$5 Footlongs

Here is an interesting Business Week article on Stuart Frankel, the guy who create the $5 Footlong idea for Subway.  He’s just a guy who owned a couple of Subway Shops in Florida, and he created this local campaign to boost weekend sales.  It worked, and it worked so well that it spread throughout Florida, and then went National. 

Being a pricing guy, I have to ask, why did this work?  It is certainly not obvious, but it works! Why?  What can we learn from this?

There seem to be two reasons.  First is the concept of a reference price.  A reference price is where the customer expects to pay a certain price, the reference price, but the actual price is lower, or a discount.  In this Subway case, people believe (rightly) that a footlong sub typically costs much more than $5, so a $5 price is certainly a discount.  Of course we like a deal and Subway is offering us one.

But that doesn’t seem to be enough to tell the story.  A lot of companies have sales.  Why don’t they work just as well?

Here is the tricky part.  It’s the $5.  A round number.  Look around and you’ll see that almost every sale price ends in .99 or .95, but not this one.  In a later blog I’ll explain why companies should use prices that end in .99 when pricing products on sale.  But this Subway sale product ends in .00.  Could this be the reason?

I would suggest that it isn’t the roundness of the number, rather it’s the special features of the number 5.  5 is memorable.  5 is impactful.  5 is a number we use frequently.  We have 5 fingers, which Subway uses in its advertisements.  It’s the number 5.  I don’t think 6 or 4 would have had the same impact.

For this campaign, price IS the message.  Using a price that is more memorable makes the message more memorable.  5 did it for Subway.

This is just my opinion.  Do you have any other ideas on why this worked?  I’d love to hear them.