Red Lobster case analysis Essay
Red Lobster case analysis
Should Lopdrup make Experientials the target segment and modify Red Lobster’s positioning accordingly. If so, how should he change its marketing mix (4P)? Red Lobster originally was founded in 1968 and gained tremendous popularity back then by offering fresh seafood for everybody. They made it easily accessible and approachable. However, over several extremely successful decades of rapid growth and many new restaurants, Red Lobster in 2004 was becoming out of date and out of touch with today’s customer. The company with more than 40-year experience in seafood restaurants, with its new leading CEO Kim Lopdrup now has invested in extensive market research. The results of the market research reveal a surprisingly exciting opportunity for the company to shift its target customer segment. The chain at the moment is taking its first steps of an elaborate 10-year rejuvenation plan under the lead of its CEO Kim Lopdrup.
Back in 2004 when he took over as a CEO of Red Lobster, the company was closing down restaurants and going through a major decline in sales. Furthermore, customer satisfaction had dropped significantly as well by then. Though, in 2010, even in a period of recession, the sales results are slowly starting to improve. As a result, the whole chain itself is improving as well. A recent market research study has revealed rather unexpected results that 25% of Red Lobster’s customers are “experientials,” people looking for pleasure, good service and high-quality food. Which is very different from Red Lobster’s traditional core customer who just wanted big portion sizes of decent seafood and does not worry about nutrition or upscale atmosphere. Lopdrup is currently thinking of possible re-positioning to attract more “experientials”, thereby also changing the company’s target segment.
But would this be a good step? Back in 1968, the brand gained popularity by making fresh seafood that was not very accessible back then. However, times have changed now. Customers now have an abundance of choices when it comes to fresh seafood, which makes it very hard for Red Lobster to differentiate from other brands only offering ‘approachable, fresh seafood’. Moreover, lately it has been associated with frozen and fried, unhealthy food, not fresh seafood. The recession has had a bad impact on the restaurant and there has been a major drop in customer count. Instead of focusing on winning the price war within the highly competitive casual dining category, Kim Lopdrup instead has decided to focus on rejuvenation, following a differentiation strategy.
The plan is to aim for higher quality, drive a higher frequency of visits and make the brand be seen as good quality seafood, where people could get a pleasant dining experience for affordable prices. In my opinion, Red Lobster must indeed focus on experientials, start fresh and show customers it is really doing things differently now. A new look, a new menu, improved service and better communication to let people see Red Lobster in a fresh, new way. They should embrace the 21st century by using more social networking (facebook, twitter, youtube), mobile apps, yet stick to its basic principles of providing fresh seafood from good fisherman, hire skillful grill masters and friendly staff, which are all core values for ‘experientials’. Moreover, these are values and expectations not only for ‘experientials’ but for the mass market in general. This way, they could achieve the highest reach and drive traffic to their restaurants.
They must get talked about and become more visible by investing in a complex marketing campaign that would go in waves. A good quality television campaign would be highly appropriate. Regarding it’s 4PS, they should adjust its current market mix by really thinking about the target group’s wants and needs. Experientials are well educated and will not tolerate bad service. They go out to restaurants to connect with friends, family, and colleagues. So the company should definitely think of ways to improve its service. Renovation of the restaurant space, hiring of friendly employees that Red Lobster would continually educate about the latest trends and menu offerings.
It is very important for the brand to have a welcoming, human face. And honest, communicative employees that will give a personal experience for each customer will take the brand image further away from its current corporate image. Regarding the products, it is also very important to communicate the source of their fish, its good quality chefs, daily offerings of ‘daily fresh catch’ to let people know that Red Lobster has ‘stepped up’ their game and only offering the highest-quality fresh crab from the best farmers. Perhaps they should do an acquisition with a wine company in order to offer experientals more wines to choose from, since they like to enjoy new food and menu items. They are motivated by culinary expertise and wine and food goes hand in hand with each other. Regarding the price, they could increase the price a little bit, since experientials are not overly ‘price sensitive’. They are well educated with a high income, though they also like to eat out often.
So a mid-range price would be the most appropriate. By focusing on experientials, Red Lobster could significantly increase profitability and get more loyal customer that return for more. The positioning should stay ‘approachable, fresh seafood’, since they have so many locations everywhere. The menu should be more frequently updated. Prices could be higher for ‘specials’, and they should communicate keywords like ‘quality, freshness, seafood lovers’, have cooking demonstrations. Invest in TV promotional ads to achieve mass awareness, hirepassionate people, focus on continuous improvement.