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Red Lobster had been built on the premise of bringing affordable seafood to mainstream American. However, when Kim Lopdrup took over as President in 2004, Red Lobster was classified by consumers as low end seafood chain. The appearance of Red Lobster restaurants was out of date. Many pictures of fried food on the menu caused consumers to question the quality of the food. Despite aquaculture decreases the cost of some types of seafood, Red Lobster still had no price advantage compared with other value focused chain. To keep the highest market share among the casual dining seafood chains, Red Lobster needed to take actions.红龙虾已经承担起美国的主流海鲜。然而，当2004年Kim Lopdrup就任总统时，红龙虾的消费者作为低端海鲜链来分类。红龙虾餐厅的出现已经过时了。餐厅的餐单上许多油炸食品引起了消费者对食品质量的质疑。经管水产养殖降低了一些海鲜的成本，红龙虾仍然没有价格方面的优势以及与其他的产业链对比。如果红龙虾要保持市场上高份额的休闲餐饮海鲜连锁店，必须得采取行动。
After analyzing consumer survey conducted by Red Lobster’s marketing team, Lopdrup launched a three phased plan in 2004 for changing Red Lobster’s positioning.红龙虾的营销团队在分析消费者进行调查，Lopdrup在2004年推出的是一个三阶段计划从而改变红龙虾的市场定位。
We use the four Ps of marketing here to analyze the changes.我们使用四个市场营销来分析变化。
Product: Red Lobster simplified menus and recipes, de-emphasized all fried items and introduced wood-fire grilling. They developed a new menu around “fresh” by using upgraded raw ingredients. Because freshness of the seafood ranks No.1 among the 11 seafood restaurant attributes in Exhibit 6. The changes above effectively convey the “freshness” concept to consumers.
Place: Red Lobster re-modeled interior and exterior of the restaurants along a timeline and created a comfortable seaside atmosphere, which was appropriate for multiple occasions. For channels, according to Exhibit 2, Red Lobster used sixteen distributors with 26 locations to handle the shipment of fresh seafood. High efficient distribution system can reduce the cost of operation. At the same time, it also ensures freshness.
Promotion: Red Lobster begun the “Ignite the Craving” campaign in 2004 and developed the 2008 ads which focused on grilling and on “freshness” again. Besides, Red Lobster revitalized two legacy promotions for driving traffic: “Lobsterfest” and “Endless Shrimp”. Both emphasized on “choice and variety”.
Price: Red Lobster stopped deep discounting, which the brand had been doing a lot of. This action can de-emphasize the “low end” image of Red Lobster. Besides, because of the two promotions “Lobsterfest” and “Endless Shrimp”, Red Lobster took a small margin hit at the price point. But the volume gains more than compensate.
The bullets above shows Red Lobster’s new brand positioning. The ads succeeded in changing customer perceptions from “low end” to “freshness”. Customer perceptions that Red Lobster “has food that is fresh” had increased significantly according to 2008 surveys. The guest satisfaction was up 14 percentage points since 2004 to 78% “excellent”. The operating profit of 2009 in Exhibit 1 was 507,600 $$.
Apparently, the most effective element in Lopdrup’s repositioning plan was customer needs. The repositioning plan was driven by the “Red Lobster’s 2004 Attitude and Usage Survey of 857 people who had visited Red Lobster in the last year”. Customer rated the 11 factors when selecting a seafood restaurant on a 7 point scale. Judging from Exhibit 6-B, we can figure out that Red Lobster was below the average level in 2004. “Freshness of the seafood” is 16 percentage point less than other seafood restaurants; “Quality of the seafood” is 14 percentage point less; “Seafood expertise” is 14 percentage point less; “Atmosphere” is 14 percentage point less. The data explain why Red Lobster’s three phased plan focused on “Freshness” concept, “Seafood Grilling” expertise and Re-modeling “Seaside Atmosphere” restaurants.
In 2008, Red Lobster’s marketing team had commissioned a psychographic study by the market research firm, Copernicus. Copernicus revealed five segments of consumers: Experientials, Indulgents, Traditionalists, Eclectics, Frugals. Obviously Red Lobster in the past time had lots of Frugals, Indulgents and Traditionalists. But Experientials, which account for 23%, would be a new growth point. We assumed that the mix of patrons shifts with the restaurant gaining 2000 new unique Experiential customers, but losing 1000 Indulgent customers and 1000 Frugal customers.
The outcomes can be seen as the following table(Annual meals per customer and Average spend per meal are from Table B in the case): 
Notes: Besides, Exhibit 1 in the case notes that margins on food items were about 67% while margins on alcohol were about 81%. The data from Table B shows that the percent alcohol of Experiential is 12% while Indulgents is 4% and Frugals is 1%.
Thus Experientials can contribute more revenues and income to Red Lobster. The growth rate of gaining the same number Experientials and losing the same number Indulgents&Frugals is above 93.39%.
How can Red Lobster achieve sustained growth in the future?
Conclusion: The key issue is that the ratio of Red Lobster’s gaining Experientials versus losing Indulgents&Frugals&Traditionalists must be higher than about 1:1.9 according to the data above.
The remaining part of the case write up is about recommendations.
Positioning: Before we move into positioning, we need to clarify a conception: Experientials are part of the Red Lobster’s customer who value “freshness of the seafood” as the first priority customer needs according to the 2004 consumer survey. Thus Red Lobster shouldn’t give up the “freshness” brand positioning. Furthermore, the changes in the three phased plan initiated in 2004 also attract Experientials. For example, the three phrased plan emphasizes “New menu”, “Culinary Expertise” and “Atmosphere”, which are also valued by Experientials. Thus Red Lobster can improve this positioning with a new concept “Eating at Red Lobster is an important source of pleasure”.
Promotion: Due to new positioning, the current ads cannot attract “Experientials” for more margins. Red Lobster with $120MM 2011 advertising budget can begin a new advertising campaign. Firstly, the traditional price promotions can be scaled back. Secondly, the ad agency should create some new ads that “Experientials” enjoy fresh seafood and have a happy time with family and friends at Red Lobster.
Pricing: Red Lobster belonged to the casual dining industry. However, compared with other Big 7s, the Average check of Red Lobster ($19.50) is a little higher. If Red Lobster raises price abruptly, it will face the competition with premium casual dining restaurants. Apparently, Red Lobster is not ready yet. It has not finished the re-positioning at nationwide. Thus the price of Red Lobster should not raise immediately. Red Lobster needs to avoid losing too many loyal Indulgents, Frugals and Traditionalists abruptly.
Product: As we mentioned above, the margins on alcohol were higher than the margins on food items. At the same time, Experientials are more likely to drink alcohol when eating out. Adding a better wine selection would increase the income of Red Lobster. Furthermore, Red Lobster can do a new survey about the meal time for different segments. If Indulgents, Frugals and Traditionalists tend to have meal before 8 pm while Experientials tend to have meal after 8 pm, Red Lobster could vary its ambience by time of day and offer more early bird specials for attracting different segments.
Place: The new menu offerings may only attract Indulgents, Frugals and Traditionalists. Due to new positioning, Red Lobster needs to gain more Experientials customers. Thus if the budget is enough, Red Lobster should remodel the remaining restaurants more quickly.
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