Subway Case Study

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For years, Subway attracted and held onto customers through a reward system known as the Sub Club. How did this system work? Basically, Subway gave its patrons business-sized cards with tiny stamps on them. Every time a card filled up with stamps, the patron earned a free meal. Unfortunately, Subway had to discontinue the Sub Club, much to the dismay of its loyal customers. The reason? Fraud.

The availability of cheaper home laser printers and multimedia personal computers has made counterfeiting increasingly easy. Using materials available at any office supply store, people with some knowledge of photo-editing software could duplicate the Subway reward cards and the stamps. In fact, fraudulent Subway cards and stamps were even being sold on eBay.

This fraud hurt Subway owners, all of whom are franchisees. At the same time, however, customers loved the program. To resolve this dilemma, the huge restaurant chain (30,000 restaurants and $9 billion revenue in 2008) instituted a new loyalty program. This program uses a card with a magnetic stripe. Each card has a unique 16-digit identification number. Customers can use this card to make payments, access instant loyalty rewards, and track highly targeted promotions. At the same time, the cards enable Subway to gather data on customers from its point-of-sale (POS) terminal to its CRM applications. One Subway executive called this "the single largest integrated cash card program in the world." Subway says its new card is unique because of its wide range of capabilities and also because it was deployed over such a huge number of restaurants.

Subway rolled out the new card to more than 20,000 stores and integrated the card into its existing POS software. This integration was difficult for Subway's IT group. Subway's IT challenges are somewhat different from a typical global retailer of its size because all of its stores are owned by franchisees. In many cases, the Subway IT group can only recommend that its...
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