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Red Lobster: Case Analysis

by on Jul.07, 2011, under Site News

Red Lobster

TABLE OF CONTENTS

 

Current Strategies of Positioning………………Pg. 3

Positioning……………………………………………………   Pg. 3

Entities…………………………………………………………    Pg. 3

Mission…………………………………………………………   Pg. 4

Distribution strategy………………………………………  Pg. 4

Product Strategy………………………………………………Pg. 4

Marketing Mix Used……………………………………  Pg. 5

Product……………………………………………………………  Pg.5

Place……………………………………………………………….. Pg. 6

Price………………………………………………………………..…Pg. 6

Promotion………………………………………………………….Pg. 6

Consumer Purchase Process…………………………Pg. 7

Strategic Analysis …………………………………………..Pg.8

BCG model………………………………………………………….  Pg 8

PLC model…………………………………………………………….Pg. 9

Competition ………………………………………………………Pg. 9

Market Trends………………………………………………………Pg. 10

Market Trends………………………………………………………Pg. 10

Recommendations ……………………………………….…  Pg.11

Confidential Evaluations ………………………………… Pg.13


Current Strategies of Positioning

Positioning

Red Lobster is a casual dining chain restaurant that offers approachable, fresh seafood. At first its mission was to bring seafood to a broad mainstream American consumer base by making it affordable. Now Red Lobster has positioned itself as an approachable place with fresh food. With an emphasis on experience and full service, Red Lobster wants its customers to bring family, friends, colleagues, or even clients, to share in the experience. The freshness of the food is emphasized in promotional efforts and menu choices.

Entities

The primary target market for Red Lobster consists of the affluent experiential segment group aged between 35 years old to 55 years. The majority of these entities are well educated, have well established careers with middle to high income that is ranging between $90,000 to $110,000 per year. Additionally, these individuals have retirement options and specific lifestyle; eating out is an important source of pleasure. They are motivated by the culinary expertise and consider most frequent diners of casual and fine dining restaurants, who enjoy new restaurants with sophisticated and upscale atmosphere, fine food and wine with dinner. The experiential are the least price sensitive people who enjoy life in the sense that they spend money on entertainment and traveling, and on average they spend the most money per meal. Their favorite food considers seafood and they love fresh fish and a wide variety of shellfish. They value the connection they have with the people they are eating with as much as the food they are eating.

Mission

These consumers need to satisfy their social needs for belonging; therefore they tend to visit restaurants often to spend time with their friends and family. Often referred to as the ‘experiential’ consumer, their main drive is to satisfy the need for love, belonging, and self esteem. By enjoying the company of others while pleasantly dinning, these consumers achieve belonging.  Restaurants they usually chose to go have to be also preferred within their peers. They have high expectations for service and atmosphere, and they seek high culinary standards. Most importantly, their main priority is to strengthen relationships with people they care about. Making similar choices as their peers allows them to satisfy their social needs and to fulfill their self-esteem needs. Thus they achieve their need for esteem, by seeking pleasant experiences.

 

Distribution

Red Lobster is the leader in the casual dining seafood category, and distributes its seafood products to the target consumer via its chain restaurants. There are nearly 700 Red Lobster locations throughout the United States, and a small number in Canada and Japan.

Red Lobster receives seafood from certified suppliers directly to the restaurant either through overnight express delivery from three suppliers in Main and Massachusetts or by truck from twelve distribution centers.

 

Product

Red Lobster was founded in 1968 by restaurant entrepreneur Bill Darden. His mission was to bring affordable, yet top quality seafood to a broad mainstream American consumer base. And back in 1985 Red Lobster introduced much of America to many “new” types of seafood such as live Maine lobster, snow crab, and jumbo shrimp. Today they offer a range of seafood products that include different verity of fresh fish, shrimp, lobster, calamari and snow crabs. They also offer popularized non-seafood items, such as key lime pie and white zinfandel wine. Red Lobster developed a new menu that includes seafood preparation concept wood-fired grilling, and created a “Today’s Fresh Fish Menu” with chef’s name on it, to empathize freshness of seafood and the high quality of their products.

 

Marketing Mix Used

Product

Red Lobster is a seafood restaurant chain for casual dining known for its affordable top quality seafood for mainstream Americans. It carries a wide selection of fresh prepared seafood products, such as lobster, shrimp, clams, calamari, steamed crab legs, and fish; including Atlantic salmon, rainbow trout, tilapia, snapper, grouper, arctic char, and mahi-mahi. Every Red Lobster Restaurant offers eight species of fresh fish from all around the world. It also offers lighthouse menu for health conscious consumers and people on diets. The menu also includes a variety of specialty seafood and non-seafood entrees, appetizers, salads, and desserts. Red Lobster stresses on the products freshness which does not only mean that the product is not frozen but that the fish is of quality and is prepared with culinary expertise. Red Lobster changed their cooking platform to satisfy their consumers. They introduced the wood-fired grill and found out that most types of seafood prepared this way was what the consumers preferred.

Place

The first Red Lobster restaurant was opened in 1968 in Lakeland, Florida. Now it is the world’s largest casual dining seafood restaurant chain with nearly 700 restaurants in all over the United States. They also have a small amount of locations in Japan and Canada. Currently, they are trying to re-locate some of their restaurants, in order to create a comfortable seaside experience for their customers.

Price

Average price for Red Lobster’s main dish is $20. Daily specials depend on the season, but the average check is $8- $20.  The prices are very affordable and an average American can afford it. However, compared to many non-seafood restaurants chains, the price is primarily higher because of the high cost of seafood. Since the early 1990’s the price of seafood has continuously declined. Regardless of the declined coast, seafood still remains more expensive than other kinds of foods.

 

Promotion

Red Lobster has a variety of promotions that it uses to target consumers. Television advertisements were developed to showcase the new menu, which clearly mentioned “wood fire grilling” and “fresh fish.” Red Lobster’s promotional efforts were towards the freshness of the food. The main emphasizes was that their products were never frozen. They wanted their consumers to know that the products are as close to their natural state as possible. The “wood fire grilling” and “freshness” was emphasized in the “Ignite the Craving” campaign. Those television ads consisted of a series of images of food that induced cravings. And those ads allowed them to reach new customers, and yet reaffirm existing customers.

Promotional discounting was reduced but two legacy promotions were re-energized: “Lobsterfest” and “Endless Shrimp.” The focus was on “choice and variety” rather than “all you can eat.” These promotions would help to drive traffic. Red Lobster uses a Pull strategy, because it promotes the brand and its product through television and billboards and offers promotional coupons. All marketing promotions are conducted by Red Lobster marketing team. Red Lobster also has a website which features the menu, and other valuable information people would like to know. They have promotional coupons, as well as seasonal promotions on their websites.

Consumer Purchase Process

Imagine a scenario where a 38 years old, married, graphic designer, decides to celebrate his birthday with his friends, family and colleagues. He loves seafood a lot, and while thinking where he should make reservation, he remembers his last pleasant experience at Red Lobster when he was invited by his colleague a few weeks ago. It awakens nice and lovely memories about Red Lobster’s pleasant atmosphere and fresh wood-fire grilled lobster.  And since his friends and family also love seafood he wants to invite them some seafood place to share fine experience. The problem arises when a consumer realizes that he is missing a lot because he never invited his friends and colleagues to a place like Red Lobster, which could become and expellant experience for his loved ones. He remembers that his friends go to Red Lobster often and it makes him to feel a need for affiliation and belonging in that group. After the problem recognition, the consumer starts information search process. Since his close friend dines at Red Lobster often he asks about his dining experience. His friend gives very positive feedback. After gathering information and mainly relining on the convincing statements done by his friend, the consumer measures the level of importance to address the problem and determines that making reservation and celebrating his birthday at Red Lobster is valuable enough to fulfill his needs of belonging, self-esteem, self-worth, and achievement. Then the consumer makes reservation at Red Lobster for 27 people. The post purchase behavior will lead to satisfaction or regret after celebrating his birth date. If he and his guests like the food and get pleasant experience from the dining at Red Lobster, then the consumer will be satisfied.

 

Strategic Analysis

BCG Model

The BCG Model is composed of four icons: the cash cow, the star, the question mark, and the dog. Red Lobster stands out as a cash cow in the BCG Matrix because it has a low market growth and it maintains high market share (with 43% of the casual dining sea food chain it has the highest market share).

Red Lobster has established a strong brand image through customers’ pleasant memories of freshness, high quality food, and friendly customer service. The restaurant has become a privilege to those who enjoys eating out with their families, friends, colleagues, and giving them memorable experience. As a cash cow, to remain the high market share, Red Lobster constantly needs to continue promoting its brand as superior seafood place. This way Red Lobster’s market share will compete with its competitors and will increase.

Product Life Cycle

In the product life cycle there are four different stages that a product can achieve: introduction stage, growth stage, maturity stage, and the decline stage. For the product life cycle Red Lobster considers to be in the maturity stage because at this point they need to defend market share and try to keep maximizing profit. This means that Red Lobster stopped growing, in other words, it showed a linear line in its growth rate starting the late 1990’s. However, due to aggressive sales promotes, some locations slightly grew.

By 2004, more competition grew in the seafood industry. For this reason, Red Lobster will need to let the consumer know how different they are from the competition, through promotions of the variety of seafood dishes that they offer. And as a result of the 2008-2009 recessions, there was a great negative effect on casual dining restaurants, which became another reason that Red Lobster stayed constant in the market and did not continue to grow.

Competition

The first Red Lobster restaurant was opened in 1968 in Lakeland, Florida and since then has seen remarkable growth. It became an instant success. And since then more Red Lobsters were opened in different locations in all over the country. Because of the decline in cost for certain types of fish cause seafood restaurants competition to rise. Aquaculture transformed salmon and shrimp from luxury items into mainstream middle class fare. And places such as Applebee’s, Chili’s and Outback offered Seafood options in their menu.  Now in the United States there are about 8,000 casual dining seafood restaurants independently owned. For example, Joe’s Crab Shack with 113 locations is a casual dining chains with near to Red Lobster price point $19. Regardless of the price decrease, seafood still remains expensive. Despite all its competitors, Red Lobster steel holds the highest market share among casual dining.

 

Market Trends

There are two categories for Seafood options; in expensive and high end locations, the offering seafood has high quality, and fresh prepared by culinary expertise, which makes it more exclusive. In contrast, low end locations offer mass-produced and frozen seafood with a majority of it fried.

 

Red Lobster’s marketing efforts

The focus of the marketing efforts is in three phases: Operational excellence, repositioning around freshness, and remodeling the restaurant. Phase one involved basic operational improvements, which is necessary in order to keep up with the growing number of casual dining option available to consumers. Operational excellence is focused on simplifying operations and reducing costs while providing high quality product, and delivering superior value for the mass market.  They also focused on simplifying the menus, simplifying the receipts, and simplifying promotions. Simplifying things, but at the same time improving quality is a great approach for marketing improvements. It is overwhelming for customers to choose from a menu that has too many options. They created “no fly zones” during busy periods in the restaurant. This meant that the company did not bother the operators with any new menu items or promotions during busy periods so that they may serve their guests.

The second phase was focused on re-positioning around “freshness.” Therefore, they wanted to concentrate on developing a mind set for the customer that Red Lobster products are fresh. Then they developed a new menu and started ad campaign around freshness by advertising “wood fire grilling” and “fresh fish” which would help re-positioning their image. By offering promotion such as “Lobster fest” instead of phrases such as “all you can eat” is a great way to target consumers who want quality seafood prepared with healthier options, instead of fried frozen seafood that contains high calories. Consumers are becoming more health conscious and are choosing healthier and high quality alternatives for their food consumptions.

The third phased was remodeling the restaurant in order to create a comfortable seaside atmosphere and pleasant experience for the guests  and to give them clues  to all senses that the seafood Red Lobster provides is fresh and of top quality.  It also meant for the customers to feel that they are dinning at a nicer than ordinary casual restaurant without losing its approachability. The atmosphere had to be appropriate for multiple occasions, including family dinners, date night, and business lunches. It meant to be nice enough for ordinary people to celebrate anniversary or other occasions and comfortable enough to bring kids or go there in their jeans.

 

Recommendations

It is highly recommended to continue attracting affluent experiential segment group. In order to continue to attract experiential, a bigger emphasis should be put on the wine selection. This group is kwon for high alcohol consumption (12% of the alcohol consumed at Red Lobster representing the second highest consuming group). Special wine menu with wide variety of wine selection should be introduced. And like the ‘fresh fish’ menu, the special wine menu should be offered to guests to compliment the wine of the day. This also would help Red Lobster to continue expanding without diluting their brand image. Because the original customers would enjoy what they like, and the new customers would have new wine selection to satisfy their needs. Also Red Lobster will benefit even more if they offer different menus at different locations. For example, in California they could offer slightly more expensive dishes and desserts as appose to the east side in the lower income earning areas where the core consumers will not like the changes at all and they only go there because of the fact that is “cheap seafood.”.

They definitely should continue remodeling all their restaurants inside and out to be able to compete and gain market share. Because it will attract new customers and the traditional customers will experience even greater pleasant experience because of the new re-modeled atmosphere. The promotion strategy benefits Red Lobster very much; therefore, they better continue offering promotions and coupons via their website.


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