Red Lobster Founded in 1968 by Bill Darden

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less price sensitive than the current target market. In addition, experimentals typically ordered appetizers, wine, and dessert with their meal making them a significantly more profitable segment.

• Current Marketing Efforts –

Currently, marketing aspects are focused on three phases; operational excellence, repositioning around freshness, and remodeling of the restaurant.

Operational excellence: This phased focused primarily on improving the operating discipline of the company. Operations were simplified to reduce errors, cost were reduced but high quality products were provided to the mass market. Other changes were made as well; menus, recipes, and promotions were all simplified.

Re-positioning around “freshness”: Company management made the choice to reposition the brand. They wanted to alter the mindset of customers to recognize Red Lobster food as top quality and fresh. Several other things were changed including the cooking platform. They put less emphasis on fried fish options while introducing and emphasizing wood-fire grilling seafood preparations. Raw materials were upgraded, more focus was placed on the chef, and  “Today’s Fresh Fish Menu” was launched. Advertisements were created to showcase wood-fire grilling and fresh fish.

Re-modelling the restaurants: This phase was primarily focused on re-modeling each restaurant to create a more comfortable seaside atmosphere for customers. They found they had a significant amount of extra space and could increase capacity by 50%. The remodel also provided subtle clues to all senses that the seafood being served was of superior quality and upmost freshness. The strategy helped to improve conditions for Red Lobster by increasing guest satisfaction by 14%. Staff morale increased, turnover decreased, customer satisfaction was higher than the industry average; overall good changes were being made.

• Conclusions and Implications of the Situational Analysis –

The situational analysis conducted above brings to light a few key discoveries. First, Red Lobster has made a tremendous amount of key changes and has seen significant gains in the last 6 years. Second, while Red Lobster is part of the Big 7 casual dining restaurants in the U.S., the company is still lagging behind its competitors. Third, the largest segment of consumers Red Lobster has is not the segment that has been targeted in the past. Lastly, the experiential customer segment makes up almost a quarter of all the companies customers, yet the marketing efforts are not aimed at this segment.

C. Problem Definition –

Red Lobster is behind its main competitors in the casual dining industry. New insights as to why this is happening have been gained by the market research study conducted by Copernicus. It has become clear that Red Lobster is not dominating any one consumer segment. Instead there are three segments (experiential, indulgent, and frugal) which are equally represented. These findings present a new set of opportunities to the company for expanding business.

D. Changes Required and Alternative Marketing Solutions –

Alternative 1:

Identify experientails as the new target segment for Red Lobster. Experientals are known as the best customers for casual dining restaurants. By expanding this segment, profitability would increase. Why? Experientials are the most profitable segment for restaurants because they tend to order appetizers, wine, and dessert. While this segment is different from the other five found in the market research study, the large majority of strategies being used by Red Lobster could continue as is. Only a few key changes to the marketing mix would be needed.

- The first key change would be a positioning addition to the existing “affordable fresh seafood”, adding elements of culinary expertise, superior service, and an atmosphere that provides opportunities for customers to connect.

- Second, the promotion should reflect the new positioning strategy. Less focus should be placed on the traditional promotions like “Endless Shrimp” and “Lobsterfest”. Raising prices could potentially be an option but I advise against it. Upping prices could deter the frugals which are currently the largest segment of customers.

- Lastly, the product would need an adjustment. A wider variety of wine should be added. Perhaps a separate wine menu could be introduced. Additional appetizers and desserts could also be added to attract new customers in the target market.

Alternative 2:

Identify indulgents as the new target segment for Red Lobster. Indulgents are already a large portion of the customer base for the company. Indulgents are motivated by large portions and all you can eat offers but they are not big wine drinkers. By expanding this segment very little would have to change in the marketing mix. Promotions like “Endless Shrimp” and “Lobsterfest” could continue and a few new promotions could be added. Wine could still be on the menu as an option but other mixed drinks could be added.

Alternative 3:

Stay with the current strategy. The company would continue to attract the four biggest segments of customers (frugals, indulgents, experientials, and traditionalists). The current strategy has done a great job of appealing to these four groups so deciding to focus on just one segment is not completely necessary. The current brand positioning, is still the most appropriate for every segment. The current promotion and place still show top quality and fresh seafood.  

E. Recommendation & Decision – Alternative 1 is the best choice. The company can narrow it’s marketing focus to concentrate on the most profitable group, experientials, as the target segment. Only a few key changes would need to be made, which would not alienate the other three existing segments found in the segmentation study.

F. Implementation Plan & Timeline –

The time required to implement and change all the elements of the marketing mix should take 4 quarters to implement with additional quarters for study and monitoring to track changes in segmentation.

Quarter 1

- The preferences of the consumers should be studied further to guide the development of additional menu items.

Quarter 2

- A