Case Study: How Pret Kills Competition: Unveiling Pret's Subscription Strategy

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Case Study: How Pret Kills Competition: Unveiling Pret's Subscription Strategy

Happy Monday!

This week's edition has an exciting growth case study - Integration of Pret’s subscription model.

Before we get started - sending a warm welcome to the 102+ subscribers who have joined The Growth Element newsletter since last week! 🎉

Without further ado, let’s get started.

Background

Pret a Manger, a popular quick-service restaurant chain, introduced a subscription service as part of its growth strategy.

The Pret subscription offered customers unlimited monthly coffee and tea for a fixed fee, aiming to:

• increase customer loyalty

• drive repeat visits

• enhance digital integration

• collect customer data

• personalize experiences

• increase cash flow

• boost revenue

One of the key strategies employed was the loss leader approach.

The Loss Leader Strategy

• The loss leader strategy is a marketing tactic where a business sells a product or service at a price below its cost or market value.

• The goal is to attract customers and generate additional revenue through related or complementary products or services.

• Pret implemented elements of the loss leader strategy in its subscription model to drive customer acquisition and long-term profitability.

Low-priced Subscription

• Pret introduced a monthly subscription plan priced at £20, which included five items of the customer's choice from their menu.

• The subscription fee was lower than the cumulative cost of purchasing those items individually, making it an enticing offer for customers.

Customer Acquisition

• The low-priced subscription plan served as an attractive offer, incentivizing customers to join the program.

• Offering multiple items for a lower cost encouraged customers to sign up and become part of the Pret community.

• Let's assume the subscription plan attracted 10,000 customers in the first month, resulting in £200,000 in subscription revenue.

Upselling and Cross-selling

• Although the subscription may have resulted in a minimal profit or loss, Pret aimed to increase the average transaction value per subscriber through upselling and cross-selling.

• Assuming each subscriber made an additional purchase of £5 per visit, with an average of two additional monthly purchases, it resulted in additional revenue of £100,000 per month from upselling and cross-selling.

Customer Retention and Repeat Purchases

• Pret's subscription model aimed to retain customers beyond the subscription period.

• Let's assume that, on average, 70% of subscribers continued to make regular purchases from Pret even after their subscription ended.

• With a 12-month subscription period, this could generate additional revenue of £1,680,000 from repeat purchases.

Brand Awareness and Word-of-Mouth

• The subscription model helped increase brand awareness and acquired new customers at a lower customer acquisition cost (CAC).

• Assuming a 20% increase in new customer acquisition and an average revenue per new customer of £150, Pret could generate additional revenue of £300,000 per month through word-of-mouth and creative growth marketing efforts.

Conclusion

Overall, using a subscription price of £20 and the acquisition of 10,000 customers during the launch month, Pret could generate £200,000 in subscription revenue, £100,000 in upselling and cross-selling revenue, £1,680,000 in repeat purchase revenue, and £300,000 in new customer revenue per month.

Using the subscription model as a loss leader, Pret strategically acquired customers encouraged additional purchases and built long-term loyalty.

Although the subscription may have initially resulted in a short-term loss, the overall goal was to generate revenue from upsells, cross-sells, and repeat business, leading to long-term profitability for Pret.

That's it for this edition of our newsletter. I hope Pret’s loss leader strategy case study was insightful and valuable.

Wishing you a successful and productive week!

Thanks,
Chintan Maisuria

P.S. Come say hi on Twitter and Linkedin 👋🏼

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