Red Lobster Case, Marketing 503

Visions Consulting, LLC

Red Lobster: Consulting Engagement

Sabrina Little

October 18, 2017

Introduction

Red Lobster, founded in 1968, has been a key competitor within the casual dining restaurant segment. Red Lobster consist of approximately forty-three percent of the entire market share, with substantial growth from 1970-1994. Reb Lobster began to become stagnant from 1996-2008 and competition within the market started to increase (Exhibit 3).  Marketing, layout of the menu, and other contributing factors can change the perceptions of the costumers whom dine at Red Lobster. Stagnant sales were due to the lack of proper marketing and organization of the menu, which lead to declining perceptions of the restaurant chain. As an external consultant at Visions Consulting, I will construct a thorough analyzation of the issue at hand and find solutions to the problem in order to generate sales and increase overall costumer satisfaction.  

Situational Analysis

Current Competitive Situation

There are three factors restaurant chains can be differentiated by which is their size, food concept, and price point. Red Lobster is lumped into the “Big 7” casual dining chains which includes Chili’s, Applebee’s, Olive Garden, Ruby Tuesday, Outback, and TGI Friday’s. The “Big 7” account for approximately 33% of the market. Even though Red Lobster is lumped into this category Red Lobster is very unique and different from the rest of the chains within the group. Red Lobster has a good competitive position, because of the restaurant’s standalone nature meaning no other restaurant in the “Big 7” has the same concept as Red Lobster.

Red Lobster is known for their seafood based menu at relatively affordable prices their menu and concept was unique compared to the rest of the chains in the casual dining industry. Long John Silver, a seafood specialty restaurant, had relatively the same number of locations as Red Lobster. However, Red Lobster and Long John Silver cannot be compared to one another even though they both provide seafood on the menu. Long John Silver is a fast serve restaurant, while Red Lobster is a casual dining restaurant two very different restaurant styles. The only competing factor within the seafood specialty restaurants is Joe’s Crab Shack, due to the fact that it is a casual dining chain with relatively lower menu prices. Joe’s Crab Shack relative size versus Red Lobster was well below the number of US locations in 2004; Joe’s Crab Shack had 95 locations versus 690 Red Lobster locations (Exhibit 4).  Meaning there is relatively little competitive competition for Red Lobster in the casual dining industry, which is why I believe that Red Lobster has an overall “good” current competitive stance in the market.

 The current marketing efforts toward improving their competitive stance is working well for the company, while I do believe that they need to slightly preposition their target market towards “experiential” customers. Management should be aware of potential variables that may affect the Red Lobster’s position and should factor these variables into future performance. A PEST analysis is an excellent way to lay out issues that may arise so that the company is prepared for political, environmental, social, and technological variables that could affect the company. I will briefly lay out potential threats within each category, refer to Table 1 for a detailed description. Political factors that could lead to declining revenue or issues in the future would be higher priced taxes on seafood in general or any kind of tariffs on importing food from overseas. Both of these political factors could change the valued price point of the items listed on the menu resulting in a decline of guests per year.

Economical issue that have previously been an issue and possibly a future issue are recessions. In 2008 Red Lobster and many other companies were hit hard financially by the recession. Economical influences could heavily affect Red Lobster’s financial standing in the future, so it is essential to ensure a recovery plan in the case of an unexpected economical casualty.

 Social factors that I believe could be a huge causality to the company would be the fact that marketing team may have gone overboard with changes to the brand and imagine. Loyal customers may decide that the “casual dining experience” Red Lobster thrived on is no longer the same place where they would like to dine. Perception of certain food items would definitely be another social influence factor that could hurt the company in a negative way. For example one social influence that has a huge impact on the food perceptions is the fact that shrimp and salmon are no longer viewed as a luxury item. In fact many of the “non-themed seafood restaurants” like Applebee’s and Chili’s provide these items on their menu.

Lastly technological influences can lead to solutions for various problems for the company. One way technological influences were utilized thus far was through implementing a new system that coordinated cook times with each item ordered within the restaurant. This type of technological advancement was crucial to Red Lobster’s effort to increase taste, texture, and freshness of the food being served.

SWOT

Creating a SWOT analysis framework is a great to get managers thinking about everything that can potentially positively impact or damage the success of the company. The SWOT analysis framework consists of listing out the strengths, weaknesses, opportunities, and threats to the company. I will briefly be discussing each one, but refer to Table 2 for further detail. The main strength of the company is the fact the Red Lobster dominates the seafood themed casual dining market. Which leads me straight to the “threat” part of the SWOT framework. One of the threats to the company as a whole is the fact that this domination in the market could come to an end if other premium casual restaurants take away a portion, if not all, of the market. As far as weaknesses go I believe that the biggest weakness that plagues Red Lobster is the perceptions that have been establish due to insufficient marketing techniques. The main perception that has been established is that the food served is mass-produced and frozen food, and most importantly has garner the reputation of not being “fresh”. Lastly, I believe that there is opportunity for the company to grow in the future by re-positioning the brand as well as establishing a consistent pricing method.

Current Marketing Efforts

The current marketing efforts thus far included three phases. Phase one included implementing operational excellence that begin as soon as the marketing efforts were conducted, around 2004. The phase consisted or simplifying the overall operations so that servers could focus mainly on their guests and less could go wrong. A few of the changes being made in this phase were simplifying menus, simplifying recipes, and simplifying promotions in order to deliver an overall great service. Changing the product or intangible service being provided. As far as promotions the company started timing the promotions to counter act the busy times during the year. During the busier times of the year the promotion would stop so that the servers would not have to memorize new menu items or promotions and could solely focus their attention on the guests. The company repeatedly tested initiatives ways to make the restaurant the best it could be before they decided to disclose the information to the public, in order to ensure perfection. The hiring process began and training of new and old employees had a huge emphasize on implementing friendliness attitudes to increase guest satisfaction. Additionally, all of the bathrooms were deep cleaned to ensure a clean factor throughout all restaurants. Lastly, all cooking equipment was recalibrated to ensure the right temperature and ultimately providing that “freshness” factor.