Red Lobster Analysis
Red Lobster – Altering Perception through Improved Positioning
Given the changes in Red Lobster’s strategy over the past few years and the surprising ability to attract new, “experiential” customers, it our recommendation that they modify their strategy to focus on pursuing this type of clientele. We will go into further detail momentarily; however, the reason for focusing on the experiential customer group is that Red Lobster has the opportunity to increase revenue and net operating income at each restaurant by 20% or more. Granted, these are enormous gains and it will take a few years to realize their full potential, but for the reasons laid out below, we believe these gains are a realistic possibility.
Red Lobster’s positioning has changed significantly over time. Before Kim Lopdrup took over as president in 2004, the company was thought of as “a dated chain that served cheap, frozen, mass-produced seafood.” When Bill Darden first founded the company in 1968, his goal was to bring affordable, high-quality seafood to mainstream America. However, somewhere along the line, Red Lobster became less known for top quality seafood, and more widely recognized for heaping portions at low prices. As we know, consumers often associate price with quality, and while this value proposition appealed to a broad customer base, it was not enough to fuel long-term success. Red Lobster was facing stagnant growth, uninspired guest reviews, and increasing competition. In addition, many of the dishes shown on the menu were fried, further reinforcing the perception of low quality among many consumers.
Lopdrup realized that changes had to be made quickly, with a primary focus on altering consumer perception by means of a revitalized positioning plan. A 2004 consumer survey revealed that “freshness of the seafood” was the most important restaurant attribute, followed closely by “quality of the seafood” and “taste/preparation of the seafood.” Given these results, it was
Given the changes in Red Lobster’s strategy over the past few years and the surprising ability to attract new, “experiential” customers, it our recommendation that they modify their strategy to focus on pursuing this type of clientele. We will go into further detail momentarily; however, the reason for focusing on the experiential customer group is that Red Lobster has the opportunity to increase revenue and net operating income at each restaurant by 20% or more. Granted, these are enormous gains and it will take a few years to realize their full potential, but for the reasons laid out below, we believe these gains are a realistic possibility.
Red Lobster’s positioning has changed significantly over time. Before Kim Lopdrup took over as president in 2004, the company was thought of as “a dated chain that served cheap, frozen, mass-produced seafood.” When Bill Darden first founded the company in 1968, his goal was to bring affordable, high-quality seafood to mainstream America. However, somewhere along the line, Red Lobster became less known for top quality seafood, and more widely recognized for heaping portions at low prices. As we know, consumers often associate price with quality, and while this value proposition appealed to a broad customer base, it was not enough to fuel long-term success. Red Lobster was facing stagnant growth, uninspired guest reviews, and increasing competition. In addition, many of the dishes shown on the menu were fried, further reinforcing the perception of low quality among many consumers.
Lopdrup realized that changes had to be made quickly, with a primary focus on altering consumer perception by means of a revitalized positioning plan. A 2004 consumer survey revealed that “freshness of the seafood” was the most important restaurant attribute, followed closely by “quality of the seafood” and “taste/preparation of the seafood.” Given these results, it was