It was a case of too much supply and static demand.
The small university town of Sackville, NB, population 7,500, had seen a growth in the number of bars catering to the limited student and town population. Darren Wheaton, owner of Ducky's, realized something had to be done to keep the business going in the face of competition from seven other bars in town. Mr. Wheaton had worked as a bartender at Ducky's for six years before becoming the manager and later the owner after his brother passed away.
The bar had been in business for 22 years, starting off adjunct to a pizza restaurant. Located in a prime downtown location, Ducky's was a small bar but it had established a reputation as a social place for hanging out with friends.
Former students returning to town for a visit would mention frequently that after moving away they had a hard time finding a replacement hangout.
Mr. Wheaton realized his business catered to two distinct market segments. The university students formed one, while the professors and town residents the other. The student business trickled off during the summer months while the town business was steady throughout the year. Focusing on both segments of the market would allow him to distinguish his bar from the competition.
Although the student segment was lucrative, Mr. Wheaton knew he had to cater to both segments not only for competitive reasons but also to even out cash flows over the entire year. In terms of traffic, from 4 p.m. to 7 p.m., 90 per cent of his clientele consisted of town residents, while almost 100 per cent of the traffic after 7 p.m. was from the student market.
After conducting some research into market trends and customer demands, he found that there was a growing desire for greater draught-beer choices. Mr. Wheaton invested more than $20,000 in new refrigeration equipment, increasing his beer line from two to 10 selections. He also decided to hire more students to attract their friends as patrons. He introduced a "drink of the week" promotion, bringing in extra traffic and revenue despite the discount – not everyone in a given party would order the drink special at a reduced price.
By actively addressing the competition on various fronts, Ducky's business not only picked up but also saw a very healthy 30-per-cent increase in sales in the first couple of years. The growth has tapered off a bit recently, but the bar was able to carve out a profitable niche in a small town.
Special to The Globe and Mail
Nauman Farooqi is an associate professor and chair of the Research Ethics Board in the Ron Joyce Centre for Business Studies of Mount Allison University.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Your Business website.