Over the past five years, McKnight's has seen a declining trend in sales. While some of this is due to the lack of initiative on behalf of the old management, much of this is due to the rise of microbreweries in the Portland area. Many customers are taking advantage of the proliferation of beer varieties in the U.S. (due to changes in the law on alcohol production) by seeking establishments that have unique brew styles. In this day and age of massive fragmentation and proliferation of brew recipes, innovation and experimentation is the name of the game.
The market segmentation is divided into the leading target markets. The division reflects the differences in marketing strategy that will be used to target each different market.
McKnight's Pub exists in a highly competitive industry whose environment creates low margins due to the high amounts of pressure placed upon participants from customers, suppliers, other rivals, potential entrants, and participants products. This has created a fragmented industry in which no one participant has significant market share.
Customers have an great deal of power and influence in this industry since there are virtually no switching costs.
Customers regularly go to more than one pub or bar to socialize and drink. In addition, while this pastime is very popular, the overall quality of the customer's life is unaffected if they choose to forgo pursuing it.
Finally, even with the rise of microbreweries, many customers still find that most pubs have the products that they seek, making the pub visit itself undifferentiated.
Suppliers also have a great deal of power in relation to the pubs and taverns. Almost all suppliers are regional companies that have a wide variety of customers including grocery stores, liquor stores, restaurants, caterers, etc.
This means that any one customer of these distributors makes up a fraction of their sales and has little influence on their prices, quality and terms.
Furthermore, while these distributors often sell a wide variety of products such as produce, poultry and meat products, tobacco, and others, pubs and taverns are solely dependant upon the distributors for all their merchandise. The only real way to offset the distributor's influence is to backward-integrate by brewing and marketing the alcohol itself.
The rivalry among other taverns, bars, pubs, etc. is especially intense. This is because there is a large number of them in the Portland area who are more or less equally balanced in terms of size, popularity, and resources.
Since industry growth is small, there is strong moves by all competitors to gain market share at the expense of others. The lack of a differentiated product or service by most pubs or taverns only makes this worse.
In this type of environment, each firm tries to cut prices, increase services and products and cut costs. This in turn creates retaliation among rivals and leads to lower profits.
There are relatively few barriers to entry in the pub/tavern industry, making the threat of new entrants to the market very real. The capital costs of starting up a bar or tavern are low and access to distribution channels is quite easy.
Where firms seek advantages is in gaining a favorable location, building brand equity through customer loyalty, creating a unique environment, or backward-integration by producing unique products. All this takes luck, persistence, and awareness of customer needs.
Finally, the existance of substitutes creates a great deal of pressure on pubs and taverns to attract and retain customers. Restaurants, breweries, and any other place where drinking and socializing goes on is a direct threat to McKnight's and other rivals.
In addition, grocery and liquor stores that sell alcohol are an indirect threat that offers alternatives to potential customers. These substitutes, who often offer lower costs, decrease the overall potential of the pub and tavern industry as a whole.
There are a wide variety of bars, restaurants, nightclubs and other direct and indirect competitors in the Portland area. Some of the closest in terms of location and quality include the following:
McKnight's opens at 11 a.m. each day to catch the lunch crowd and closes at 2 a.m.. Revenues are quite variable in the short-term with the majority of sales occuring on the weekends between the hours of 8 p.m.-midnight. Seasonally, McKnight's is usually more busy during the summer months due to the heat and with more people wishing to be outside during this time.