Red Lobster Case Study
What is the 20/80 rule? Does it have application and relevance to Red Lobster?
The 20/80 rule simply states that 20% of users make up 80% of the usage. According to a Ball State University article:
“Vilfredo Pareto was an Italian economist who, in 1906, observed that twenty percent of the Italian people owned eighty percent of their country’s accumulated wealth…this analytic has become to be called Pareto’s Principle, the 80-20 rule, and the ‘Vital Few and Trivial Many Rule’ (Hafner).”
For marketing purposes the 20/80 rule is commonly applied to the product mix. It is often believed that 20% of the market segments make up 80% of the profits.
This principle, in different capacities, does not hold much resonance in the Red Lobster case. The case tells us that of the dollars spent on dining outside of the household only 31% were on casual dining (Red Lobster’s dining segment). Additionally, the seven largest casual dining chains, which Red Lobster is a part of, only accounts for 33% of all the casual dining chains in America. Therefore, it should be clear that Red Lobster and its market segment do not account for a disproportionate amount revenue or segment share in comparison to the entire market.
Even though the 20/80 rule does not apply to this case, the closest it comes to being applicable is in terms of market share. According to the case:
“More than 80% of the roughly 8,000 casual dining seafood restaurants in the U.S. were independently owned or were chains of fewer than 10 restaurants. At 43%, Red Lobster’s market share was the highest among casual dining seafood chains (Harvard Business School pg. 3).”
This means that of casual dining seafood chains, Red Lobster has a large market share of 43%. Although this does not qualify for the 20/80 rule it is significant that Red Lobster has such a large market share in a market that has many different players.
Define the term “positioning”.
According to class notes for Marketing Management, positioning can be defined as the following:
“Positioning is the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. It is the ‘relative competitive comparison’ their product occupies in a given market (Day 1).”
The class definition of positioning is loosely based off of Jack Trout’s logic. Trout defined positioning as filling a hole in your customers’ mind. More specifically Trout defined positioning as:
“Positioning is an organized system for finding a window in the mind. It is based on the concept that communication can only take place at the right time