REthink Wine Blog

There’s been a lot of talk about the current state of the economy and how it effects the wine industry. On this blog alone there’s at least three recent posts dealing with the subject, so I figured I’d talk about something completely different - let’s leave the current situation for now and think about the future and the past. We’re in the business of trying to shape the future and make it better for wine producers and consumers. But will we ever be able to escape the kinds of constraints that the wine industry operates within today?

The Past Isn’t Dead. It Isn’t Even Past.

In January The New Yorker published a great article by Atul Gawande, where he describes health care systems around the world in terms of Path Dependence. Simply put, path dependence is the phenomenon by which a situation in the past continues to constrain the evolution of a system well after the original situation ceases to exist. I see this all the time when working with software. Why is Microsoft Internet Explorer by far the most popular web browser? IE achieved dominance in the late 90s thanks to (among other reasons) a competitor with scant resources (Netscape), a licensing deal with AOL, and greater support for emerging standards. Today none of these reasons is relevant but the “path” that led us here has helped maintain Microsoft’s huge advantage in market share.

The parallels in the wine industry are clear. The three tier system is a perfect example of path dependency. It came into being in a time when government wanted a limited distribution network in order to make taxation easier and keep organized crime out of the business. Today technology has made taxation of goods much easier and organized crime is not a concern when it comes to trafficking wine and liquor. But the three tier system remains because economic and political entities have grown up around it and have an interest in maintaining the status quo.

Talking ’bout a Revolution?

So are we forever trapped in the past? Why not throw off the shackles of path dependence and create a new system? While that sounds exciting it’s not likely to happen. Massive institutional change is often messy, time consuming and expensive. Revolutions are rarely bloodless. But the news is not all bad. It is possible to change a situation without escaping the constraints of path dependence. To extend my web browser analogy, although Microsoft maintains browser dominance Firefox and Safari have chipped away at its market share and also innovated in ways that Microsoft has been forced to adopt in IE, making the browser market better for consumers overall.

The Same but Different

If change is going to happen it’s probably going to be within the current system. Inertia and other companies have spent a lot of time making the three tier system work as well as possible for wineries and consumers. Even though this is difficult, it’s probably still easier than investing in trying to completely change the system. Institutional change does happen – if Iowa can allow same sex marriage then anything is possble – but its progress is often slow and unpredictable. We’ve had a lot of success building programs on top of the current regulatory structure. I believe the future of the wine industry, even when dependent on history, is going to look much brighter than its past.

The more we all read about Twitter, Facebook, Myspace and other Social Media, the more the Internet starts to look like the domain of plugged in kids who spend their lives online.  Sure there’s a need to reach out to this new generation of wine consumers, but wouldn’t it be safer to ignore the internet and concentrate on old methods we know will work with a more established market?  No.  You can’t write off the internet as a young person’s medium and a new study from the Pew Internet & American Life Project has surveys to back this view up.  To quote the study:

Contrary to the image of Generation Y as the “Net Generation,” internet users in their 20s do not dominate every aspect of online life. Generation X is the most likely group to bank, shop, and look for health information online. Boomers are just as likely as Generation Y to make travel reservations online…even Silent Generation internet users are competitive when it comes to email.

Cleary the internet has become a pervasive fact in American life across all age groups.  Younger people are more engaged in social media but Gen X (i.e. 33-44 year olds) are the ones purchasing online in greater numbers.  Not to mention that the greatest increase in internet usage is among 70-75 year olds, 45% of whom are currently online compared to 26% just four years ago.  This demographic is more comfortable with email than with the newest web technology, but there seems to be a trend of internet activity spreading to older Americans.

So if you were avoiding improving your web presence or getting into e-commerce because you didn’t think that the kids on the ‘net were the market you wanted to reach, you now have no excuses.  The Internet is a global phenomenon transcending the boundaries of geography, nationality and yes, even age.

Notorious for outages, wasting otherwise productive time and allowing you to follow the thoughts of MC Hammer, Twitter may now be making its mark as a powerhouse marketing platform. Twitter, for those of you new to the whole social media thing, is a web application/platform that allows you to share 140 character messages with anybody who cares to tune in to what you’re saying. It’s really that simple.

This past year, Dell shared messages on Twitter offering exclusive discounts to some of its products. They pulled in $1 Million in revenue from those little messages. Surely there must be room for others, including wine marketers, to exploit this communication platform. To this end, I present my ideas for how the wine industry can use Twitter to best advantage. One prerequisite: get a twitter account at twitter.com; it won’t hurt a bit.

1. If you run a winery, twittering (yes it’s a verb too) can put a human face on your organization. Zappos CEO Tony Hsieh represents his company on Twitter and has written an article about how Twitter has helped him and Zappos.
2. If you have a web site which you update with new products or news, flag those changes in Twitter. This will drive additional traffic to your site.
3. Experiment with Twitter wine tastings. Project Vino, based in Australia, organized a wine tasting over twitter last year. Twitter Taste Live is another project I’ve come across trying something similar. Seems to me that 140 characters is just right for sharing a thumbnail sketch of a wine’s character.
4. Find fellow wine industry professionals on Twitter and follow them. You can search twitter for keywords and get real time results of what people are saying. A search for “Napa” brought up several results that looked like promising leads for people in and around the wine biz. Update: A fellow known to me only as dhonig has saved you some time and put up a long list of Wine Twitters.
5. Twitter is a great way to use the “lazyweb”. Once you’ve built a twitter network you can throw out questions that others in your group of followers might have an answer to. Twitter becomes a great cooperative exercise in this way.

I’m sure there are numerous other ways for you to use, enjoy and grow your business with Twitter. I’m convinced that we have only scratched the surface of this fascinating and sometimes infuriating new technology.

We talk a lot here about where technology and the wine industry meet, so I was wondering how do you interact with technology? What hardware and software do you use to contribute to and keep up with the wine industry? Drop us a comment and let us know.

My setup:

Hardware

• Apple Macbook Pro
• Dell E207WFP 20″ Monitor
• iPhone (some neat wine apps there)

Software

• Apple Mail
• Microsoft Entourage (for networked calendar)
• Google Reader (for news feeds)
• Coda (for web development)
• Marsedit (for blogging)

• VM Fusion (for running Windows XP)
• and a slew of browsers: Firefox, Safari, IE, Fluid and more

I recently read a great story about the importance of customer service by e-tailers. If you don’t feel like following the link, the short summary is this: customers buying the same popcorn popper from different online stores gave radically different ratings of the product itself based on the level of service they received when the product broke.

Given the subjectivity at work in how we experience wine there’s an enormous opportunity to influence how people experience this product through customer service. The importance of tasting rooms has already taught us this lesson, but are you providing that same level of service to online customers?

We’ve talked about the changing nature of of marketing and consumer involvement here before, but a post at California Life got me thinking about the topic again. In general I believe that the movement toward a flatter more inclusive market empowers consumers and weakens the power of producers and marketers to shape their audience’s perceptions. When word of mouth is amplified and given wings by a global communication platform like the internet, it dwarfs the unilateral broadcast muscle of marketers.

Wineries may be uniquely positioned to take a more active role in the conversation. Thanks to the popularity of tasting rooms consumers are already used to the idea of talking directly to the wine producer and being educated by her. Wine drinkers crave information about what they are drinking and wineries have the opportunity to participate in the space that folks like Gary Vaynerchuk have already rushed into.

The hardest part of this is going to be that wine producers will have to trade the safe turf of their own tasting rooms and converse with consumers on an equal footing – on the internet there are no pourers, just fellow drinkers.

Yesterday two votes paved the way for increasing the market for direct sales of wine. They both further the cause of broadband access in the United States, a major factor in the potential growth of the online market.
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We sometimes think of winery websites as "virtual tasting rooms". Okay, you can't actually taste the wine on a website, but in other ways a website can, and should, achieve much of what a tasting room does. Next time you're thinking about the content of your web site, or if you're building a new one, a lot of what you already know about your tasting room will help you with your online presence.

Making A Connection

Tasting rooms allow customers to make a personal connection to your wine. Tasting room employees engage with customers in a way that captures a customer's attention in a way that no other kind of promotion can. A winery website has the potential to make a connection in a similar way. What are you saying on your website? Can you imagine an employee in your tasting room talking like the text reads on your site? You have an opportunity to connect directly with customers on your website – don't lose sight of the human being on the other side of the screen.

Honoring the Journey

When somebody shows up at your tasting room you know that they have traveled to get there. You appreciate they have taken the time to visit your winery and you try to make sure they don't regret that investment. A customer visiting your website has also made a journey. Maybe they arrived after searching for your wine on Google or following a link from another site. However they got there, they made a choice to visit your site and have invested some time in exploring it. They should feel like they are getting some value in return, whether it's a special offer on a wine, an opportunity to join your club or an invitation to a winery event.

Beating the Competition

Especially in the big wine centers there are plenty of opportunities to visit tasting rooms. Many people who visit your winery may already have been to one or two others and may visit more after they have left. You need to create a memory of your winery that stands out among the other tasting room visits that day. One the web the competition is even more severe. You are competing with millions of other web sites and all of them are only a click away. How have you distinguished yourself and made sure the memory of your web site stays with each customer?

In an Interview with Wine Business Monthly tasting room consultant Veronica Barclay says that the purpose of a tasting room is to "create memories". A good winery website can do the same thing. But what about the purpose of selling wine? I'll get to that in a future post.

Last week the San Jose Mercury News reported optimistically on the state of the wine industry in these economically troubled times. With the not so original title “Wine Industry See The Glass Half Full” the Mercury News presents the conventional wisdom that people are continuing to buy wine, though may be looking for more value at lower prices. I have to wonder: is there anybody who turns down a good wine value at any time? (more…)

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Still a little fuzzy on what all this means? Check out this post on RSS from our own Rachel Reed.