hit in his store, boosting Saturday sales by 17–22 percent and Sunday sales by over 30 percent.

The concept soon spread to other Subway outlets in Florida. To its great credit, executives at Subway headquarters in far-off Milford, CT, recognized a hit. The $5 foot-long sub rolled out nationally in March 2008, accompanied by a national ad campaign with a nice jingle.

Subway auditions

Other restaurateurs such as Taco Bell and Schlotzsky’s have since launched their own versions of the $5 deal, but Subway has continued to let innovation bubble up. The company invited customers to submit their own versions of the ad jingle to the Subway website. Hundreds of videos have been viewed hundreds of thousands of times, collectively; website visitors rate their favorites and pan the not-so-good attempts. The $5 foot-long has entered the vocabulary of popular culture, thanks to Subway’s willingness to co-create first internally, with franchisees, and then externally, with customers.

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