Red Lobster Case, Marketing 503
Visions Consulting, LLC
Red Lobster: Consulting Engagement
October 18, 2017
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.
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.