Red Lobster Situational Analysis

RED LOBSTER

INTRODUCTION

        Established in 1968 by Bill Darden, Red Lobster aimed to provide America with delicious and affordable seafood. Since its fruition, Red Lobster has faced many challenges as a whole which has caused it to lose its competitiveness in the casual dining sector. Kim Lopdrup became president of Red Lobster in 2004 and initiated an aggressive turnaround program. Fast-forward to the year 2010 where he is finally seeing some success, he is now looking to find a way to ensure sustained growth.  As lead consultant with Rio Grande River Consulting, I have assisted Red Lobster in realizing the changes necessary to ensure the growth they are striving for. With both the popularity and market share of Red Lobster decreasing, changes need to be made internally first and foremost. They must seek to understand their target customer’s needs and wants, rebrand its image, and provide new and improved plates of food on their menu. Together with management of Red Lobster, I have encouraged them to rebrand as a premium dining chain in which will serve only fresh ingredients in their menu options. In doing this Red Lobster will regain its popularity and some of its market share.

SITUATIONAL ANALYSIS

Current Competitive Situation:

        The current competitive situation in which Red Lobster is a part of consists of the Big 7, which is seven different casual dining restaurants (Applebees, TGI Fridays, Outback Steakhouse, Chilis, Olive Garden, Ruby Tuesdays, and Red Lobster). The competition is strong in this market whereas each business provides a variety of meals and food options as well as different advertising strategies. What makes Red Lobster different is the fact that its focus is on providing affordable and appetizing seafood to customers. When it comes to the seafood sector Long John Silver’s is close in size but falls under the “quick serve” market, other wise known as a fast food chain and the two would not be in competition for the same costumers. Another close competitor in the seafood sector is Joe’s Crab Shack which is the only casual dining restaurant that was near Red Lobster’s average price point per check of $19.

SWOT Analysis

        Red Lobster has many strengths that put them apart from many other casual dining restaurants (See Exhibit 1).  They are actually one of America’s oldest and largest national full service casual dining restaurants that provide affordable lunch and dinner options. They offer quality seafood to inland consumers, as well as wood grilled menu options. Another strength is that Red Lobster has recently upgraded and revamped the look of their restaurants offering a more appealing place for customers to sit and enjoy a meal. Red Lobster has also done a great job in continuously utilizing their promotions such as Endless Shrimp and Lobsterfest which have kept a large flow of traffic in and out of their restaurants throughout the year. Fortunately, for Red Lobster Aquaculture is a major strength for them since they are able to purchase its fresj seafood for lower prices.  Although Red Lobster has a substantial amount of strengths, they also have many weaknesses. Through the recent surveys conducted by Red Lobster’s marketing team they discovered a large amount of negative customer feedback. Some of this including “quality of their seafood” and “taste and preparation of their seafood”. Based on customers’ feedback, it is evident that they believe Red Lobster is serving frozen seafood and not fresh seafood. Because of this, Red Lobster’s image as a whole is also lacking. Although the restaurants have been upgraded, I believe there is an untapped market segment in which Red Lobster has not yet reached in order to increase its sales and ratings.

        Though Red Lobster faces challenges and weaknesses, some opportunities have still arisen for the company.  Red Lobster has the chance to take advantage of the recovering financial market condition with cheap operational costs and real estate allowing them to build new restaurants in different locations. Also since there isn’t much competition in the seafood sector of the casual dining market, they have the flexibility to raise prices for the items on their menu. If necessary Red Lobster can expand its menu items and offer food options that are not entirely seafood much like their competitors in the Big 7. With opportunities unfortunately comes threats. Because of the increase of Aquaculture, many other casual dining restaurants have the ability to start adding more seafood options to their menus. Also, if Red Lobster decides to not expand their menu options out of the seafood sector they could potentially lose business from parties who are looking for more of a variety in the foods served. If they fail to meet customers needs they may lose more of their market share due to the fact that the casual dining market is expanding and thriving.

Current Segmentation Scheme & Target Market Being Served

        In 2008 Red Lobster’s marketing team commissioned a study by the market research firm Copernicus with the hopes of uncovering customers or potential customers whom shared similar preferences and behaviors. Copernicus collected information from online interviews and used that information to conduct a cluster analysis. Red Lobster then realized they didn’t have a firm grasp of their target market. They had been serving multiple markets which included the Traditionalists, the Indulgents, and the Frugals. I have provided information provided to me by the company on these specific segments in Exhibit 2. Because Red Lobster has been able to continuously keep their prices relatively low, it seems these target markets have not completely shied away from Red Lobster as a whole.  

Current Marketing Efforts

        Since Red Lobster initially opened its doors the price, product, place, and promotion aspect of the business has remained relatively the same. After thorough research it had been decided that Red Lobster needed to rebuild their products and services in which they offered to customers. They also decided to take advantage of the demand for fresh seafood as well as a clean and upgraded dining scene.

Price: Red Lobster should consider adjusting the price of the seafood they’re offering since it can be considered a premium food option. Since Aquaculture is plentiful Red Lobster wil be able to purchase more fresh seafood at lower prices.