By Edet Ekpe

RED LOBSTER CASE STUDY

QUESTION 1
How has Red Lobster’s positioning changed over time? Do the current ads reflect the
repositioning that Lopdrup and his team envisioned when their effort began in 2004?
ANSWER
Prior to 2004, Red Lobster was positioned as a chain where customers could get
affordable seafood in a casual, approachable dinning setting. This position led them to
focus on promoting price and the use of deep discounts to drive traffic into restaurants.
This budget conscious positioning and the pictures of fried food on the menus caused
customers to question the quality of Red Lobster’s seafood, viewing it as a low-end,
outdated restaurant serving cheap, frozen, mass-produced seafood. This perception
coupled with the fact that its price tag was on the high end of casual dining, led to
stagnating customer satisfaction rating. Based on this negative perception and
stagnating customers satisfaction rating, Red Lobster reposition around freshness and
focuses on delivery fresh, quality seafood served in an atmosphere that is conducive for
various occasion.
The current ads, such as those from exhibit 9 (Stillshots from 2008 TV Ads) and the
campaign “ignite the craving” aided in conveying the message of repositioning. The new
ads that focus on “wood fire grilling” and “Fresh Fish” reflected Red Lobster’s
repositioning strategy from frozen to Fresh. Moreover, their change of slogan from “For
the seafood lover in you” to “Come see what’s fresh today” also boosted the current ads
strategy to reflect the repositioning around freshness.
QUESTION 2
What was the most effective elements in Lopdrup’s repositioning plan (initiated in
2004)?

Answer
There were three most effective elements in Lopdrup’s repositioning plan:
1. Operational improvement. This involve simplifying many of the operations in the
restaurant including the menus, recipes and promotions, to enhance efficiency
and reduce unnecessary mistakes. Second, they discontinue deep discounting in
favor of a well-timed promotions to offset seasonality and focus on sales.
Furthermore, the initiatives with the acronym “Fresh, clean, Friendly, and Full
was designed to ensure cleanliness and this led Red Lobster to carry out
equipment repairs in its restaurant and engage in staff training.
 2. Focus on Freshness. Lopdrup shifted Red Lobster’s focus to freshness. He
develops new menus items around freshness and change cooking techniques.
He downplays all fried items and introduced wood-fire grilling, “Today’s Fresh
Fish Menu”, and upgraded some of its raw ingredients. With the shift to
freshness, Red lobster promotions activities now focus on quality as seen in the
promotion for “Endless Shrimp” which promote “Choice and Variety”.

3. Re-modeling of the restaurants. In re-modeling, Red lobster focused on creating

restful and seashore like environment in which customers can feel unique and
distinguish from other casual dining. They focus on ensuring customers feel the
restaurants are Pleasant, yet approachable. It should also be conducive and
friendly enough for various occasions, from business lunches to date nights to
family dinners.

QUESTION 3
Compute restaurant level profitability under the following scenario: The Mix of
patrons shifts with the restaurant gaining 2000 new unique Experiential customers, but
losing 1000 Indulgent customers and 1000 frugal customers.

Experientials Indulgent Frugal Totals

+2,000 -1,000 -1,000
Avg. Annual 6.3 5.6 3.8
meals out
Alcohol 12% 4% 1%
Consumption
Avg. Spend/meal $24.88 $18.78 $14.86
Revenue/meal +$49,760 -$18,780 -$14,860 +$16,120
(Revenue/meal) +$313,488 -$105,168 -$56,468 +$151,852
*Annual Meals

The analysis of the scenario as shown in the table above indicate an increased revenue
for the store of about $151,852 per year. This calculation does not include 81% margin
of alcohol consume by Experiential, which means more of that excess revenue is profit.
Generally, Experiential are more profitable and insensitive to price, however, they are
more sensitive to service quality. This means that Red Lobster may need to spend a
little more to maintain the quality of the service in order to keep Experientials happy.
Question 4
Should Lopdrup makes Experientials the target segment and modify Red Lobster’s
positioning accordingly? If so, how should he change its marketing mix (i.e., the 4ps)?
Answer
Lopdrup should make Experientials the target customer segment, make some
modifications and reposition Red Lobster to be fascinating to this target segment, but
should not alienate other customer segments. Focusing on ensuring that customers
have a fantastic experience when dinning in Red Lobster will be a much more
sustainable advantage competitively rather than trying to be a price leader on quality
seafood in a casual dining setting.
Red Lobster’s marketing mix (4ps) can be change as discuss below:
1. Price mix. Red Lobster is already on a high side of the price range for casual
dining with an average price tag of $19.50, that is, almost $4 higher than most of
its competitors. Even though, Experientials are not price sensitive, Red Lobsters
must be guided by not pricing itself out of casual dining into premium casual
dining. Red Lobster should sustain its well-built position in the casual dining
category and not price out those customers who are price sensitive. Although,
Experientials are most likely to order premium items like appetizers and desserts,
such items could be included in the price menus. Generally, Red Lobster should
not increase its prices.
2. Product mix. The change of product mix from fired seafood to grilled seafood
and the emphasized concept of Freshness is positively working for Red Lobster.
Since the current product mix is perfectly working well across all customer
segments, it will be needless to make any changes in the product mix.
3. Place. Red Lobster should endeavor to identify areas with highest concentration
of experientials customers and then focus renovations on those store locations
first. Generally, all stores location should be remodeled as designed.
4. Promotion mix. Red Lobster should continue with its promotions that emphasize
Freshness and quality. However, the can still include price as part of its
promotion, but it be careful and subtle, the main focus should be on Freshness,
quality and fantastic place that create experiences and building relationships with
others.