Individual Paper 1 Achmad Husni Thamrin

Marketing Management
RED LOBSTER
BACKGROUND
Red Lobster is a casual dining chain restaurant that serves affordable and fresh seafood to
mainstream America. Bill Darden, who found the restaurant in 1968, started Red Lobster from its
early focus on affordable and top quality seafood to become, more than 40 years later, one of
Americas oldest and largest national full-service casual dining chains with 694 locations that
spread within US and the highest market share among casual dining seafood chains.
When Kim Lopdrup, who had worked in the chain restaurant business for 25 years, took over as
President in 2004, Red Lobsters consumer survey showed that the top three attributes when
choosing a seafood restaurant are freshness, quality, and taste of the seafood. Lopdrup realized
that Red Lobster was lagging the seafood competition in these three attributes. He felt that a
major change in positioning was needed. He succeeded to shift perceptions and reposition Red
Lobster in the consumers mind from frozen to fresh through three following phases:
1. Operational excellence
This phase involved some basic operational improvements which were focused on
simplifying operations and reducing costs while providing high quality product, and
delivering superior value for the mass market.
2. Re-positioning around freshness
This phase was focused on developing a mindset for the customer that Red Lobster products
are fresh. They changed the cooking platform with de-emphasizing all the fried items and
introducing wood-fried grilling.
3. Re-modelling the restaurants
This phase was focused on re-modeling the restaurant to create a comfortable seaside
atmosphere. It also gave customers clues to all senses that the seafood Red Lobster provides
is fresh and of top quality.
The strategy brought much better condition for Red Lobster. In 2010, they can increase 14 % its
guest satisfaction since 2004 to 78%. Furthermore, they had a significant extra capacity that can
accommodate 50% more in guest counts. Staff morale was up and turnover was down. They
were in a right track a growth restaurant at that time, according to the Wall Street analysis.
In July 2008, Red Lobsters marketing team identified purchase behavior of its segments through
market research study. They divided the segments become 5 behaviors: experientials, indulgents,
traditionalists, eclectics, and frugals. From the results, they also found almost a quarter of their
customers would be described s experientials. The people in this group actually have very high
culinary standards, and they have really high expectations for service and atmosphere. But they
still prioritize the relationship with someone else who they care about. Experientials are the best
customers for a casual dining chain and were particularly profitable because they are more likely
to order desserts and appetizers and wine, and they are less price sensitive.
PROBLEM / KEY ISSUES
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Individual Paper 1 Achmad Husni Thamrin

Marketing Management
The new finding of Red Lobsters marketing team gave Lopdrup an insight about its customer
segments. He pleasantly surprised by the segmentation study and believed that this situation
could be an opportunity to expand that segment further. He wants to respond properly to the
segmentation study to get best result. However, he needs to elaborate all options more deeply
based on some considerations. Two main questions that need to be answered before deciding
what to do are whether the Red Lobster needs to change its position to focus on experiential and
what the implications if they shift their ongoing strategy to attract the experiential segment.
ALTERNATIVES AND CONSIDERATIONS
The following actions can be alternatives for Red Lobster to respond the segmentation study:
1. Staying in the ongoing strategy
Red Lobster could continue to attract the affluent experiential segment group without change
its current strategy. The general picture of its strategy may not change, however, they may
add or scale up some components that could draw the attention of people in the segment.
The segmentation may be still the same. They have four big groups of customers: frugals,
indulgents, experientials, and traditionalists. The current strategy has brought many
customers from these segments, then changing the focusing to one segment is not necessary.
The brand positioning, approachable and fresh seafood, is still the right positioning for every
segment. It also may be still accepted by customers in the experiential group. Other
components that could be still ongoing are the promotion and the place. Both components
still show the brand as a providing of top quality and fresh seafood which is in line with the
character of customers in the experiential group.
However, it may add a better or special wine menu with many varieties of wine selection.
Similar to the fresh fish menu, the special wine menu could be offered to customers to
compliment the wine of the day. This also would help Red Lobster to continue expanding
without changing its current strategy. The current customers would order what they normally
like, and the new customers would have new wine selection to meet their wants.
2. Focusing on the experientials as the new Red Lobster target customer.
Representing experientials as the new Red Lobster target customer is the great idea to expand
that segment further then take the profitability from new customers in the group. The
experientials are considered as the best customers for a casual dining chain and mostly
profitable because they are more likely to order desserts and appetizers and wine. This group
is also known to have less price sensitive character compared to the other groups of
indulgent, frugal, and traditionalist. However, Red Lobster may need to adjust some
components in its strategy if it decides to focus on this group.
The positioning of Red Lobster as the approachable and fresh seafood may not meet the
expectation of the experientials since they have very high culinary standards and high
expectations for service and atmosphere. Red Lobster needs to provide a higher standard of
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Individual Paper 1 Achmad Husni Thamrin

Marketing Management
service to its customers. The positioning as a providing of excellent dining experience is
necessary to build in every customers mind. The promotion through advertising and
sponsorship of special event may support its image as an upscale restaurant. They could
reduce the price promotions since this group is less price sensitive. Based on this character,
Red Lobster may increase the price a little bit to provide what customers want.
Fresh and best quality seafood should be still provided in the menu. They may need to add a
better and higher priced wine and food selection. They could offer the special wine menu to
customers to compliment the wine of the day or slightly more expensive dishes and desserts
to attract more people from the experiential group. Finally, the remodeling of interior and
exterior of restaurants is still a good idea because people from this group really appreciate the
comfort atmosphere and pleasure restaurant.
SUCCESSES AND FAILURES
Currently, Red Lobsters marketing effort is focused in three phases: operational excellence,
repositioning around freshness, and remodeling the restaurant. They chose to continue changing
in positioning through three phases to build the brand image as top quality and fresh seafood. In
fact, the strategy had resulted the better condition for Red Lobster. Its internal research found
that its customer satisfaction was higher than industry average. They could increase its capacity
to accommodate 50% more customers. Additionally, staff morale was increasing and turnover
was decreasing.
However, some of indulgent customers thought Red Lobster was heading in the wrong
direction. This phenomenon indicated that the strategy is not communicated well to some
community. Failing to send the companys message to clients will result the misunderstanding
and the loss of our customers.
RECOMMENDATIONS
Focusing on the experientials as the new Red Lobster target customer is the best action to
respond to the segmentation study. As one of the best customers for a casual dining chain, this
group can give more profitability if become the biggest proportion in percentage of customers.
To increase the business in this group, Red Lobster needs to focus to serve this group because of
its unique characters compared to other groups.
Although the action will increase the cost in the promotion and place, Red Lobster will offset it
from the higher revenue.The communication between customers and company also will be more
efficient and effective. Considering this, focusing on one profitability segment is a better option
for Red Lobster than staying in the ongoing strategy.

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