Here's a guaranteed way to rake in customers: Take a good or service in high demand, put an artificially low price on it and watch people flock.
It worked for Red Lobster. Until it didn't.
Red Lobster is among the latest businesses to learn that subsidizing products is a poor strategy for sustainability. Majority owner Thai Union Group is closing dozens of Red Lobster locations as the restaurant chain faces serious trouble.
There are many reasons for the chain's failures. The most fun reason to talk about (even if it's not the most consequential) is endless shrimp. Red Lobster last year began an Ultimate Endless Shrimp promotion in which customers could pay $20 (later $25) for all-you-can-eat shrimp any time they felt like it.
Before Red Lobster's latest round of store closings, it blamed the Ultimate Endless Shrimp promotion for an $11 million operating loss in the third quarter last year.
Red Lobster seems to be either a slow learner or very forgetful. As CNN reported, the chain tried a similar promotion in 2003 – and reaped similar results. Red Lobster lost $3.3 million over seven weeks that year to an Endless Crab promotion.
Companies have lots of reasons for trying things like this,........