Chapter 9 Case Study:
RED LOBSTER
Market Research Reveals
What’s Fresh Today
Remember the Red Lobster commercials featuring lots
of fried shrimp bouncing around and lobster claws dripping with butter? They’ve been replaced by scenes of
steaming fresh fish, rice, and vegetables. The old slogan,
“For the Seafood Lover in You” has also been canned.
Now Red Lobster wants you to “Come See What’s Fresh
Today.” The restaurants themselves will soon look different, too, with a more streamlined, contemporary décor that downplays the traditional nautical themes.
These changes and more are part of an effort to
make over the seafood chain after marketing research revealed that the restaurant was considered outdated and
unappealing to potential customers. Red Lobster president Kim Lodrup says that in the first stage of the makeover, the chain improved operations so that customers
wouldn’t have to wait so long for the food to reach their
table. The second phase focused on improving the restaurant’s image and shifting the focus from low prices to
freshness. The third and final challenge will be to increase
sales. Lodrup says, “We are positioning Red Lobster to
be the best seafood restaurant on the planet.”
Lodrup was originally hired as a marketing specialist to revive the sagging brand’s image in 2003 when
sales were falling and customer satisfaction was at an
all-time low. He immediately put the kibosh on promotions like the All-You-Can-Eat Crab Legs Specials that
had lost money for the company in the past and emphasized Red Lobster’s seafood expertise instead. After sales
increased in 2004, he was promoted to president, but he
still relies on marketing research to keep his finger on
the pulse of customer preferences.
“We find out what they want from idealized dining service and research how to deliver value to guests,” Lodrup
says. To do that, Red Lobster follows changing consumer
habits and pays attention to which dishes patrons prefer.
They use phone and Internet surveys to learn about guest
attitudes toward the food they’ve tried and try to deter-
mine how well they might respond to new menu items
or concept changes before instituting them. The guestrelations department “catalogs the nature of guest contact
so we can see if there are changes in trends,” Lodrup explains. “Emerging concerns or requests from consumers
get captured weekly and recorded for our executives.”
More in-depth research measures attitudes and
trends that could affect the brand in the future. Before a
promotion is launched, featured menu items are chosen
through extensive consumer testing. Beginning with a
large number of possible dishes, they narrow it down to
the one that testers deem most appealing.
After studies indicated that freshness is the single
biggest criteria consumers use to judge a seafood restaurant, the chain knew it was vital to get word out that
fresh fish is delivered to Red Lobster restaurants six days
a week. Interviews with former customers revealed that
many still believed that Red Lobster’s fish was frozen
despite the company’s extensive global connections and
rapid seafood delivery system. “It’s really important to
signal to people food is freshly prepared,” says marketing vice president Salli Setta, who created the Culinary
Institute of Tuscany for Olive Garden before being hired
by Red Lobster. The company is considering a similar
seafood-related school in Maine to add authenticity to
Red Lobster’s menu. In the meantime, Setta hired a new
team of executive chefs to create updated recipes with
the herbs that customers said had fresher connotations
than the traditional lemon and butter sauces.
They also introduced a separate Fresh Fish Menu that
is updated twice a day at the restaurants. Even though
fresh fin fish had been on the regular menu for years, it
had never really been promoted. Research showed that
this could make the restaurant more appealing to their
lapsed customers, who tend to be affluent, educated, and
over 50. Households with an annual income of more than
$70,000 account for half of all food eaten in restaurants
CASE STUDIES
1
and have been shown to be most interested in seafood
dining. Reeling these customers back in has become a
top priority in the chain’s turnaround.
So far the makeover is working. Red Lobster has
been reporting same-store sales increases since 2004.
Improvements in operations and other cost controls led
to the highest operating margin in Red Lobster history
and, Lodrup reports, “Every measure of guest satisfaction is at a record level.” However, it continues to be a
challenge for the chain to change old perceptions of itself. As one surveyed customer put it, “My wife swears
by the fish. She just can’t get her friends to try it.”
Questions
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3. Red Lobster’s closest competitor in the seafooddining business is Joe’s Crab Shack. Check out their
Web site at www.joescrabshack.com and compare
it to Red Lobster’s. How does their marketing approach differ? Do you think they’re appealing to
the same types of customers? How does the Web
site try to get information from its customers?
1. Why do you think Red Lobster relies so much on
Internet surveys to track customer opinions, preferences, and criticisms? What are the advantages
of online questionnaires versus traditional surveys
conducted over the phone or through the mail?
4. Suppose Red Lobster was wondering how well its
new interior design was being received by customers at a redecorated restaurant in Columbus, Ohio,
and hired you to create a questionnaire. Write one
of each: an open-ended question, a closed-ended
question (either dichotomous or multiple choice),
and a scaled-response question.
2. Go to www.redlobster.com and click around. How
well do you think the site appeals to the educated,
affluent, and over-50 crowd that the chain wants
to reel in? What are the primary messages that it
communicates about the restaurant, and how effective are they? How does the site attempt to capture information about its customers?
SOURCES: “Las Vegas Tourism Agency Announces 1.3 Percent Rise in Visitor
Totals for 2003,” Las Vegas Review-Journal, February 14, 2004; Jennifer Bjorhus,
“Las Vegas Tourism Agency Executive Says Research, Marketing are Key to
Success,” Las Vegas Review-Journal, April 6, 2003; Chris Jones, “Las Vegas Tourism
Chief Opposes Ads; Board Members Object to ‘Sin City’ Phrase,”’ Las Vegas
Review-Journal, December 16, 2003; Chris Jones, “Las Vegas Tourism Officials
Plan Marketing Blitz to Attract Canadian Tourist,” Travel Weekly, March 3, 2003;
Chris Jones, “New Las Vegas Tourism Ads Target Hispanics with TraditionFocused Messages,” Las Vegas Review-Journal, July 17, 2003.
CASE STUDIES