Aditya Vats

MS-GSCM

EXECUTIVE SUMMARY-
RED LOBSTER
New Product Development (MGMT 522)
 EXECUTIVE SUMMARY

Recommendations and Key Reasoning (Refer Exhibit-1)

Based on the market research study and the three phased plan strategy adopted by Red Lobster, the

following key changes are recommended for Red Lobster to improve their profitability:

 Segmentation: Considering the relatively similar behavioural aspects of the ‘Experientials’ and

‘Eclectics’, both these segments should be targeted with an additional menu, without jeopardizing the

other three segments (Refer Exhibit-2 and 3)

 Positioning: It should change from “Approachable, Fresh Seafood” to more niche ‘Culinary exquisite

Seafood’ to target the key segment, as Red Lobster scored less on ‘Seafood expertise’ in the 2004 survey

 Promotion: Since the target segments are least price sensitive, current discounting strategy should be

stopped and alterations in current menu with more ‘chef’s special’ dishes for target segment needs to

be developed and promoted.

 Pricing: Current pricing strategy should not vary, however a different ‘chef’s special menu’ with focus

on ‘exotic dishes’ and more variety of wines should be developed, which would have more margin for

increasing profitability

 Product: In the additional ‘chef’s special’ menu, the focus should be more on fresh, healthier and exotic

items for target segment. The existing menu should be left unaltered focussing more on younger

customers

 Place: Ongoing remodelling of the restaurants should be concluded expeditiously. Furthermore, modest

remodelling should be done every alternate year to attract existing and new clientele

Analysis of Key Issues (Refer Exhibit-4 for implementation strategy)

Among seafood chains, Red Lobster currently has the highest market share of 43% and thus the focus of

Red Lobster should be aimed at increasing this further to compete with the selected premium casual chain

such as Cheesecake factory etc. The following Segmentation, Positioning and 4P’s Strategy for

Marketing should be adopted to attract more customers:

 Segmentation: Based on the five segments inferred from the survey, Red Lobster should target the

‘Experientials’ and ‘Eclectics’ as there is maximum revenue generating prospects from these customers,

considering both are similar in their spending habits and demands. Saying so, Red Lobster should also

not neglect its other category of ‘price sensitive customers’, who constitute maximum percentage in its

segment. Thus, the menu and aesthetics should be designed to appeal both the categories.

 Positioning: Red Lobster should continue with positioning ‘Freshness’ as its predominant strategy.

However, Red Lobster should also concentrate on suggesting its lacking ‘Seafood Expertise’ though

trained chefs and waiters that can communicate the specialities in the menu to the customer. Red Lobster

aesthetics should appeal to the price sensitive or least price sensitive customers who dine with family

or as business luncheon respectively by having a semi-formal dining arrangement.

 Promotions: The price sensitive customers are targeted through ‘ignite the craving’ campaign, thus the

traditional discounts should be offered to attract these set of customers. However, to attract its target

segment, Red Lobster should develop a campaign suggesting its ‘culinary expertise’ and promote a

‘Chef’s special menu’ with more exotic dishes and wine options. Promotions such as ‘Grill Master’

should insist on promoting variety as well.

 Pricing: Competitor seafood chain Joe’s Crab Shack has an average check of $19.5, thus, increasing

prices would prove detrimental for Red Lobster. However, in the proposed additional ‘chef’s special

menu’, Red Lobster should not only increase the current margin (81%) of alcohol but also should

demand more margin for the exotic dishes offered.

 Product: As suggested above an additional menu with exotic food options and variety of wines to be

developed to cater to the target segment. Furthermore, the Frugal category (highest clientele %) should

also be targeted with more ‘Americanised’ customized seafood options that are relatively cheaper, such

as fish and chips. Cheaper beverage options should also be suggested in the menu.

 Place: Remodelling efforts must be concluded as early as possible and must captivate the target

customers, who pay more attention on aesthetics and better service. Special emphasis on capturing the

nostalgia of the customers, which may serve as a value proposition for ‘traditionalists’ segment, must

be developed by placing traditional posters or vintage furnishings.

 Exhibit 1- Pros and Cons of Suggested Marketing strategy

Sr. No. Marketing Pros Cons

strategy
 Additional menu caters to all the
1 Pricing customer segments
 ‘Culinary Exquisite Seafood’ would
2 Promotion target directly to the target customer
segments- Experientials and
Eclectics
 Variety increases chances of
3 Product attracting all segments of customers
irrespective of price sensitivity
 Appealing aesthetic attracts
4 Place customers
 Price Sensitive customers could
perceive the place as costly
viewing the additional menu first
 Resources to prepare the exotic
dishes will be expensive and rare
 Research and training costs
would surge
 Ecstatic are not a major clientele
of Red lobster, targeting them
may prove disadvantageous
 Existing customers perception of
the Red lobster menu may
change, suggesting them to try
other alternatives
 Variety in menu could create
confusion
 Increase in inventory
 Operational difficulties as
unstandardized model creates
chaos
 Would appeal as too expensive
for price sensitive customers

Exhibit 2- Attributes of the segments

Experientials Indulgents Traditionalists Eclectics Frugals

Price Low High Very High Very Low High

Sensitivity
Indulgence Frequent, Love all types Less casual and Unique dishes Infrequent
Casual and of food infrequent casual diners
fine dining
Education Well educated High school Average Well educated Attended
diploma Education college
Average $100K $58k $70k $91k $60k
Income
Other Motivated by Motivated by Want Health Prefer
Particular culinary large generous conveniently conscious traditional
Needs expertise portions located meals American
restaurants favourites
 Exhibit 3

Price Sensitivity and Dining Indulgence Behavior of

Segments
Frugals

Eclectics

Traditionalists

Indulgents

Experiential

Price Sensitivity Casual Dining Indulgence

Exhibit 4

Implementation Steps:

1. Investing in research and training chefs and waiters for preparation and serving of exotic dishes

2. Advertisement of the ‘Additional Deluxe Menu’ to be shown along with the cheaper menu options

for price sensitive customers

3. Architects and designers to remodel the new Red Lobster branches based on suggested target

segment

4. Specialised menu in consultation with chefs to be developed

5. Increase inventory of wine and food items in Red Lobster branches