REthink Wine Blog

Over the past 4 months I have spoken with many wineries that are “thinking about” dedicating more time and resources to support their ecommerce channel. After all, a website for many wineries today is nothing more than an online sales brochure. They see that nearly all of the reports support the fact that the Ecommerce is the fastest growing channel and most importantly, levels the playing field for the smaller wineries. But when is a good time to revamp a website to make it worthy of facilitating ecommerce? Well, I can certainly tell you that waiting until after harvest is too late.

More often than not, what prevents wineries from fulfilling the most important phase of sales and marketing - planning - are activities relating to production (i.e. bottling, harvest). Is it more important to focus on producing wine than selling it? Shouldn’t they have equal balance within your business? Also, with the current state of the economy (gas prices, drop in disposable income, etc.) many consumers are choosing to pay FedEx and UPS to ship their wine rather than make the annual drive to wine country. Historically, most planning activity comes to a complete halt in the summertime in order to align resources to focus on the tasting room customers. This year, I suggest carving out some of that time and energy to support those customers that may not be ale to visit…and in doing so you will provide a great destination for those who have the opportunity to visit and want to stay connected.

So what non-production related event can the sales and marketing folks rally around to generate a sense of urgency for the Direct Sales channel? It’s called the ‘Fall Release’. It might not sound quite as fancy as harvest or crush, but it certainly has dollar signs associated with it for those wineries who only release wine twice a year. Following the ‘Fall Release’, of course, is the holiday season (O-N-D) and if you don’t have your plans in place 60 days prior, there is a good chance those plans will never come to fruition (no pun intended).

Over the past few months we have blogged about various ways that our winery partners leverage the REthink Engine to increase their sales, and a topic that comes up time and again is conversion (check out some of the recent BLOG entries that touch on this subject: How much is your average order? & Email Campaign Effectiveness). The subject of conversion should begin with one question: how much does 1% of your total sales represent? All things being equal in the world of Customer Relationship Management (CRM) tools, the best solution is one that drives the highest % conversion. In speaking with wineries who struggle to justify the cost of such a solution, especially when they currently possess all the CRM “pieces”, some simple math usually helps them to see the light…so to speak.

What do I mean by conversion? Well, there are many types of conversion when it comes to Direct Sales. One common example of conversion is the % of sales transactions relative to the total # of campaign/promotion recipients (email, direct mail, etc.) For example, if you send an email blast to 1500 people which results in 15 orders, the conversion rate is approx. 1%. Unlike email campaigns which have relatively zero cost (depending on your email solution), this conversion rate for direct mail campaigns is critical to understanding ROI associated with cost of paper, stamps, etc. Here are some other examples of conversion that are the result of a sound CRM solution: conversion rate for customers vs. club members, conversion rate for declined credit cards, conversion rate for allocated wines vs. non-allocated, and so forth…

What is the relevance of 1% of sales when it comes to conversion? Again, if all CRM solutions are the same in terms of cost, the solution that provides the highest compound rate of conversion will provide the highest ROI. By doing some simple math to determine the % of sales and/or cost savings (i.e. declined credit card conversion) that can be achieved through leveraging the right CRM solution, most wineries come to the realization that a significant amount of the costs are offset. One more factor in the conversion equation is Time: by converting time previously dedicated toward costly administrative activities to customer-facing, revenue-generating activities a winery can focus on what they do best…making great wine and building customer loyalty for their brand. The conversion rate math is simple, especially when it comes to calculating based on sales, but the tough question is…what is your time worth? By answering this question, you will undoubtedly come to the conclusion that working smarter and leveraging a better CRM solution is the best decision for your direct sales business.

According to a 2007 eHoliday Study commissioned by Shop.org “Most Retailers Will Offer Shipping Promos This Holiday”. Surprised? To me this is further evidence that shipping continues to be the greatest hurdle for online consumers, regardless of product, price, or promotion. And for the first time this decade, a majority of retailers have shifted toward promotions with shipping discounts* as standard practice for eliminating this barrier to purchase. Here are some of the key stats that surfaced as a result of the study (survey sample size of 2,695 online buyers and 116 online retailers):

• 78% of retailers will offer free shipping with minimum purchase requirements.
• 60% of retailers will also use free shipping upgrades.
• 54% of retailers will offer discounted shipping.
• 41% of retailers will offer free shipping without conditions.

[61% of the online buyers surveyed said free shipping without conditions is one of the promotions they would like to see for the holiday season.]

Retailers also reported that they plan to use other marketing techniques to increase sales:
• 63% will offer online-only sales.
• 56% will offer refer-a-friend promotions.
• 37% will give repeat-buyer discounts.
• 35% will give early shopper discounts.

Consumers are becoming more comfortable shopping online—35% of those surveyed said they planned to do more of their holiday shopping online this year.

Some of the top reasons that surveyed consumers prefer to shop online instead of in stores:
• 59% for the ability to shop at any time of day.
• 44% don’t want to fight the crowds.
• 39% prefer the convenience of shopping on the Internet.

The survey also stated that to increase sales, retailers plan to integrate channels more than ever this year.
• 81% of online retailers with stores will advertise their Web sites in their stores.
• 76% will offer in-store e-mail registration for customers.
• 48% will offer the ability for store associates to place Web orders for customers.
• 31% will offer in-store Web kiosks.

As I have stated in previous blogs, I believe that the wine industry should take a serious look at subsidizing part or all of shipping costs in an effort to stimulate direct sales. Many wineries choose to discount their prices online which results in conditioning of customer purchase behavior so that over time they do not respond to purchase at full retail pricing. This makes it difficult to offer pre-release promotions on wines because most customers know that it is only a matter of time before the wine price is discounted. Finally, by subsidizing the shipping cost wineries can prevent price erosion which helps to support their other channels of business as well.

* Due to direct shipping laws which frown upon the use of ‘FREE’, remember to be careful when using the word ‘FREE’ in your online promotions - ‘Complimentary Shipping’ is the better alternative.

Sources: Shop.org

In a recent conversation with one of our small, boutique winery clients, some interesting information came to light. When they analyzed their Sales across all channels, the sales through traditional wholesale channels represented nearly 70% of their sales volume, but only 40% of their revenue. On the flipside, their Direct Sales represented roughly 30% of their sales volume, but nearly 60% of their revenue. Upon further exploration, their wine club and online sales represented over 60% of their Direct Sales…which begs the question, ‘Why do I employ the least amount of resources to this channel?’

This simple analysis is not complex by any means, but points to a problem that we find more and more with our winery partners. It seems these days that everyone is excited to exploit the DTC channel opportunities, but they do not invest enough to make it happen. A successful DTC program cannot be implemented without 3 simple things…

1. Mind share for DIRECT TO CONSUMER that starts at the top (CEO, owner, etc.)
2. Dedicated person/team to the Direct Sales Channel (Wine Club and Ecommerce)
3. Common goals across all departments incentivizing employees to drive customers to the winery website

So often we find that the various channels within a winery compete against each other rather than drive toward one common goal -> driving Sales. By funneling all Direct Sales through one person/team, they can share the same goal for building sales and making sure that everyone works in the same direction. Next steps…hang up the FOR HIRE sign in your front window and add someone to your team to manage the most profitable area f your business.

With respect to measuring the effectiveness of email campaigns, many wineries are preoccupied today with one metric: “open rates”. This figure represents the number of people that actually opened their email which illustrates the “effectiveness” of the email campaign. This begs the question: What did they do after they opened the email?

In working with our winery partners to grow their direct sales each month, one of the many tools that wineries have at their disposal is our proprietary “email blast tool”. This tool helps wineries communicate to segments of their customer database on a monthly basis. For those emails that “bounce”, or are returned to sender for various reasons, our email blast tool even helps to maintain good “email address hygiene”. Once the email template has been created and sent, our Client Development team helps each winery break down the data points associated with the campaign based on the following criteria:

1. Campaign Description
2. Customer Segmentation
3. # of emails sent
4. Purchase Trigger
5. Conversion to visitor
6. Conversion to Contact
7. Conversion to Customer/Order
8. Total # Orders
9. 4-Day Sales Total
10. Avg. $ per Order

For historical reference, it is important to track a general description of the campaign for future ranking purposes. Specifically, it is important to track the segment of your database that you are targeting (i.e. All Club Members), the # of recipients in this segment, and finally, the intended “trigger” which will stimulate the website visitor to initiate the purchase. While there are many ways to “incentivize” the wine consumer, shipping discounts will certainly allow you to eliminate a huge barrier to purchase while continuing to support price points. Outside of a rewards program for your cub members or top customers, product discounts should be limited to driving volume (i.e. 15% discount on purchase of 6 bottles or more). For a long term brand strategy, it is very important that wineries DO NOT condition their customers to seek out their email and website offers solely as a destination for discounted wines. This will keep your distributors happy and maker it possible in the future to raise your price points.
Getting back to my opening statement, there are MORE important things to measure than “open rates” in order to properly measure the effectiveness of a particular email campaign. The conversion of email recipients to website visitors should be the MOST important metric. To say that your mailing list opened and read your email is one thing, but measuring how many of them were driven toward your call to action is quite another. From this point, website components such as product merchandising and streamlining of the purchase path can be measured through our web analytics tool - Google Analytics. By developing “microsites” to funnel traffic to a particular page on your website, you can be sure to eliminate any visitor data that may sneak into your analysis. Ultimately, the # of customer orders and avg. $ per order will provide concrete data on the effectiveness of an email campaign.

In our continuing effort to provide opportunities for our winery partners to increase their online sales the Client Development team has scheduled a Wine Club & Allocation Workshop at our Napa office Wednesday, August 8th at 12pm.

Workshop Goals:

1. Recognize building blocks of a solid wine club
2. Learn how to set your wine club apart
3. REthink your Allocation Program
4. View the new Allocation tool

Since space is limited at our Napa offices, and some of you are located too far to attend, we will also be offering this Workshop by Webinar (View the workshop by computer and listen via your office phone).

RSVP by emailing clientdev@inertiabev.com. Please be sure to indicate whether you will be attending in person or by webinar.

Eric’s post last week on “Effective Email Campaign” has sparked some great conversation recently amongst our client development managers and designers. I thought it was worth revisiting as many of our clients are in the final stages of mapping out their campaign strategy for the Fall and Holiday seasons. In recent months, many of our winery partners have been working with our design team to produce beautiful, image-based emails that resemble those found from companies like Pottery Barn, Red Envelope, etc. We have found the conversion rate for a typical email campaign (conversion from recipient to order) is usually somewhere between 1% and 4%, depending on many factors including customer segmentation, the specific call to action, general health of the mailing list, etc. Our recent findings reflect a higher rate of conversion for those “pretty” image-based emails, and in some cases we are seeing conversion rates as high as 10-12% (again, based on many variables in the offers). There are several resources on the web for email “best practice” and I am certain that all who are reading this email have plenty of emails in your inbox that reflect some of these best practices, but I wanted to echo some of Eric’s points and support them with some empirical evidence:

• Event-driven email campaigns (i.e. wine release, holiday, post-club shipment offer)
• We have found that basing your campaign around an event has more impact than a routine monthly email. Often times, the winery must be creative in developing these events, but if you have wine in the cellar, then it may be time for a “library” release to reward your best customers
• Support price points by avoiding simple discounting of wines
• Some of our most successful client campaigns have been the result of higher $ per order, and movement of higher priced products, rather than volume driven sales. This has been achieved through discounted shipping or case quantities
• Tailor email campaign to the customer segment you are targeting
• Our winery partners have FINALLY begun to segment their mailing lists on a monthly basis through our email campaign tool (i.e. ALL customers who purchased a particular product previous vintage, all CA residents, etc.) which has resulted in much more effective email campaigns. Some of the most successful promotions have been a combination of snail mail and email, both driving traffic to the website for purchase.

If your are in charge of email campaigns for your winery, I suggest signing up for several of your favorite wineries’ mailing lists. In fact, if you don’t mind a little spam from companies outside of the wine biz, I would also suggest signing up for some of the mailing lists of the companies Eric highlighted last week. It is great to see the wine industry taking note of what has been happening in other CPG company Direct campaigns and apply them to our own universe. You can also decide for yourself, what stimulates you to jump into the pool of conversion rates for recipient to website visitor to customer.

Many of your are in the middle of preparation for the release of your wines this Fall. For those of you who intend to send out a release/offer letter to your mailing lists at the end of summer, you will be happy to know that we are releasing our new “Allocation Wizard” for allocating product to your mailing list at the end of this month (end of shameless plug). In order to add value to your business between now and then, I wanted to revisit the ‘3 principles of a Successful Allocation Program’ which were included in a blog I posted last year around this time. By following these simple guidelines, you will set yourself up for a successful release of your wines this coming offering season and for years to come.

In analyzing the business practices of some of the more successful “Mailing List” wineries, I have come to understand 3 basic principles that make for a successful DIRECT sales strategy. The first two principles below are commonly used across wineries of all shapes and sizes; the third, I have found, is common only to a select few in our industry. These principles rely on the assumption that wine quality is NOT the primary point of differentiation (if you intend to adopt this approach to sell your product, you better be on par with the upper tier wine brands in your varietal category, appellation, etc.) The three basic principles are:

1. Exclusivity & Limited Availability
2. Relationship with your Customer
3. Conditioning of Purchase Behavior

The first principle above, Exclusivity & Limited Availability is obviously a combination of two important, but inter-related concepts. A ‘Mailing List’ customer is primarily interested in being part of a small sub-set of wine consumers that have ACCESS to your wine, which is in short supply and therefore limited to a “small” group of people (every winery has their own definition of a “small” mailing list).

The second principle, Customer Relationship, is key to ANY strategy for delivering your product DIRECT to consumer. The most successful wineries carry on a relationship with their mailing list customers throughout the year. Often times, rewarding your mailing list customers with private events or special gift packs/bottle formats in a supplemental offering can be the best way to cement share-of-mind for your wine brand. If you only reach out to your customers once a year to announce the release of your wine, then you better have one hell of a value proposition in the bottle, because more often than not they will become tired and move on to the next new thing. At the very least, a simply email/letter saying hello will remind your customer why they belong to your mailing list community.

The third principle applies to how you position your offering and more importantly, how you establish the “rules of engagement”. Many wineries will have the same questions when starting out: How much wine should I allocate to each person on my list? When is it appropriate to drop them off of my mailing list? These questions need to be addressed in your DIRECT strategy and specifically how you intend to condition the purchase behavior of your customers. While there are various approaches to this principle, the most important element to this strategy is to allocate accordingly so that you retain the “Limited Availability” of your wine. Specifically, a ‘Waiting List’ is as important as a ‘Mailing List’. Simply put, healthy demand is generated by creating the perception that your wine is just out of reach. Another key component to this strategy is to establish a reward (and penalty) program for customers who purchase (or don’t purchase) your wine. Again, while there are several ways to tackle this, I recommend rewarding customers who continue to purchase their FULL allocation each year, by graduating them to a higher tier/customer segment in your ‘Mailing List. The top tiers, of course, we receive access to exclusive, small production wines and a larger allocation. This process will inherently establish the rules of engagement, without having to specifically communicate this concept to them.

Most importantly, for those customers who do not stay active and continue to purchase your wine each release/year, it is VERY important to communicate the behavior that will allow them to stay off of the ‘Waiting List’. Wineries do this in many ways, but at a minimum, you should expect your active customers to purchase wine at least once a year. Of course, it is up to you to decide if customers who simply satisfy the requirements to stay on the list by purchasing one bottle per year will warrant the same allocation each year.

I personally signed up for many, many mailing lists (and waiting lists) this past year and will choose which value proposition is the most appealing (no surprise - 90% of the mailing lists are Pinot Noir producers). I personally have loyalties to certain wineries that are particularly good at maintaining good relations. After all, there is no substitute for good, old-fashioned customer service.

Yesterday marked a small win for Direct Sales in the wine industry (very small win). My colleagues and I met with the GM from a large restaurant chain to present our Direct to Trade value proposition on behalf of our winery partners (click here to learn more about this program). Our success for this program took a major step forward when the GM and Wine Buyer confirmed what we have been preaching all along…that wine sales through a DIRECT relationship with winery and restaurant is a value-add for both restaurant and consumer. The main points that surfaced in our conversations were:

1) ACCESS to small, boutique wines allows the restaurant to differentiate their wine list (even in a national chain, they usually have approximately 30% of their list open to local decision-making)

2) Wines available through this program are attractive because most often times they are small production, high quality (or so the scores say) and are often NOT available through existing distribution channels

3) With a low barrier to entry (6 bottles vs. 12) they are not penalized with case breaking fees or inventory carrying costs which allows them to “put their toe in the water” on wines to qualify them for potential subsequent orders.

Bottom line…if it tastes good and their restaurant guests are pulling through the product, then they simply graduate the wine to the sweet spots on the wine list.

Again, this is small win for Direct to Trade, but hearing this positive, excited response from one of the largest restaurant chains in the US gives us hope that our small winery partners can swim with the big boys. This also opens up the possibilities for our larger winery partners to engage the On-Premise channel at a regional or someday national level. Word of advice to the small wineries out there…keep increasing the quality in the bottle. We are fighting to make sure your wines get noticed by the rest of the world.

Have any of you been watching the battle between ‘NetFlix‘ and ‘Blockbuster - Total Access‘ these days? I find it to be a fascinating example of “Bricks & Clicks” in action. I also find some parallels to the wine industry that make me want to bang my head against the wall…I’ll get into the head banging in a moment

Bricks & Clicks as defined by the good ‘ol wikipedia:

“Bricks-and-clicks is a business model by which a company integrates both offline (bricks) and online (clicks) presences. It is also known as click-and-mortar or clicks-and-bricks, as well as bricks, clicks and flips, flips referring to catalogs…

…The Bricks-and-clicks model has typically been used by traditional retailers who have extensive logistics and supply chains. Part of the reason for its success is that it is far easier for a traditional retailer to establish an online presence than it is for a start-up company to employ a successful pure “dot com” strategy, or for an online retailer to establish a traditional presence (including a strong brand).”

With regard to my first example, Netflix vs. Blockbuster, I want to briefly recap the history. Netflix came onto the stage as a late dot.com bloomer and carved out a piece of the video rental pie. Like most ‘Brick & Mortar’ companies, Blockbuster sat by and watched as their market share was depleted by a business model that was totally foreign to them. Being a bi-product of the dot.com era myself, I thought this was the beginning of the end for the Blockbusters of the world. BUT, Blockbuster has come back from near death (ok…so I’m exaggerating a bit here). Blockbuster threw out the challenge to Netflix and their incredible inventory of movie rentals, slick order “queue” for staging movie rentals, and general youthful vibe. They attempted to copy the model in an attempt to re-gain market share from this relatively new segment of online rental consumers. Would they survive? Enter…Blockbuster Total Access.

Customers now have the option of renting a movie from the Blockbuster’s online or store inventory, and returning the movie to the store or simply mailing it back. Most importantly, they can SEE and FEEL the movies before they buy them in the store vs. online, which most people still prefer. Netflix will probably always have a larger inventory, slicker design, search-ability and ordering process…but, Blockbuster has certainly leveraged their Bricks & Mortar to enhance the rental experience that many customers have come to expect from them.

Now for the head banging -> The wine industry is perfectly suited to adopting this Bricks & Clicks model. True, most wineries are experts in the art of creating an experience for customers at their hospitality and tasting rooms. However, many wine companies fail to convey that same experience to their web visitors. That being said, one website that is doing this extremely well is VinoAmigo.com which partners with wineries to offer ALL the benefits of being a club member, without the commitment. Look for them to launch sometime next month. Click here for a sneak peek.

I believe that the concept of Total Access for the wine industry includes:

• The EXPERIENCE of visiting the winery and spending time with the winery “family”
• Allowing your customers to taste/sample the current release and even library wines
• Private Tastings with the owner, winemaker or hospitality staff
• Winery events throughout the year (especially harvest)
• Receiving regular communications from the winery about “winery life”
• Regular Wine Club shipments (sampling program) with each new release & the benefits that go with membership!
• ACCESS to limited production wines and ability to purchase at the winery or ONLINE

The customer experience realized in the tasting room and at the winery should be the SAME experience that they feel on the web. Exclusive club member website areas and special allocations of product are just a few of the ways that you can reinforce that experience. Finally, leveraging the beautiful vineyards and winemaking facility and developing a solid wine sampling program (wine club) is paramount to making sure your brand message is consistent in the Bricks & Clicks model.