Case Write-up Red Lobster Customer Analysis Red Lobster is flavored by those who desire to use the meal occasion as an opportunity to connect with family, friends, colleagues and clients, , not as it assumed that customers are there for affordable seafood. Customers who come to Red Lobster are classified as 5 different people. The most common one is Indulgents, then Experientials, Traditionalists, Eclectics, Fruguals. Experientials are more frequent to come and spend more money per meal than the other four. In addition, Eclectics are more likely to take wine during meal, wine which is the most profitable part of sales. Profit from each kind of Customers are calculated by: [Average spend per meal * (1- percent alcohol) * 81% + Average spend per meal * percent alcohol * 67%]* Annual meals per customer (See Exhibit 1) Obviously, Experiential customers are most profitable. In addition, 2000 Experientials = 215303 > 1000 Indulgents and 1000 Eclectices = 147610. Company Analysis First, In 2004, Red Lobster is rated as excellent by 64 percent of its guests. This number goes up to 78% by 2010. Second, from the survey done by Copernicus, it shows that, compared to other sea food restaurants, Red Lobster best in non-seafood items and price. However, the most important ones, such as freshness, cleanliness and quality of seafood, Red Lobster did worse than other restaurants by 16%, 5% and 14%. Red Lobster is seemed as low end places by customers. Third, Red Lobster grew quickly from 2001 to 2006 but suffered slow rate in 2008-2009, and will grow slowly in 2010. As Red Lobster did not good in three important areas, it lacks competition with other seafood restaurants. Therefore, changing is necessary. Of course, it did some changes, and those changes have some good influences. Collaborator Analysis Red Lobster lower price, which is also its strength, is attributed to it distribution system,. Red Lobster developed the first national seafood distribution system in 1970’s by computerized. Competitive Analysis Red Lobster has 6 inderect competitors, Big 7, such as its sister chain, Olive Garden, biggest casual dinning bar, Applebee’s etc. However, Big 7 are more like bar&grill, not seafood restaurants, but they also have salmon and lobster tails. Among seafood chains, Bonefish and McCormick& Schimick have a higher price. So Red Lobster’s direct competitor is Joe’s Crab Shack, is Joe’s Crab Shack, however, has a smaller size and spends less money on advertising. Therefore, Red Lobster takes the dominant market share, which is about 43%. However, from respondents who were asked to rate how well Re Lobster did, its rating is lower than industrial average. In addition, Red Lobster has the lowest alcohol sale, which is more profitable than food. Context Analysis Americans would like to spend 31% of their food dollars away from home on casual dinning. Therefore, it is a high amount. However, because of the recession, the whole industy grow slowly In addition, because of 150,000 independent casual dinning, the competition is intensified. Segmentation Should Red Lobster make Experientials the target segment? First, Experientials are wealthy and well educated, so they are not price sensitive and would pay more per meal. Second, they are more frequent to take dinning at casual and fine restaurant, so they would pay more meals. Third, they prefer to enjoy dinner with wine, which is a more profitable item, so they are more profitable. Finally, they enjoy new foods and menu items, so they are more likely to try Red Lobster’s daily fresh and new items so that Red Lobster also could get feed back. Therefore, why not?
Even though the restaurant gaining 2000 new unique Experiential customers will lose 1000 Indulgent customers and 1000 Frugal customers, the margin from 2000 Experiential customers are higher than 1000 Indulgent customers and 1000 Frugal Customers.

However, Experientials will not tolerate bad service and prefer well-cooked meal and sophisticated atmosphere. Therefore, Red Lobster should focus on satisfying Experientials. How? By product, promotions and places.

Product Decisions How has Red Lobster’s positioning changed over time? Red Lobster’s products changed from affordable and high quality seafood at the beginning to provide fresh and premium products. Recommendation for Products One way the managers have mentioned is to broaden its menu to include more non-seafood items. As Red Lobster has a successful distribution chain, approachable and fresh seafood still should be the right positioning to stand out from competitors. However, as Expenrentials should be their target market, Red Lobster needs some changes. First, Red Lobster has the lowest percentage of alcohol sales, it should add a better wine selection to cater to experientials, also to make higher margin. Second, Expenrentials are new thing adventures but seafood is one of their favorite. Red Lobster should not broaden its menu on steal share even though Red Lobster did well on that part. In addition, Red Lobster instead should broaden its sea food menu by providing raw seafood like Oyster and other kinds of seafood which means fresh. Promotion Decisions Lopdrup took three phased plan to improve Red Lobster. Phase one: Improving basic operation by stopping deep discounting, recalibrating all of its cooking equipment, doing deep cleans of all the restrooms and tracking down chronic odor issues, and by focusing on hiring and training to emphasize friendliness. As a result, Phase two:Red Lobster sought to develop a new menu around freshness.
First, it introduced wood-fire grilling to restaurants.
Second, “Today’s Fresh Fish Menu” was introduced
Third, Endless Shrimp and Lobsterfest are shown and endless shrimp became to be the most popular one. Phase three: all locations would be remodeled in the following 6 years to make Red Lobster restaurants to be a comfortable seaside atmosphere. Evaluation of repositioning Plan Market: Consumers who see Red lobster as low end places Mission: Reposition Red Lobster in the consumer’s mind from frozen to fresh. Message: Fresh, high quality and comfortable. Media: Television advertising Measurement: percentage of excellent by customers goes up from 64% to 78%. Do the current ads reflect the repositioning? Today’s Fresh and grilling did give customers a positive attitude and impression of fresh food. The ads in Television did show how fresh its food is. In addition, customer perceptions also show that, in their opinion, Red Lobster is more likely to have fresh food. What were the most effective elements in Lopdrup’s repositioning plan? From customers and company analysis, the most effective one is menu.
Recommendation for Promotion
I think their promotion is proper. Red Lobster is trying to improve their service, atmosphere and menu, all which are satisfied for Expenrientials. And its advertising is proper to show how fresh its food is. However, should they still spend a huge amount money on Television? I think they need some way special and more efficient.
First, improving its advertising. Red Lobster has a well organized distribution system and it buys fresh and top quality seafood directly from fishery. So why it doesn’t show how make some extreme advertising to show how fisher men catch fish and how it distributes its fresh materials?
Second, as Red Lobster wants to show how fresh its food is, why it doesn’t have some striking and impressive titles? For example: if we are closing tomorrow, it means the weather is not good to fish today.
Third, not only focuses on fish and lobster, oyster is also an option, which are usually ordered with wine and shows freshness. Place Decisions First, Red Lobster is aiming to provide affordable and high quality seafood to non-coastal regions, therefore, most Red Lobster restaurants are located in non-coastal area. Second, Red Lobster restaurants have existed more than 30 years, so it is old fashion and needed renovation. Therefore, one place decision, the phase three, is to renovate all its restaurants in 6 years. However, this decision costs a lot of money. 350,000 dollars to renovate and 150,000 dollars for maintenance fee, which are equal to one year’s net profit. Is this prefitable?
Recommendation for place
Renovation is expensive, but is also effective, because it will attract more Expententials. However, I don’t recommend to move things more quickly because it will totally change Red Lobster’s acceptance by other customers, and stretch Red Lobster too far.
The way I recommend it to renovate a portion of its restaurants, for example, half in one area. This is because, renovated restaurants could attract Expenrientials, even Electics. The old ones still attract Indulgents and Frugals. This way will change Red Lobster gradually, similar to LEXUS and TOYOTA. Pricing Decisions

Red Lobster was trying to no to raise price by focusing on chain’s extensive price promotion. So its price is premium buy affordable and cheaper than other sea food restaurants. This is its strength and how it is distinct from other seafood restaurants.
Recommendation for Price
Was raising prices an option? Raising price is a option because Expenrentials are not price sensitive and it will bring more profit. However, I don’t recommend to raise price, because Red Lobster will lose more customers on other part, maybe more than they gain in Expenrentials. Red Lobster | Experientials | Indulgents | Traditionalists | Eclectics | Frugals | Annual meals per customer | 6.3 | 5.6 | 4.4 | 5 | 3.8 | Average spend per meal | 24.88 | 18.78 | 15.84 | 22.29 | 14.86 | Percent alcohol | 0.12 | 0.04 | 0.02 | 0.14 | 0.01 | Margins on food | 0.67 | 0.67 | 0.67 | 0.67 | 0.67 | margins on alcohol | 0.81 | 0.81 | 0.81 | 0.81 | 0.81 | Annual margins(dollar) | 107.65 | 71.05 | 46.89 | 76.86 | 37.91 |
Exhibit 1

By Yizhuo Wei