The widening income gap pushes Red Lobster to either go upscale or go downscale (Chen, 2013). The top 10 percent richest people earned 12 times what the lowest ten percent earned, according to 2012 Census Bureau data. Although an unexpected high percentage (23%) of experientials patronized the restaurant in 2008 (Red Lobster Case, 2010), the shrinking middle class makes it embarrassing to serve both experientials who expect the best service and price sensitive customers at the same time. Neither the rich nor the poor will choose Red Lobster since rich people will directly go to fine dining restaurants because they expect top notch service, and the low income people tend to spend more time eating at home (Gustafson, 2012). For a chain restaurant as large as Red Lobster, it should not go premium and change its customer base to experientials because of potential market opportunities and its own operating features.

Segmentation
The revenue brought by more profitable experientials will be offset by the loss of other 70% price sensitive customers because they can not afford the costly upscale service. It is true that experientials account for 23% of total customers and contribute more to profits. Indeed, the three phase plan has attracted many experientials that the company has not expected. However, they could not represent the company’s new customer base since 23% of them are far from enough when compared to 70% of price sensitive customers that include indulgents, traditionals, and frugals. Moreover, the tragic story of K-mart tells a truth that turning too abruptly to another customer base may cause a company to lose its core brand value. Sticking to the original customers is a better choice for now.

Promotion and Pricing
Promotion activities and renovations should be scaled back because the company already had fairly high advertisement costs. Although the company spent a lot of money on promotion activities, those policies may not be as effective as they seemed. Statistics from Market Realist 2013 annual filings shows that not only the dollar amount of advertisement expense increased by $100 million, but also the percentage of advertisement expense in proportion to sales grew by 0.3% in two years. In spite of such aggressive promotion policies, year 2013 has witnessed 2.8% decrease in guest account, and even worse, a 5.9% drop was just reported in the latest quarter. Chen (2013) concludes that the unclear brand value led to the loss of guests. As I mentioned above, the company needs to focus on price sensitive customers and rebuild the brand. Instead of offering promotional discounts, the company could consider using the money on activities such as updating the menu and providing higher quality food, which help build customer loyalty.
Pricing strategy should be in line with the segmentation strategy so prices should not be raised. Admittedly, Red Lobster remodeled itself by offering higher quality cuisine seafood and had seen positive results. But Bell (2010) revealed that there were some critiques about the “sophisticated dining experience” (p. 11). Although promotion activities make the guest loss less obvious, the declining guest account is still an alarming sign that Red Lobster has to do more than just special deals to win customers back.
Positioning, Product and Place
Minor changes in positioning are preferred for the company under current market condition. The recent eating behavior of average American families gives the company a more suitable positioning strategy: fast and healthy affordable seafood. Gustasfson (2012) reports that while more people are eating at home, less produce is consumed, indicating that people make quick meals from pre-prepared food to save their time while enjoying the time of eating with families or friends. That is to say, American people do eat at home, but that does not mean that they eat healthier food. Providing fast yet healthy food is something that Red Lobster can do in order to fill this gap. Reflecting on the company history, we can see that in the 50s when the company was headed by Howard Johnson, it already obtained the tradition of serving food quickly with low cost. According to Gallup strengths analyzing expert Rath (2007), strengths deserve more time to work on because working on what you are already good at will take less time and effort yet achieving bigger improvement. “Fast and healthy affordable seafood” tend to be a wiser positioning than “approachable, fresh seafood” at this point.
To avoid too much loss of experiencials customers, higher price wine selections could be added if not much costs are incurred and the wines are welcome in the selected locations. Apart from that, new flavor of sauces and even dessert can be added to increase the variability of menus, since experiencials are interested in new flavor. Another product strategy may be adding a new menu emphasizing on fast delivery and balanced diet.
The remaining remodeling work should not be done in haste. The decoration work could continue but the wood-fire grilling that complicated the dining experience could be discarded. Although the highly profitable experientials customers are tempting, it will be better if the renovation work goes on with a steady pace, for complains from original customers has emerged (Bell, 2010).

Action Plan
Goal: reduce promotional discounts while increasing advertising efficiency, change positioning slightly to make customers believe that Red Lobster care much about their health and time, and increase profits through brand loyalty
Short-Term Steps * The first and the easiest easy step starts with cutting advertising expenses. Reduce television advertisement by half since more people tend to spend time online than watching TV. For July to December, 2014, the advertising budget can be $85000, half of which is allocated to online advertising, a quarter to TV ads, and another quarter to billboards, posters and magazines. If $85000 will work, then carry on this budget to year 2015. * Add “Fast Servicehealthy diet” menu andadd a line of produce and vegetables choices to the menu. This practice will only be implemented in 50 selected locations first. For this particular category, Red Lobster can estimate hourly demand and prepare produceand seafood in advance and make sure that every customer can get theirheated food within 5 minutes without paying more. * Add Sauces from traditional Asian countries to add flavor to the new menu. * Limited choices of dessert can be added to create a warm family dining atmosphere.
Long-Term Steps * Except some adjustments mentioned above, continue with the three phase remodeling work steadily and hopefully finish these steps by 2015. Winning customers back is essential to Red Lobster’s success. If the new “fast and healthy” menu does not live up to expectation, the company still can turn to Gallup formore intensive market research.
Risks and Countermeasures
There is a possibility that experientials will go away from Red Lobster if their demands are not met. They might find Red Lobster’s food boring with little variation. To alleviate the revenue loss associated with potential decrease in experientials, Red Lobster can buy in ideas from other culture to increase variety of food. For example, the restaurant may combine vegetables and seafood together and cook them in a new sauce. Pilot study can be taken in selected locations to gain experiencials’ feedback towards the new flavor. Moreover, wine selection will be adapted according to their preference. Attract them by advocating a warm and family-like caring eating environment.
References
Bell, D. E., & Riis, J. (2010). Red Lobster. Harvard Business School Cases, 511-052. Retrieved from http://www.hbs.edu/faculty/Pages/item.aspx?num=39298
Chen, X. (2013, October 29). Darden analysis: Darden must increase or decrease average check. Market Realist. Retrieved July 27, 2014, from http://marketrealist.com/2013/10/darden-analysis-darden-must-increase-decrease-average-check/#tab-research
Gustafson, T. (2012, February 19). Americans Prefer Eating at Home But Still Don’t Cook and Don’t Eat More Healthily. seattlepi. Retrieved July 27, 2014, from http://blog.seattlepi.com/timigustafsonrd/2012/02/19/americans-prefer-eating-at-home-but-still-don%E2%80%99t-cook-and-don%E2%80%99t-eat-more-healthily/
Lynch, D. (2013, December 5). Obama Decries U.S. Income Gap That Has Widened Under His Watch. Bloomberg.com. Retrieved July 27, 2014, from http://www.bloomberg.com/news/2013-12-05/obama-decries-u-s-income-gap-that-has-widened-under-his-watch.html
Rath, T., & Buckingham, M. (2007). StrengthsFinder 2.0 (New & upgraded ed.). New York: Gallup Press.