Red Lobster Case Study
Customers had vague understanding of freshness and they thought Red Lobster‘s product not fresh mostly because too much fried Items on the menu. This phase played the most Important role In Lollipop’s plan, and De-emphasizing all fried Items and Introducing wood-fire grilling are most effective elements. In these ways, Consumer Needs were satisfied and Company Skills were improved. Phase 3 is re-modeling the restaurants, the target of which is becoming nicer than ordinary casual dining but still approachable.
This phase started in 2008, and was supposed to redone all restaurants by 2014. As a results, customer perceptions that Red Lobster “has food that Is fresh” had increased significantly according to surveys In 2008. By 2010, Internal research found that guest satisfaction was up 14% to 78% excellent”. Everything seemed good at that point. There are something worth notice: the new 2008 ads followed the same model of 2004 ones, but focus shift from “wood fire grilling’ and “fresh fish” to “new grilling method” and “freshness”.
That means they were introducing new category of cooking method and food that not constrained as “seafood”, a shift in product. It’s extension of Introducing wood fire grilling to reposition. In 2008, Copernicus Company conduct a study to uncover some cryptographic segments, and summarized Red Lobster’s customers into 5 categories: Experiential, Indulgent, Traditionalists, Eclectics and Frugal. Lollopped was facing a balance between building stronger connection with Experiential and losing part of Indulgent and Frugal.
If the mix of patrons shifts with the restaurant gaining 2000 new unique Experiential customers, but losing 1000 Indulgent customers and 1000 Frugal customers, restaurant level profitability would change In this way: Experiential Indulgent Frugal % of clients Gains/loss in customers under the assumption 2000 -1000 Annual meals per customer 5. 6 3. 8 Average spend per meal $24. 88 $18. 78 $14.
86 * Percent alcohol 4% 1% Gain/loss in annual revenue $313,488. 00 -$105,168. 00 -$56,468. 00 -$161 ,636. O According to form above, the revenues gained from new Experiential are as twice as the combination of loss from Indulgent and Frugal.
Besides that, Experiential consume much more alcohol, which is more profitable than food. Former calculation showed an optimistic result to us, so Lollopped should make Experiential the target segment. He also should modify Red Lobster’s positioning accordingly, but do it ritually lest go chapter 11 in the process as K-Mart. The scale of modifying can be described by the answer of questions at the end of the case.
- Segmentation: According to the former paragraph, experiential should represent the new Red Lobster target customer.
- Positioning: Red Lobster need to change positioning but not too much.
The rise of aquaculture had led to dramatic declines in the cost of seafood, so “approachable seafood” is not as appealing as before. Red Lobster need to find a new positioning, while keeping “fresh”. Exhibit AAA also showed that customers think cleanliness, quality and taste/preparation are very important, so “tasty fresh seafood” and “best fresh seafood” are all good options.
- Promotion: Current ads fit the positioning the marketing team wanted, as the focus was “freshness”. Traditional price promotions should be scaled back, shown in Exhibit AAA price is one of the least concerned factor.
- Price: Simply raising prices is not a good idea for Red Lobster.
Although Experiential are important, Indulgent and Frugal are large in customer percentage. Using price discrimination can be a good strategy: keep some cheap items in the menu, while introducing more expensive items. In this way, most patrons can be kept while revenue would raise.
- Product: Adding better wine selection is a good idea, since experiential could be attracted in this way while other customers have other options. Broadening the menu further Deanna estates to steal snare Trot toner premium casual canals Is also Teasel, ten success of “wood fire grilling” verifies that. Similarly, emphasizing on wine in menu, aging some location vary its ambiance by time of day are all good idea for the same reason as illustrated before.
- Place: To target experiential, re-modeling is necessary.
Most customers would enjoy better atmosphere. Moreover, re-modeling were operated after hours, so business won’t be disturbed. The most important reason is experiential are motivated by Culinary Expertise, sophisticated, upscale atmosphere. To conclude, all the strategies are to attract experiential without losing other customers.