Subway Searches for more Jareds


For years
Subway ran a rewards program that was the CRM equivalent of a free lunch. The 29,000-restaurant chain handed out paper stamps to be affixed to a small paper card; when the customer filled up the card, he received a free sandwich. No data was collected, nor did Subway bother to compile customer information when the cards were redeemed. The program did little to drive sales or loyalty, it admitted.

The restaurant chain does, however, have very loyal customers. It has built a wildly successful marketing
strategy around its most famous one -- Jared -- who lost 245 lbs. 10 years ago eating at Subway and has since
become a worldwide phenomenon. Subway wanted to be able to identify and connect with other loyal customers.

The company's rewards program subsidiary, Value Pay Services, tapped Chockstone to help revamp its offerings.
It developed a rewards card program that identifies and remembers card member preferences, then delivers personalized offers when they use the card.

According to Carman Wenkoff, Value Pay Services president, the program was designed as much to bolster customer relationships as to collect data. "For anybody using a gift card or a rewards card, we'll try to understand
how often they come in and what they like to purchase," he says. "Then the system will customize promotions that will
be meaningful to that customer, based on previous history." Customers receive personalized messages, including incentives for future visits, on their receipts.

When a user swipes a gift or rewards card, all data related to the purchase is saved in a central database, including
store location, time, purchase amount, items purchased, tax amount, payment method used, and gift/loyalty card
swiped. A gift card is an anonymous account, and that information becomes tied to a specific name only when a
user explicitly registers his card via a website or through a toll-free number. Subway's goal is to get customers to
identify themselves and continue to use the card to gain points and incentives while providing valuable data.

Wenkoff's efforts are focused on customer retention and share of wallet. He admits that his subsidiary operates in a
silo from the company's marketing efforts. Subway's larger marketing strategy and customer positioning is handled by
another subsidiary.

The program started with about 500 of Subway's locations. "To anyone who had historically come in once a
month, we gave them an offer to see if we could get them to come in twice a month. If they did, we gave them a free
cookie," says Chockstone president and chief executive officer Jeffrey Lipp. One third of them returned, which led
to the program's expansion nationally. Wenkoff says a "great majority" of franchisees have signed on.

Facing challenges

The program is still in its infancy, and there are challenges. Employee training is an issue, and as a franchise
organization, Subway restaurants boast wildly divergent technology infrastructures. Not every outpost has high-
speed connectivity -- a must to ensure that the messages and profiles are delivered instantly from the central
database -- and there are a number of operating and point-of-sale systems involved.

Similarly, Subway continues to grapple with the reality that its customer set is largely anonymous. While the number of customers using its loyalty and gift cards has surged in recent months, most still pay with cash.

Wenkoff doesn't have a solution for this problem just yet, though Subway has succeeded in driving sales of gift
cards through third-party channels (most notably Wal-Mart). "Indications so far are that many customers who
have received cards from those locations are trying out Subway for the first time, and they're coming back," he

Subway will keep at it, though, offering more and, ideally, better personalization than in the past. "We haven't done
this as much as we'd like to, or as much as we will," Wenkoff adds. "The landscape is changing for the type of
value proposition we'd like to provide to customers."