We previously talked about the pricing implications when Red Lobster decided to make its deeply popular “Endless Shrimp” promotion into a permanent menu fixture (see “What If the Pricing Promotion Is Too Popular? Ask Red Lobster”). The fallout from that experiment continues to challenge the restaurant chain, and its latest response may come as a surprise: It decided to add an Endless Lobster promotion too!

To remind you, following the company’s decision to make its Endless Shrimp promotion permanent, it suffered $11 million in losses in the next quarter, then experienced another $12.5 million loss during the subsequent quarter. Investment groups began trying to sell their shares; executives began worrying about their jobs. In addition, the price for the all-you-can-eat deal rose substantially and rapidly, from $20 when first announced to $25 currently. 

So in the face of such losses, why in the world would the restaurant add yet another price promotion? Considering the strategic design of the promotion gives us some clues. First, the lobster promotion is explicitly and strictly limited, in availability and scope. Only 150 people who enter will win the right to have an unlimited number of the luxury crustacean. In addition, their free offer includes only 12 desirable whole Maine lobsters; once they have consumed all of those meals, the remainder of their free food will consist of still tasty but less popular Rock lobster tails instead. 

Second, it coincides with and is closely linked to the restaurant’s annual and popular Lobsterfest campaign. Thus, it offers a logical connection to an existing marketing tactic, which arguably should enhance the impact and benefits of each strategic element. Every year, Red Lobster introduces new, lobster-inspired menu items during Lobsterfest, such that it knows the people who enter the contest to win already are likely to be excited at the prospect of having even more.

Discussion Questions

1. Is a further price promotion a good idea, following a failed price promotion? Why or why not? 
2. What other options does Red Lobster have, to recover from such steep recent losses?

Sources: John Towfighi, “Red Lobster Was Nearly Crippled by All-You-Can-Eat Shrimp. Now It’s Trying Endless Lobster,” CNN, February 21, 2024