Red Lobster

Marketing Management
Abstract
• Red Lobster, a 40-year-old chain of seafood restaurants, has just completed
some market research revealing an opportunity to shift its target customer
segment. The chain is in the final stages of a 10-year plan of rejuvenation
under CEO Kim Lopdrup. When he took over as CEO in 2004 the chain was
closing restaurants and suffering declining same-store sales and declining
customer satisfaction. But in 2010, even in a recession, the fortunes of the
chain are improving.
• A recently commissioned market research study has revealed, unexpectedly,
that 25% of Red Lobster's customers are "experientials," people coming for a
"good evening out" rather than Red Lobster's traditional core customer who
came because of a craving for seafood. Should this news cause Lopdrup to do
anything differently?
Why a 10-year plan of rejuvenation?
• Before 2014: cheap, frozen, mass-produced seafood (affordable)
What is the 10-year plan of rejuvenation?
• Reposition: freshness at the same price
• Operation excellence:
• Simplifying menus, recipes and promotions
• Fresh (right temperature), Clean (bathroom and odors), Friendly (emphasize friendliness)
and Full (reset and turn tables faster)
• Re-positiong around “freshness”:
• De-emphasizing all the fried items and include “Today’s Fresh Fish” (w/chef’s name)
• Introduce wood-fire grilling ($10,000 investment per restaurant)
• Change the focus “Endless Shrimp” to choice and variety instead of “all you can eat”
• Re-modeling the restaurants
• Seaside atmosphere for multiple occasions
Internal research found that guest satisfaction was up
14 percentage points since 2004 to 78% “excellent.”
~ 25% of customers are "experientials"

2,000 experientials 1,000 indulgents and 1,000 frugals

6.3 meals per year x $24.88 x 2,000 customers 5.6 x $18.78 x 1,000 + 3.8 x $14.86 x 1,000
$313,488 $161,636
∆ $151,852
 Comparison between segments
Experientials (23%)
• Eating out is an important source of
pleasure.
• Most frequent diners at casual and
fine dining restaurants.
• Enjoy new restaurants/foods/menu
items, and wine with dinner.
• Motivated by Culinary Expertise,
sophisticated, upscale atmosphere.
• Seafood is a favorite food. Love
fresh fish and a wide variety of
shellfish.
• Will not tolerate bad service.
• Well educated; HH Income $100K
avg.
Indulgents (24%)
• Love all types of food, eat what
they want and don’t worry about
nutrition.
• Motivated by large, generous
portions.
• Seafood is a favorite type of food,
particularly shellfish.
• Open to all types of entrees and
promotions (especially all-you-can-
eat specials).
• Enjoy new restaurants/foods/menu
items, but not wine-drinkers.
• Most likely high school diploma or
some college; HH Income $58K avg.
Frugals (28%)
• Not particularly fond of going out to
dinner.
• Least frequent casual restaurant
diners, and below average check
size.
• Price sensitive and look for
inexpensive restaurants.
• Below average liking of both
shellfish and fresh fish. Prefer
“traditional American favorites”.
• Younger and tend to have children
• Attended college; HH income $60K
avg.
Should this news cause Lopdrup
to do anything differently?
Product Price
• Wine selection • Maintain or increase
• Experiential menu slightly w/special
w/entrees (Exhibit 8) promotion for early birds
(Exhibit 4)

Place Promotion
• Continue renovation • Maintain traditional price
gradually (Exhibit 10) promotion (volume, still
50% capacity)
Preparation questions

• 1. How has Red Lobster´s positioning changed over time? Do the current ads reflect
the repositioning that Lopdrup and his team envisioned when their efforts began in
2004?
• 2. What were the most effective elements in Lopdrup´s repositioning plan (initiated in
2004)?
• 3. Compute restaurant level profitability under the following scenario: The mix of
patrons shifts with the restaurant gaining 2000 new unique Experiential customers,
but losing 1000 Indulgent customers and 1000 frugal customers.
• 4. Should Lopdrup make Experientials the target segment and modify Red Lobster´s
positioning accordingly? If so, how should he change its marketing mix (i.e., the 4 Ps)?
Exhibit 4
Exhibit 8
Exhibit 10