Promotion: Red Lobster begun the “Ignite the Craving” campaign in 2004 and developed the 2008 ads which focused on grilling and on “freshness” again. Besides, Red Lobster revitalized two legacy promotions for driving traffic: “Lobsterfest” and “Endless Shrimp”. Both emphasized on “choice and variety”.
Price: Red Lobster stopped deep discounting, which the brand had been doing a lot of. This action can de-emphasize the “low end” image of Red Lobster. Besides, because of the two promotions “Lobsterfest” and “Endless Shrimp”, Red Lobster took a small margin hit at the price point. But the volume gains more than compensate.
The bullets above shows Red Lobster’s new brand positioning. The ads succeeded in changing customer perceptions from “low end” to “freshness”. Customer perceptions that Red Lobster “has food that is fresh” had increased significantly according to 2008 surveys. The guest satisfaction was up 14 percentage points since 2004 to 78% “excellent”. The operating profit of 2009 in Exhibit 1 was 507,600 $$.
Apparently, the most effective element in Lopdrup’s repositioning plan was customer needs. The repositioning plan was driven by the “Red Lobster’s 2004 Attitude and Usage Survey of 857 people who had visited Red Lobster in the last year”. Customer rated the 11 factors when selecting a seafood restaurant on a 7 point scale. Judging from Exhibit 6-B, we can figure out that Red Lobster was below the average level in 2004. “Freshness of the seafood” is 16 percentage point less than other seafood restaurants; “Quality of the seafood” is 14 percentage point less; “Seafood expertise” is 14 percentage point less; “Atmosphere” is 14 percentage point less. The data explain why Red Lobster’s three phased plan focused on “Freshness” concept, “Seafood Grilling” expertise and Re-modeling “Seaside Atmosphere” restaurants.
In 2008, Red Lobster’s marketing team had commissioned a psychographic study by the market research firm, Copernicus. Copernicus revealed five segments of consumers: Experientials, Indulgents, Traditionalists, Eclectics, Frugals. Obviously Red Lobster in the past time had lots of Frugals, Indulgents and Traditionalists. But Experientials, which account for 23%, would be a new growth point. We assumed that the mix of patrons shifts with the restaurant gaining 2000 new unique Experiential customers, but losing 1000 Indulgent customers and 1000 Frugal customers.
The outcomes can be seen as the following table(Annual meals per customer and Average spend per meal are from Table B in the case):
Notes: Besides, Exhibit 1 in the case notes that margins on food items were about 67% while margins on alcohol were about 81%. The data from Table B shows that the percent alcohol of Experiential is 12% while Indulgents is 4% and Frugals is 1%.
Thus Experientials can contribute more revenues and income to Red Lobster. The growth rate of gaining the same number Experientials and losing the same number Indulgents&Frugals is above 93.39%.
How can Red Lobster achieve sustained growth in the future?
Conclusion: The key issue is that the ratio of Red Lobster’s gaining Experientials versus losing Indulgents&Frugals&Traditionalists must be higher than about 1:1.9 according to the data above.
The remaining part of the case write up is about recommendations.
Positioning: Before we move into positioning, we need to clarify a conception: Experientials are part of the Red Lobster’s customer who value “freshness of the seafood” as the first priority customer needs according to the 2004 consumer survey. Thus Red Lobster shouldn’t give up the “freshness” brand positioning. Furthermore, the changes in the three phased plan initiated in 2004 also attract Experientials. For example, the three phrased plan emphasizes “New menu”, “Culinary Expertise” and “Atmosphere”, which
