Case Write Up #1- Red Lobster
Established in 1968, Red Lobster’s focus was bringing seafood to costumers at a price where they could afford. Since then, Red Lobster has continued to serve mainstream costumers who didn’t want to spend too much money on seafood while going out to eat. In 2009, it held a 43% market share among casual dining seafood restaurants without much competition from other similar seafood restaurant chains.
Kim Lopdrup, president of Red Lobster, saw that the company was struggling and needed to update. Red Lobster needed to change positioning in 2004 from being a “dated chain that served cheap, frozen, mass-produced seafood” to “approachable, fresh seafood”. In order to present this new value proposition, Lopdrup developed the three-phased plan that involved 1. Operational improvements, 2. Major menu changes and 3. Remodeling of the restaurants. 4 P’s
Product- More frequently updated menu ( Today’s Fresh Fish Menu) Price- Higher price point on fresh fish daily
Promotion- Time promotions to counter balance the seasonality of business Place- Remodeling of its 700 restaurant chains( Remodeling+Maintenance 350 M) Television ads clearly reflect the repositioning envisioned in 2004 by showing wood fire grilled lobsters and shrimp. Focus groups showed Lopdrup that costumers viewed “fresh” as being as close to its natural state as possible. By adding wood fire grilled items to the menu and displaying ads on TV with those items, costumers could change their perception of Red Lobster and now see that they were serving “fresh” seafood. Wood fire grilled items were also the most preferred type of seafood items by costumers so by introducing these new menu options, Red Lobster brought “fresh” to its menu. The most effective Phase of the re-positioning plan was phase 2 by re-positioning around freshness. What set Red Lobster apart from other seafood restaurants was its ability to bring quality seafood to people that didn’t want to spend too much money on food. Over time, health trends changed and Red Lobster needed to adapt to the new costumer base that wanted “healthier” and “fresher” food. It was extremely important for them to re-position around freshness because it not only showed that their food was fresh, but also that it had high quality at a good price. Internal research showed that guest satisfaction had increased by 14% from 64% to 78%. These results were excellent because it showed that the changes were impactful. In order to fully know what effects the changes had on the company, Red Lobster hired a market research firm to uncover psychographic segments. Surprisingly, the group experientials, composed almost a quarter of the costumers. Experientials were considered to be people who saw eating out as an important source of pleasure, enjoyed new restaurants and had a household income higher than all other groups researched. This was surprising because they did not know they were attracting this new group who was less price sensitive than the other groups. Lupdrop saw this psychographic change as a tipping point to the company and was wondering if the company should start focusing more on these experimentalists. Costumer Segment
Avg Spend per Meal
# of Costumers
Total Annual Spend
Net sales increase $151,852
Net Profit Benefit $21,411
The table shows what would happen if experientials became the target costumer base for Red Lobster by the increase in the number of costumers. If experientials became the target costumer base, net profit and net sales. Lopdrup should consider how the company is right now and what the company represents before making any major decisions. Since it was founded in 1968, Red Lobster was always focused on bringing affordable seafood to the mainstream...
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