REthink Wine Blog

You may have heard this already: Inertia is pioneering the enablement of wine producers to reach trade buyers directly, in an easy, efficient and fully compliant online fashion. As we ramp up our efforts to empower more wineries to sell more wine Direct-To-Trade, I want to take a closer look at the big-picture question of why direct trade sales must inexorably grow.

By now, the message is clear: the American system of wine economics is rapidly mutating. Not only have consumer habits made wine a much more popular consumer good and increased demand and supply, ongoing regulatory changes have made the marketing and distribution of wine a much more creative and competitive sport.

Innovation arises when things stop working. In our industry, innovation needs to answer many a winery’s dilemma: “I can’t find a distributor who’ll carry my wine; how can I get it to market?”. Whatever the answer may be, it also needs to answer the challenges facing wine buyers: “How can I buy this rare gem if none of my distributors carry it?”

The situation is familiar:
> There are more and more wine products hitting the market (both foreign and domestic).
> There are fewer and fewer distributors as they rapidly consolidate.
> Warehouses are full of inventory that is slow to move.
> Margins are rapidly being eroded by rising fuel costs.
> Traditional distribution systems have less incentive to build brands.

The American 3-tier system has been tremendously successful and continues to be. Yet it is currently not capable of efficiently absorbing all the new-comers to the market. A small number of brands represents a huge portion of what is actually consumed today and it is the 3-tier system that makes this possible. But how can smaller, high-end, boutique brands catch the attention of giants? How can a 10,000-case winery, making stellar wine (though not yet blessed with a sacred 94point rating), possibly catch the attention of large, bottom-line focused, distributors? Fortunately, many still do for the benefit of the consumer; but not all.

As Angela remarked in her recent post: there is distribution and then there is effective distribution. This is my central argument: going direct is about filling the gaps of the 3-tier system. Wine producers need to ask of their distributor: “are you the most effective way to get my wine to market?”. Most often, the answer is a resounding “Yes!” , but in certain situations or for certain brands, the 3-tier system will not work. Here is a short list of situations many wineries will recognize:

> I have a restaurant in Florida who wants my wine, but I can’t get a distributor to carry me because it’s not enough volume.
> My distributor in New-York does not service up-state, how can I get my wine to a buyer in Rochester?
> I have a retailer who really wants my Syrah, but my distributor only carries my Cabernet and Merlot.

All these recognizable barriers to sell are about one thing: Access
- State access: getting to certain states
- Geographic access: reaching all areas of a state
- Product access: getting all your products in a state
- Buyer Access:making your products easily accessible to all potential buyers

So how can innovation help solve some of these issues? A minority of producers is currently selling directly to trade, but technology hasn’t been fully leveraged yet and the scope of current direct trade sales is still geographically narrow. While I will not go in the details of our ‘secret sauce’, Inertia’s DTT program enables bonded wineries to transact sales to these 12 states:

Arizona
California
Connecticut
District of Columbia
Florida
Illinois
Ohio
Oregon
New-York
Vermont
Washington
Wyoming

As Corey commented, these sates represents a huge swath of American wine consumption. If any one of the above states, or portions thereof, have been closed-off to you, or if your distribution in any of those states isn’t as effiective as it should be, then you should take a hard analytical look at the opportunities and implications of DTT.

Inertia’s DTT program will allow wineries to transact sales from trade buyers in any of the above states (or a sub-set for 17/20s and importers). Inertia’s DTT program allows you to pick what you want to sell, where you want to sell it and whom you wish to sell it to, in a fully-streamlined way, all on-line. DTT also implies minimal over-head that frees up staff resources (that would otherwise be spent on order management, invoicing, collections, etc.) to do what is most important: selling.

Access is the first and most obvious reason for going Direct. This is why DTT can be an incremental distribution channel, supplementing the 3-tier system if and where it is not efficient.

Upcoming posts will shed more light on the other two compelling reasons for going Direct-to-Trade: Control and Sales.
Stay tuned.

Uh oh, the Inertia tech team is at it again - today we release our CMS platform to all as an opensource project. Why would we release a proprietary engine that can enable our competitors and others to use for making websites? Because we believe in a healthy ecosphere for people to help wineries sell direct even if they are not on our platform. We are firm believers in open source and take our lessons from http://bit.ly/3DMt5Z and http://bit.ly/wikinom - you have seen this displayed first with our free compliance tool, rethinkcompliance.com and now with Brix.

What is Brix?

BRIX is an Open Source Initiative sponsored by Inertia. Based on Wicket and JCR, it is the ONLY Wicket-based CMS framework available today. As such, BRIX was designed to aid our partners, designers and other organizations in accelerating development by allowing for easy integration of a powerful CMS into existing applications. BRIX was built on the idea of “Power versus Complexity”, providing for ease of use while at the same time allowing designers the highest degree of freedom in developing a rich user experience.

Web 2.0 has created a fundamental shift in end-user expectations, which in turn has resulted in a continually evolving set of business requirements as they relate to Content Management Systems. BRIX was designed to allow developers to meet those requirements, and delivers the tools you need to compete in the marketplace.
Brix can currently be found at http://code.google.com/p/brix-cms/ and eventually will be at brix-cms.net
BRIX TOOLS:

• The ONLY Wicket-based CMS framework: With a refreshing lack of XML being just one of its many benefits, Apache Wicket makes developing web-apps simple and enjoyable.
• Based on JCR (Java Content Repository):
• Based on Java: Use an enterprise-standard data repository.
• Extensible Plug-in Architecture: Create and publicly code extensions without having to roll those changes into the BRIX core providing a hack-free way of extending and customizing Brix to suit an extremely diverse set of needs of its user base.
• Tiles: Easily incorporate configurable, reusable blocks of dynamic content into your CMS.
  Templates: Easily create and reuse website skins.
• Prototypes: User-defined, clone-able site structures provide additional ease of use.
  Support for WebDAV: Allows for a collaborative approach to document creation, editing, and distribution. Also edit using your favorite desktop HTML editor.
• Site Snapshots: Provide support for version control and backup.
• Raw or Rich Content Editing: Incorporate rich text and the associated formatting.
  Ease of Use: Basic workflow/publishing support and flexible security infrastructure.

Delivery of BRIX via the open source community fosters innovation in Content Management.

At its deepest abstraction, BRIX is not a standalone CMS, but rather a CMS framework which allows for easy integration of CMS functionality into existing Wicket-based applications. This is its primary benefit and we are confident that it will become the CMS tool of choice for many organizations as a result.
BRIX is developed under the Apache License, Version 2.0.

Please enjoy our contribution and give us feedback, success stories, or challenges with Brix. Moreover, we hope that you will become contributors to this exciting project.

I have been watching and planning for what we will do for .mobi - when do we create a tool that replicates all our winery partner sites with a mobi extension? I am still not sure the answer to that question but I am thinking about it. I am also an avid Iphone user (though I hate the email delivery and can’t wait for the next version). I like to the tools that are useful on this platform in mobi format or more. Fortunately we have a new partner that extends us to the mobi side of the fence. Culination has a great model of matching food and wine and more importantly, putting it on a mobile platform to view and search easily. Kudos to Rick for leading this charge and we are pleased to be his partner.

On another note, I will be doing a theme for a few weeks and taking questions from twitter (http://twitter.com/pmabray) or from the OWC post and then taking them to the team to answer every Wednesday. Please send questions about selling or marketing wine or major industry challenges (in regards to direct) and we will put our thinking caps on and try to bring a good answer. The questions that I will try to answer before next Wednesday mostly came from Twitter:

http://twitter.com/kathleenlisson asks:
Could wineries partner/contract with a personal chef to develop recipes, answer questions on a forum on the wineries website?

Is giving customers ideas / new reasons to drink wine a part of their sales strategy?

If wineries have a mailing list, can they encourage direct sales by providing an e-recipe book of 5 - 6 wine and food pairings?

http://twitter.com/israeliwine asks:

maybe some formulas for determining your best shipping discount strategy (maybe it varies by state even)

http://twitter.com/ColeDavid asks:

How do you better sell DTT? What are the best practices?

http://twitter.com/domaine547 asks:

Do wineries get value from sponsoring celebrity events and if so do you know any who’d be interested in sponsoring wine at an LA/Celeb event on july 4?

Stay tuned next week (or hopefully sooner) for the answers and more questions. Now off to get the team to do some brainstorming.

Inertia’s 5th Annual Direct Symposium will take place on July 11th, from 9-3:30pm at COPIA in Napa. This year, we’ve expanded our agenda to include interactive sessions on topics chosen by attendees. Last month, we released a survey on what we were hearing from our clients and industry partners as the ‘hottest’ topics in the direct industry. Topics included:

• Website Design
• Website Merchandising
• Selling Direct to Trade 
• Direct Shipping Compliance
• Allocation Program Management 
• Wine Club Management
• Wine Blogging
• Online Social Networks

We asked attendees to ‘vote’ on their topics of choice for breakout sessions at our July Symposium. The results were tallied, and we have our winners… 

• Selling Direct to Trade: Access. Control. Sales. 
• Direct Shipping Compliance: A Dynamic Marketplace. Your Options.
• Wine Blogging: Brand Building, Customer Loyalty and Sales
• Online Social Networks: Consumer- to-Consumer, Peer-to-Peer Engagement
• Website Design: Designing for Best User Experience & Greatest Sales
• Website Merchandising:  Sell More Online 

Our Symposium agenda will allow attendees to participate in two breakout sessions of their choice: One in the morning, one in the early afternoon. During each of these sessions, panelists will lead an interactive discussion with the audience around a designated topic. Based on several workshops which we led earlier in the year, we know our clients are eager to engage and look forward to some good interaction.

Because of limited space in each of our breakout sessions, we request that attendees reserve their spot in the session of their choice as soon as possible. Signups will be taken the day of the Symposium, at check in, but to ensure you get a seat in the topic of your choice, send your request through today (along with your RSVP if you haven’t already!) to rsvp@inertiabev.com.

See you in July!

The rumors are flying - there is growing concern that we are entering a recession.  All indicators seem to point in that direction.  What does that mean for the wine industry?  Well, in general wine sales have slowed during recessions but people tend to enjoy wine when they are in good or bad times, they just tend to be more frugal.

But the ramifications and challenges are less related to consumption than they are to how the market deals with the plethora of brands.  What you have is that wholesalers are less likely to take chances and buy low velocity or unproven brands.  As a businessman I completely agree with their thought process.  Why tie my dollars up in inventory that I may not sell, takes extra effort to sell, or sells slower than other possible products.  Moreover, when they do take a position in a brand, they tend to take a far less aggressive purchasing approach.  Why buy two pallets instead of just one?

On the demand side of the equation the trade also is experiencing a similar approach.  Retailers are less likely to veer off the standard path of what sells and what sells fast and easy.  Restaurants on the other hand are in the situation of not wanting to purchase deeper inventory due to the slowdown in on-premise sales.  But remember, restaurants continue to proliferate in direct support of population growth and I know people don’t stop making babies during recessions.

Consumers are still buying wine, just trying to manage their pocket books better and buying less expensive wine on the frequency basis yet still saving a bit of money for that favorite winery or exploratory purchase.  Unfortunately also they are not traveling as much to wine country diminishing the tasting room as your core direct sales machine.  That doesn’t mean they don’t want your wine, they are just not traveling across states lines as frequently to get it (one side note, tasting room sales do not often decline during recessions because LOCAL residents not traveling out of state tend to visit local wine regions more frequently to get their fix - it doesn’t denote health of hospitality, just a shift in attendance).

It sound scary.  It sounds ominous.  But look deeper.

As a result of the “slow down” the amount of access to brands in any particular market becomes limited.  That does not change the fact that that there are still buyers - both trade and consumer - looking to buy their desired brands.  It just means that those brands may no longer have the same access to the markets.  Do you really think that just because the brand is not in the market and someone loves the wine that they are going to abandon purchasing it? Heck no! They will simply need to find another way to gain access to that brand!

Also, just because on-premise has slowed it does not mean that restaurants do not want a diverse wine list that matches their food, atmosphere, and personality.  But unfortunately the slow down means their access to these brands is now limited by the economics of the market.

So where is the good news?  It is very pure and simple.  Demand for your products still exists, but the strategy for getting them effectively into your desired markets does need to change – think DIRECT.   With a direct sales strategy, the consumer who can’t find your wine in the local market will search the internet and find themselves at your website or find a phone number to call you on the phone.

How do you ensure you’re available for that DIRECT contact? Consider the following: Are you staffing appropriately for your DIRECT program?  Do you have a good fulfillment strategy (like leveraging Wine Tasting Network’s bi-coastal operations) to help lower costs and incent people to buy direct?  Have you made sure to get maximum, cost-effective penetration through your direct shipping permits?  On the trade side, specifically for restaurants, selling direct to trade is new. However, in an economic slowdown, with a limited selection likely being offered by traditional means, they are more likely to go the extra effort to buy direct. Why? Because it allows them to continue in their efforts to create a unique Point of Difference through their selection, from the restaurant next door.

And for you, the winery, this is ALL good news.  It means that your direct channel gets more fuel from sales.  It means that you can possibly recapture margin.  It means that your customers now go into your database for creating long term relationships, thus stabilizing your brand.  Are your direct programs ready for the recession?

I had an opportunity to speak at the Specialty Wine Retailers Association Symposium this past Wednesday at the Kendall-Jackson Wine Center in Santa Rosa. It was an intimate group of attendees, representing everyone from the larger, multi-channel retailers and wineries, to service providers who help enable retailers and wineries to get their products into the hands of consumers across the country.

Kenneth Starr was the keynote speaker, and he engaged attendees with a good overview of the legal battleground which retailers face with shipping their wine to consumers throughout the country.

I spoke on a panel with Dom Moreci of Plumbline about Wine Retailing in the Online Space.  We touched on everything from the basic necessities for building and managing an e-commerce business, to innovations and utilizing Web 2.0 strategies to engage your customers.

I’ve included the full presentation here: SWRA Presentation_Ktaaffe, Inertia

As a quick highlight, I broke my discussion into three “buckets”, defined as the Need to Have’s, the Nice to Have’s and Innovations to Consider. If you are an online retailer or winery selling online, consider the first two bucket’s mandatory to finding success. Move into innovations if your brand, your customers and YOU are ready for them.

A special thank you to Jeff Stai of Twisted Oak Winery, for allowing me to take attendees on a ‘Day in the Life of Jeff’ as he travels through the Web 2.0 space!

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.

You may have heard of big wave surfing, in places like Maui, Hawaii’s Jaws or at competitions such as Mavericks on the coast of Northern California (check out the documentary Riding Giants). Last month I enjoyed a great day at the beach watching the Mavericks competition. It’s a bodaciously insane surfing event where the world’s best must be towed by jet skis to catch 30-foot waves.

What’s that got to do with wine marketing? Well, it made me think of an analogy - here goes:

The metaphoric big wave is the expected growth of online wine sales. Numbers don’t lie - so here are the recent stats for the year 2007 (courtesy of the Wine Market Council):

• 38% of Millenials (those born between 1980 and 1993) say they are drinking more wine. Nearly all Millennials will be of legal drinking age in the next 5 years and this group will drive both consumption gains and taste trends.
• 18% percent of core wine drinkers (those that imbibe at least once a week) have purchased wine online.
• 64% of those purchases were done on winery websites.
• Over the next 5 years online wine sales will triple!!!!!!

My point today is that the big wave is coming for online wine sellers, be they wineries or retailers. How will they surf it and which channel is best prepared to capture these new consumers we keep hearing about? The telling number here is that 2/3 of online sales in 2007 were direct, i.e. from winery websites. As online sales grow, will wineries keep that market share, or will it dwindle?

I would argue that currently retailers are better poised to ride the wave. Like the surfers, if you want to ride big, you literally need some ‘pull’- pull marketing that is! Retailers have quite a bit of it already, are getting more, and it will increasingly help them.

Wineries have many advantages over the traditional retail channels like content, branding, being the producer, loyalty built through hospitality etc., not price however. These strengths work great to retain customers acquired directly (via tasting room, clubs, website…). However, harnessing the power of the web to acquire new customers is another feat entirely - hence the need for pull marketing. To keep with the analogy, wineries have superior surfing skills but they don’t have a Jet Ski to help them catch that mythical break. Bummer dude!

A newfound desire for wine, marketing, demographics, deregulation, supply… all converge to generate and sustain new demand. The new wine buyers that make up the big wave are the famed Millenials. Who are they? What is their purchasing behavior? How do they shop? What makes them tick? These are questions anybody selling wine online should be asking. Yep, the eCommerce revolution is hitting the wine world.

Like most savvy online shoppers, these new wine buyers will first look to shopping portals, vertical search engines, social shopping sites, social networks, blogs, forums, etc. to get information, prices and to make a purchase. If a prospective online wine buyer has not visited your winery or received an email from you or heard a recommendation from a friend, chances are he or she may not first look to your website to buy wine. That person will Google what they are interested in and see a very long list of possibilities - only one of them being your winery’s website.

That plethora of options can be daunting, so smart entrepreneurs have created marketing services that act as filters to help consumers find what they want quickly. You know the main ones: Wine-Searcher, WineZap, CellarTracker… and the newer ones: Snooth, Winelog, Vinquire, Radcru, TasteVine, Vino2Vino, Calwineries, Bottlenotes, Cork’d, ClassicWines… There are many. These essential outfits compete to cater to the needs of the inquisitive wine lover. With a few exceptions, they look to wine sellers to fund them. Almost all paths to purchase lead to a retailer paying for a click or a sale. These wine marketers allow supply and demand to connect, and so far, the supply being connected is represented mainly by retailers. This ecosphere of wine marketers has undeniably helped wine retailers, big or small, build their online business. Can they also help wineries?

Wine retailers have been at the online marketing game for some time now. In addition to experience, they have the advantage of working with large inventory, this makes for economies of scale in marketing. They can feed their product data to various price comparators or product list aggregators and also engage in paid search. Retailers have been quite effective at creating multiple paths to their stores. With the growing appetite for imports, this pull marketing is what will surely help them ride the big wave of online wine sales.

The number of wine producers is growing. The number of distributors is decreasing, as is their appetite for diversity… This classic scissor effect creates the need for wineries to find customers outside their usual hunting grounds. No one can argue that the web can be the largest source of new sales. We can agree that retailers already have an edge in this regard. So, given this situation, how can wineries effectively compete for new online customer acquisition?

They need to find ways to enter the same marketing channels as retailers and have their products and content listed on as many wine search engines, databases, social networks or marketing programs as possible and have links to their store wherever their brand is mentioned. Not only will having links and content listed outside your website help your SEO, it is the surest way to bring in traffic and sales.

In acquiring new customers from the web, I would argue that:
- wineries can hugely benefit from such pull marketing
- wineries actually have many strengths they can leverage over retailers
- wineries can play on mediums retailers cannot
However, for wineries to make this happen, they need what only retailers have - scale. Wine marketers need to work with compatible entities, requiring low overhead for data collection. I would argue that for wineries to build this kind of pull marketing, they need an enabler who can bring scale to the table. By working with multiple wineries, using a common data platform, such an enabler can broker on their behalf to make this happen.

In case you’re wondering where this is going… Inertia is busy building the Jet Ski that will help its clients ride the big wave. To beat the analogy to death, I’ll say that what powers the jet ski and how it pulls is best kept for a later blog post… Gnarly!

Wine online darling Gary Vaynerchuk from WinelibraryTV continues to grab the wine world by its shirt lapels and give a good, healthy shake.

You may recall that Vaynerchuk spoke at the Wine Industry and Technology Symposium (WITS) in July where he was quoted as saying (in reference to the wine industry’s use of technology in marketing):

“Ninety-nine percent of the people in the wine business are really blowing it,” said Gary Vaynerchuk, director of operations for the WineLibrary, a Springfield, N.J. wine store with a popular interactive Web site. (Quote excerpted from the Santa Rosa Press-Democrat)

I wrote a blog post on this site shortly thereafter that can be found here.

Gary continues to not only lead the charge in creating a brand online for himself and his business by proxy, but he also continues to give advice, good advice, to folks interested in growing their business, any business.

Vaynerchuk did an audio interview with an Internet-based business coach and he provided some additional insights that are not just applicable to technology marketing, but marketing in general. You can find the audio portion of the interview here and a transcript of the interview here.

A couple of the nuggets that I gleaned are:

* Vaynerchuk on putting content out on the web: “If you put out great content, you will be found.”

* Vaynerchuk on leveraging your expertise: “So, if you are the best guy in your law firm in contracts, instead of waiting eight to ten years to become a partner, start (using technology) about what you know. Give away that content for free. It will come back to you in spades 800 times over.”

* Vaynerchuk on tapping your passion: “So you may be good at three or four things, but please site down and analyze where you feel you’re most passionate about, even if that is the most competitive genre, do it because that is where you’re going to win when you really believe it, when it goes through your blood, you’re going to wine every time because even if you’re not seeing the mythical success, your heart and soul is going to be happy. That is going to push through to the point when you will start seeing success.

* The Interviewer on setting lofty goals: “you have to have high ideals. You have to have something that you’re shooting for that’s absolutely spectacular. What you have to realize is that’s the ideal, that’s not the goal. When you achieve a certain level of success, the people that are super successful don’t compare where they get to–to their ideal. The ideal is just where they’re focused towards. To be happy and to be excited about what you’re accomplishing, you have to look backwards to where you were. As long as you make that leap and you look backwards to feel good about yourself then you can keep that excitement going. If you’re always comparing where you are to the perfect (ideal) then it’s very hard to stay excited …

The frenetic interview wraps up with Vaynerchuk’ “Five Steps to Mastering Social Media.” If you replace the “social media” with “online marketing” or just “marketing” the same values hold true. They are:

1) Make sure you want to engage/learn it.

2) Now that you know you want it, spend every living second that you possible can on it.

3) Put your toe in the pool. Get involved.

4) Humble yourself. If you’re the best basketball player in the world, you’re playing hockey now. Put on your skates.

5) Know what you want to accomplish.

As we head into the biggest selling month of the year for wine thoughts naturally turn to 2008 and the unconquered horizon that a fresh start presents. Read the Vaynerchuk interview or simply just ponder the excerpts here and consider what you can do in the new year to accelerate your marketing success!

When you are lucky enough to work in an environment that meshes technology and wine, and have had the good fortune of being handed a modicum of wine knowledge, you find yourself being asked a lot of questions about wine by tech-savvy folks. What’s “bret”? “Wait a minute, there’s Pinot Noir in Champagne!?” For whatever reason, wine has a tendency to intimidate, so sharing wine factoids is cool and helpful. Likewise, technology language, geek-speak, can sound foreign to wine folks. To further evangelize Inertia’s creed, I thought I should share with our winery friends some of the basic terminology of online marketing.

SEO: Search Engine Optimization
This is the dark art of getting your website to return higher rankings on search engines (Google, Yahoo, MSN…) for searches on keywords that are directly related to your website/business. These are the free, ‘organic’ results on the left of a Google page. There is no silver bullet for this, experts can help, but ultimately it is a reflection of how relevant the WorldWideWeb thinks your website is for the searched subject. When you type ‘Napa’ on Google, you will see that the Valley is second to auto parts… sorry folks.

SEM: Search Engine Marketing
This is how Google makes billions of dollars in exchange for providing us with an indispensable free service. When you type in search terms in any search engine, somebody pays to have a relevant ad displayed next to the ‘organic’ search results. These are the sponsored links on the right and top of a Google page. When you type in ‘Napa Valley Cab’ on Google, you’ll see that KLWine and Napa’s finest taxi and limo service paid good money to be displayed. It is an awesome money-making service Google provides called ‘AdWords’ that allows advertisers to bid money on search terms and have their ad shown in relevance to what they paid and how relevant their site is.

CPM: Cost Per Mille
aka CPI: Cost Per Impression or CPT: Cost Per Thousand
By web standards, this is the granddaddy of advertising business models. This is online advertising that works just like ads do on TV or in print. You pay for how many times your ad is shown. Say you want to run an ad on a particular page of an online publication and that the CPM for that page is $6. If that page is viewed 5,000 times, you will pay $30. Sounds great for publishers, but it offers no guarantee to the advertisers that the ad is driving traffic or sales. This is good for brand building, getting mind share. General Motors doesn’t expect you to buy a car online or visit its websites, it just doesn’t want you to forget it makes cool cars.

PPC: Pay Per Click
aka CPC: Cost Per Click
This is a method of advertising where the publisher of an ad, text or visual, gets paid every time that ad gets clicked on. If you run an ad for your winery on a blog with a CPC of $0.05 and the ad gets clicked on 100 times, you paid $5 for 100 hits on your website. However, this does not mean 100 new visitors to your site or 100 new sales.
This is the business model that dominates the online world today. It makes the publishers sell ad spaces relevant to its own traffic (otherwise, no clicks, no money) and it gives advertisers a return on what they spend (one click is one potential conversion/sale).

CPA: Cost Per Action or Cost Per Acquisition
This is an advertising model where the advertiser pays only if an action takes place. The advertiser defines what matters to him: a survey being completed or a bottle of wine being sold. He also defines how much he is ready to pay for that action. That cost can be a fixed sum like paying a website $5 for a newsletter sign-up. The CPA can also be a set commission on the sale of a bottle of wine, “a piece of the action”, whereby you give X% of that order amount to the referring website.
For an advertiser this is the ideal form of advertising, you pay exactly for what you wanted and only that.

Affiliate Marketing
This is the name for the industry built around the CPA model. To reconcile demanding advertisers with a multitude of heterogeneously targeted publishers struggling for ad dollars, third parties (LinkShare, Commission Junction…) or large retailers (Amazon) have organized affiliate networks, grouping publishers, to sell advertisers or merchants a relevant space to push their products or services. Instead of going to each individual publisher and figuring out if they are right for you, you trust an affiliate marketer who selects the publishers for you and you pay only for what you get in return.

SMO: Social Media Optimization
This is a fairly new concept that arose with Web 2.0 and its bevy of social networks. Rohit Bhargava coined the term and gives 5 rules for conducting SMO. It is another dark art way of generating more traffic/sales/exposure by using social media, online communities and community websites. Using RSS feeds, “Digg this” buttons, Youtube, Facebook pages, etc… are among the many ways to practice SMO.
For wine, SMO would be a way of getting your winery’s website and your wines listed on as many wine blogs and wine social networks and wine-related websites as possible. These include Snooth, Cork’d, TasteVine, Winelog, Calwineries, Openbottles, Vinorati, Bottlenotes, BoutiqueWineCellar, etc…

As you can imagine, which business model is chosen largely depends on the bargaining strength of the publisher and the advertisers, as well as the type of products or services that is being promoted. When it comes to selling more wine online, directly from the winery to the consumer, leveraging wine social network into an affiliate-type network is a very compelling argument. SMO is a concept Inertia strongly believes in. We will soon be putting it into action with the firm intent of driving new traffic and sales to our winery clients. Stay tuned.

Hopefully, this little introduction will make online marketing seem less esoteric. If you have any questions, feel free to drop me a line in the comments section or email me at pascal.davis@inertiabev.com

Cheers!