Case Study on Red Lobster Restaurant
Red Lobster is the private dining restaurant; it was founded in March 22, 1968. Founder of this restaurant were Bill Darden and Charley Woodsby. It head quarter is in Orland, Florida, U.S. Red lobster is in different countries like, Mexico, Canada, Japan, Brazil, Malaysia, New Zealand, UAE etc. Kim Lopdrup is the CEO of the restaurant and worked in chain restaurant for 25 years. They serve seafood, chicken, steaks, pasta etc.
Presentation of the facts surrounding the case:
Red lobster is the largest national full-service casual dining chains; the chain is struggling for years to provide the best food quality, Kim Lopdrup in 2010, take initiatives to ensure the sustainable growth. Red lobster positioned itself in the market as the affordable and fresh items. The management of red lobster is trained and the study about the market segments by the Lopdrup and his team identified that, people love the foods as it is affordable, and all market segments are being targeted. In 2009, it was estimated that Americans spend about 40% of their food dollars away from their home, in the restaurants.
There are two more segment, which are emerged from the studies, “fast casual”, who want quick services, and “premium casual”, who like casual dining, refined atmosphere and moderately higher prices. Red lobster targeted those segments also and at 43%, their market share was higher among casual dining seafood chains. In 2004, the emerging business of competitors resulted in the loss of profitability; red lobster want to include more items in its menu, however, according to the research comes to know that, competitors had set their prices lower then red lobster.
It was noticed that, red lobster is lagging at two points, “taste of sea food” and the “quality of sea food”. Lopdrup saw some immediate opportunities, for the improvement and brand positioning. Lopdrup, launched three plans, which could result in improvements.
Phase 1, “operational excellence”, which can bring the immediate improvements, phase 2, “re-poisoning around freshness”, it involved the major menu changes, and phase 3, “re-modeling the restaurants” this is something which can change the customers mind. The plan was begin to test in 2008, and follow for 6 years if successful. Lopdrup, involved Copernicus, which analyzed and reveled, five segments, which should be targeted are “Experiential”, for them eating is a source of enjoyment, they enjoy new restaurants, motivated by upscale atmosphere, do not tolerate bad service and are sea food lover. “Indulgent”, who love all type of food, do not worry about nutrition’s, enjoy new restaurants and mostly from high schools. “Traditionalist”, which is the oldest segment, they are less frequent to restaurants, they are price sensitive, have average education and prefer o eat shellfish and fresh fish. “Eclectics” they like ethnic and regional cuisines, want unique dishes, health conscious and least price sensitive. “Frugal”, they are fond to go out for dinner; price sensitive, prefer traditional American favorites and attended college.
They did the study on market research; find the behaviors of the segments, the marketing team find ongoing strategies for all types of customers. Lopdrup, by the segmentation study and facts, make strategies and focus on product, price, place, promotion, positioning and segmentation, that what should be done. Focus was on the strategic marketing management, the changing in the exterior and interior remodel of the building take place, menu items and prices were set and supply management etc. Bar Harbor, image transformation timeline, shows that planning’s were effective.
Identification of the key issues:
Lopdrup took over as a president of the Red Lobster in 2004, from then the issues were observed that why there is slow growth in the profitability. Many obstacles take place when there were increases in the competitors; competitors were attracting the consumer’s through making effective planning and strategies. Consumer saw the food market into two categories, the ‘high end place’ there were the places for the sea food who were offering high quality food, fresh food prepared with culinary expertise and the ‘low end place’, where sea food was serving in mass production, frozen and fried sea food was given. Many of the consumers were taking red lobster as the latter category. This was very shocked by the company because they were using best quality of ingredients. As red lobster was known as the “frozen to fresh”, the consumer minds or perception needed to be changed. While they were still having the live lobsters and fisher in their menu but number of seafood restaurants emerging everyday, who were targeting the customers of red lobster.
Red Lobster had the expensive menu than the other restaurants like, Chili’s, Applebee’s and Outback. All competitors had the wide range of the items but comparatively prices were low, which attracted many of the consumers and consumers shifted from the red lobster to others. There were two laggings find after the survey that “quality of seafood” and the “taste of seafood”. Other restaurants were providing the food quality better than red lobster at lower prices that affected their market segment; competitor’s food was good in taste also. Other restaurants targeted all segments from the market but red lobster, failed to attract all market segments. They wanted to get more profit from the customer that resulted in the loss of customers, and they attracted towards other seafood chains.
The growth rate of the red lobster business, declined significantly as the competitors planning’s were effective. Red lobster was only targeting the specific market, but marketing department helped them to do analysis on all segments. Red lobster were targeting the new experiential customers and this the reason they were losing their frugal and indulgent customers. There were the problems faced by the marketing department, they unable to re-position red lobster because of loss of target market, people perceived food as low quality, which was resulted in the loss of market share. They did excessive use of promotional menu items, to attract the customers but it resulted in negative attitude of the customers because they think that food is low in quality.
Listing of alternative courses of action that could be taken:
As the strategies were planned and Red Lobster, marketing team did the market survey, it was an effective approach to recognize the importance of target market segmentation. The research was done to know about the real consumer insight, that they expect and what should be done. After the researches, they should take initiatives so they can compete with the competitors, they should assess the conditions and make the alternatives plans, if some plans did not worked. There is need to use cost effective production methods. As estimated by the Darden, that aquaculture will play a significant role in the business; it will save the cost and offer other supply chain advantages.
They can do innovations in their menu timely; this will make their customers able to trust them, and brand loyal will increase. Alternative plan of innovative menu can motivate “Experiential” customers or target market to eat more, for experiential customers eating new thing is a sources of pleasure, they really enjoyed eating new dishes. They do not care about the money they just wanted the best, so variety of food should be there, best environment and services should be given to them. If more or new dishes innovate on monthly and seasonally basis, then profitability will be increases. The risk of instability and growth will be lessening and intrigues experimental customer base will be increased.
Alternative strategies based on, to improve the restaurant services should take place. Restaurant services could be improved by hiring and training the personable employees. Through hiring new employees, innovation will take place and new ideas will generate. Welcoming the people from various background and culture can be opportunity for any company, they need to train the new and existing employees, so better services could be given and customers could be satisfied.
Red lobster should adopt the alternatives strategies to clean the environment and make it modern, based on modernization, red lobster can know about the existing trend of the market. By using strategies to create the new managerial system, could also be useful for them, managers should ask the customer about food experiences and take the reviews, the can be demonstrate by the culinary experts. Investment should also be done on the strategy of “Ignite the craving”.
As lopdrup explained, that people have the perception about us that we sold frozen fish, this perception need to be changed, because people will not prefer the frozen fish to fresh fish, so there is need to understand the importance of the ‘freshness’. The cooking styles should be changes; there should be no emphasis on the fried items of the restaurant.
Evaluation of alternatives course of action:
Implementation on the seasonal menus; seasonal menus play an important role to build the customers relationship with the restaurants, if customers know that there are innovations in the product then they will appreciate the effort and suggest to other. For the profitability to make changes in the menu and environment is very essential, red lobster should need to change its menu on occasion basis, so the customer will not go anywhere else, this is good in competitive sense also, company can competitive advantage and earnings if there are continuous changing in the verity of the menu. Integration of chef and marketing team, if experienced and knowledgeable recruitment is done of chef and marketing team, then there will be variety of taste, and it will attract the customers; customers will attract if there is product development, company need to do the operations, that how red lobsters and enough fishes could get.
People behaviors have been changes with the modern and existing world and technology, people will prefer fresh food items, if people know, that fresh food is given to them they happily come to eat the food. The perception people have about the fry food nowadays, can never allow red lobster to grow, however, they have changed the strategies that really worked and increased their profitability, as estimated in 2010.
They fixed the grills in their restaurant, which changes the mind of the customers, the customer perceptions changed due to the innovation done in the food (fresh). The television advertisements and re-modeling of the restaurants also helped to increase their market share. Their sister brand Oliver Garden, helped a lot to change the market and consumer perception about them, there researches was focused, this is reason that their business flourish again.
The advertisement done in the new direction also responsible for the development and attainment of the goals, any company can be famous and can get competitive advantages if it does the advisement in a new way, visually attractive menu can grab the attraction of the customers. When customer sees the picture of the eatable he/she could crave for the item. The pictures of the products should be attractive; this is the marketing technique to grasp the customers.
The segmentation of the market by the marketing team was effectual approach, based on demographics, regional demographics, psychological aspects, food and beverages attitudes, brand selection criteria etc, researches were undertaken. The understanding of the customer’s preferences is very important in this way, first customers should be classified by the regions that what are the preferences; if research is done properly then seafood will make the potential increase in the market share.
For the long-term benefits, to increase the market share is important. After the implementation of the preferences, there is need to evaluate the result that what is achieved and what need to be focused. Domestic and international preferences should be noticed and planning should be done according for the sustainability of the brand and for the customer’s satisfaction.
Recommendation for the best course of action:
Red Lobster need to focus on, to provide the extraordinary services to their clients or customers, their services should be innovative, as to innovation in the food is necessary for every restaurant otherwise there will be no or less profitability. In the case of economic downfall or for less-income consumers there is need to focus on the menu, as the prices of the food is higher than other seafood restaurants, there should be variety of food, if there will be variety every class could enjoy the food and profitability will also increases. Therefore, innovations should be part of strategies, is they want to retain customers and want to make maximum market share of seafood market.
Red lobster should highly concern about making the new plans, there should be focus on the production of red lobsters and fishes, and they should have their own farms to increase the profitability. There approaches should be to do more advertising and promotions, if more customers know about the products and prices, then more customers will come. In this case, television and media support is needed.
Olive garden should be given more support because number of people attracts towards it, for the brand poisoning qualitative researches are needed that will help in further researches and design. Attentive services should be given to the customers, there should be sophisticated ambiance as these strategies helped them a lot to grow, there is still need to emphasis on the appealing food, culinary exploration and friendly environment for the growth and sustainability.