Arby's New CMO Russ Klein Targets Subway With Ads Emphasizing 'Freshness'

Arby's Takes On Subway

Soon after Russ Klein became chief marketing officer at struggling sandwich chain Arby's in January, he commissioned the Boston Consulting Group to conduct a study on how consumers decide where to eat. It was a basic, but crucial question.

Klein's 30 years in the restaurant industry had already taught him some of the lessons in the report. He already knew that the "craveability" of a dish is a crucial driver of return visits, for example. But other results surprised him. He was especially struck by the fact that three-quarters of respondents listed the "freshness" of a restaurant's food among their three most important qualities.

The study showed that Atlanta-based Arby's was already considered "craveable" by many consumers. Many regulars are obsessed with the brand's signature roast beef sandwich, by far its number one seller. But when it came to the perception of "freshness," Arby's lagged behind its bigger rival Subway, which has emphasized healthfulness and fresh produce in most of its ads from the last few years.

Klein, 55, knew it would be hard to convince consumers that Arby's could match Subway in healthfulness, but he also knew consumers think about "freshness" in many different ways.

"Some people think about fresh like the FDA does -- as the opposite of frozen. Fresh is perceived as the opposite of stale, by some people, or as the opposite of fried, for others. So the word 'fresh' has lots of connotations, so it tends to function in the context in which it's given to people," Klein told The Huffington Post.

He realized that Arby's had one clear "freshness" advantage over Subway. Arby's slices its sandwich meat fresh every day -- whereas its Milford, Conn.-based counterpart outsources the slicing to a factory.

And Klein soon figured out that many consumers didn't even realize that the two chains sliced meat differently. Internal tracking surveys showed that about 55 percent of fast food customers know that Arby's slices meat in-store every day. But about 55 percent of fast food customers also thought that Subway sliced its meat fresh.

"I thought, 'This is crazy,'" Klein recalls. "We're in business for 48 years, and only slightly more than half of the people know that we slice our meats in our restaurants. And here's Subway, who the same number of people think they slice their meat, and they don't! So it was a clear market belief opportunity for us to go in and re-establish exactly who does what, knowing how important it would be to a consumer."

In March, Klein decided to make the fresh slicing the centerpiece of his first full ad campaign for Arby's. The results of that decision, and the work he and his team have done in the last seven months, were revealed this week and are visible in the videos embedded above and below. Like a recent ad series by Pizza Hut, they're quite explicit about the contrast with Subway.

The ad campaign is just one facet of a broader effort to revive Arby's, which private equity firm Roark Capital bought from Wendy's for just $130 million in June 2011, after several years of double-digit sales declines at the stores. The chain recently got a new logo and is currently, like several of its peers, experimenting with new store designs. It introduced its first-ever hot roasted turkey sandwich this past month.

The central goal of these changes is to encourage the most enthusiastic Arby's customers, who Klein puts in a category he calls "Modern Traditional," to eat there more often. Right now, about 20 percent of Arby's customers visit the chain at least six times a month -- generating two-thirds of the company's sales.

You wouldn't think that you'd be able to get this core customer to come any more often than that. But research shows that these same customers actually eat out 40 to 50 times per month, including at Subway, so Klein is confident that a canny marketing strategy can increase that number significantly.

"Eating out is just part of their lifestyle," he explained, "And they're very unapologetic about that. So they would have, in most cases, Subway in their repertoire. They like their brand and the food just fine. But after speaking to the 'modern traditionalist,' if they didn't know the facts about freshly-sliced meat before, it seems to be a factor that would lead them to consider more visits to Arby's as opposed to, in particular, Subway."

Actually making that happen, in the case of Arby's, is slightly tricky, because the core Arby's customer is relatively skeptical of novelty and change. So Arby's probably wasn't going to excite them by adding kimchi to its roast beef sandwiches or starting to offer gourmet salads. That's why Klein has pursued an advertising strategy that hews close to what Arby's has always been good at: making sandwiches that people really want to eat.

The strategy is not without risks. Convincing already loyal customers to eat even more Arby's sandwiches might be more difficult than Klein believes. Consumers may be wedded to Subway's equation of freshness and health, and so dismiss the idea that freshly-sliced meat means fresh food. And there's even a chance that the ad's focus on images of meat slicers could remind customers of the mini-scandal that erupted when a detached human fingertip made it into one unlucky customer's Arby's sandwich.

And there's also a chance that Arby's is beyond saving. After all, JP Morgan analyst John Ivankhoe has described its performance as "among the worst in modern restaurant history."

But Klein's marketing plan can already pat itself on the back for one victory: the introduction of the roasted turkey club. A free sandwich giveaway on Sept. 6, the day of its release, introduced the new item to 1 million customers, and roasted turkey clubs now account for about 10 percent of total Arby's sales. That's not only a testament to good ads -- it's also a testament to Klein's good instincts when he encouraged the company to introduce the product.

"Turkey is more on-trend than roast beef. It's perceived as being a better choice in terms of nutrition. It's the best seller in delis," he explained. "When I got here, I just couldn't understand why we wouldn't do turkey the way we do our roast beef as well, and that's what roasters is all about."

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