REthink Wine Blog

Almost all businesses fall into the Pareto Principle - optimistically 20% of your customers do 80% of your business.   Applying that math to your ecommerce in order volume will yield you interesting math to help you estimate your yearly sales.  So let’s apply this to a database number.

If you have 500 ACTIVE members in your mailing list you can expect a maximum of 100 members ordering in a year.  Divide that by the months in a year and you will get approximately 8 orders per month.  The average order is 3 bottles.  So multiply your SRP times 3 time 8 and you will arrive at your estimated gross income on the web per month.  Please consider that this is IF YOU HAVE AN ACTIVE and VALID email list of 500.  In general we find that customer databases have approximately 35% of the list inactive.  Using that math against a mailing list of 500 (not active) - you find that you have a potential of 325 customer and only 20% of those will translate into orders in a year.  That equates to 65 orders per year or approximately 5 orders per month.

My net message is that to run a successful direct business (ecom and phone and club) you need to do a lot of data hygiene.  Moreover, you need to really grow your list to continue to press your numbers higher.  Even more meaningful is that the 20% of orders you receive you need to really reward and engage with that limited customer set and find ways to increase customer satisfaction and order size.  Direct sales are a game of numbers and your metrics will drive your business if you stay rooted in the numbers.   If you have a weak customer database, your results will be significantly less.  As my first mentor always says, “math never lies.”

Those crazy frogs are at it again! Not only do they claim to be the godfathers of the wine industry, but it looks like they may have beaten us to the punch and found a unique way to market direct online wine sales. Through a brilliant viral marketing campaign, one company has found a way to grow their email list and promote their wine-a-day program.

Check this out:

When the video completes, you are invited to click on the link to ‘acceder au wine store’ which redirects the viewer to a site advertising a wine-a-day (1Jour1Vin) program similar to RadCru. The viewer is asked to share their email address to receive alerts for discounts on wine direct from the retailer, thus gaining emails to grow their wine club. This video originally appeared on a website called MensUp.fr, which is a site dedicated to sharing the latest information to young men interested in technology and social networking.

In the Business Development department here at Inertia, we look for new ways to help our partner wineries channel new customers back to their website. We look to other online sites that may draw those wine aficionados our partner wineries have not yet been able to reach through their traditional marketing strategies. This is where you can learn a lesson from this kitschy advertisement. By targeting non-traditional wine websites where consumers have a high social networking potential (in this case, a website targeted to tech savvy young men who are interested in new products) your winery could build your brand and sell more wine direct.

The ad has now reached not only the people on this website, but the humor in this video further inspires friends to pass the link on voluntarily through word of mouth enthusiasm, using their preexisting social networks to share the video promotion within their personal online communities. While 1Jour1Vin has only paid for the ad space to host on mensup.fr, they are now relying on the humor of the clip to get the people to distribute this content for them, at no extra cost. As a result, the video was also reposted on youtube.com (where it was subtitled) and many other websites… and just like that, the word is out! This company has successfully built a name for itself through a clever viral marketing campaign.

After all these years, we find the French still have many tricks to teach us about the wine industry.

I recently had dinner with a thirty something couple that lives in Oakland.  During our conversation they asked if Inertia had a certain winery from Mendocino on our platform.  I said no, but why the interest?  They belong to the wineries club, and raved about the experience.  For five minutes they talked about how friendly the people were, the great events they have twice a year, and so on.  They never once said anything about the quality of the wine.

That got me thinking about wine clubs in general, and specifically why do people join.  My net opinion, it’s not about the wine, it’s about the inclusiveness.  I know of two different couples that belong to a club from a popular Sonoma winery, that does not sell their wine in the general market.  One couple lives in So. Cal, the other in Upstate N.Y.  Both couples drink good wine, and have pretty good pallets.  Both are effusive about this winery.  The truth is the wines are average to mediocre, and definitely over priced.  However, the winery experience is outstanding, as is the job done by the club manager in staying connected with their members.

So the moral of the story?  Love your club members.  Let them know they are special.  Give them unique insights into life at the winery.  Get them to feel invested in your success.  They will not only stay on your club list, they will be your best ambassadors for future growth.

If you believe that the Direct Sale Channel is the most profitable and growing, what are you doing to make sure you’re making the most of this?

Most wineries spend a majority of their budget furthering the wholesale channel and few funds are allocated to the Direct Channel. What a different place the wine industry would be if budgets were adjusted to allow for hiring more high-powered marketing managers to oversee the wine club, tasting room and ecommerce. Imagine if the ideology that the Direct Channel is second best (and thus does not deserve the same resources) was changed and now winery staff is not tasked with wearing multiple hats to try and do the work of three people or more!

A traditional industry is slow to change, but you can make the most of what you have to work with. Think by and for individual channels – ecommerce, tasting room, wine club, and telephone – and leverage the nuances of each. Create goals and plans to reach those goals for each DIRECT sales channel. Plan, monitor, and reassess your goals as necessary. Have a plan in place on a monthly basis for the entire year, but continue to reassess and reschedule. Plan down to the detail – not only plot out what wines will go in the club shipments for the year, but what emails will you send, when you’ll send it, and what you’ll feature; plan your emails as far in advance as possible to coincide with events, wine releases, accolades, etc. If you have a solid plan with tactics and resources in place, you can take the stress out of the day-to-day.

If you believe that the Direct Sale Channel is the most profitable and growing, then plan, monitor, and reassess your methodology and tactics to grow this channel. Put your resources behind the channel in the most effective and efficient way possible to make the most return on your investment into the Direct Channel.

A key success factor in the execution of any direct marketing initiative can be found in the quality of the data which makes up your contact list. Is your data ‘complete’? Is it ‘valid’? Is it ‘up to date’? Each of these questions should be considered by anyone implementing a direct marketing campaign.

Research from Dynamic Markets indicates that 86 percent of businesses admit to having incomplete or inaccurate customer data files. Additionally, 75 percent of businesses admit that potential revenue is lost because of missed opportunities due to poor data quality.

Here in the Direct world of the wine industry, we’re no different. There are several simple activities of data management that should be applied by anyone managing a Wine Club or Allocation program, Tasting Room or E-commerce effort. Conveniently enough, I’ve outlined them here.

Garbage In, Garbage Out
Start at the point of entry. If what goes in isn’t clean, what comes out certainly won’t be either.

Have a Tasting Room?
Ensure your staff has the tools they need to capture complete and correct data. Provide a script to the staff to ensure they are asking all the right questions – for instance, did they ask for an email address? Did they repeat back the spelling and the address to the customer for confirmation?

Have a POS?
There are address validation applications which can auto-complete city and state names by simply entering a zip, as well as validate whether certain addresses exist. By validating with these tools, you ensure your state abbreviations are correct, city names are spelled the way they should be, and apartment and suite numbers actually exist.

Make Data Hygiene a Regular Activity

There are a lot of vendors out there who will take your data, consolidate any duplications (multiple John Smith’s at the same address, for instance), check all names and addresses against Change of Address databases (both physical AND email Change of Address services exist), even validate against Deceased lists and certain non-desired types of businesses. The costs are relatively cheap, and the return is worth it:

Imagine sending 5,000 direct mail postcards to your mailing list and having 15% of them return as undeliverable; at approx $.85 a piece that’s $638 wasted. It’s also a loss in potential revenue – 750 people will not see your message and not have a chance to buy your latest offer.

For Wine Clubs, imagine the savings in minimizing undeliverables. By having accurate shipping information, you’re thereby preventing returns and the inevitable fees that go with them. What’s more, customer satisfaction goes up – by ensuring the customer receives what they were expecting.

The More Relevant Data, the Better

No doubt, segmenting your database (by user preferences, purchasing behaviors, geographic locations, etc.) and targeting the appropriate message to each segment is one of the smartest way to increase conversions to purchase – however we could write a whole book on this subject (and many have). For this discussion, it’s about having relevant and usable data, in addition to complete and accurate data, to ensure you have the basic foundation for a strong segmentation strategy.

You don’t get what you don’t ask for

Do you prefer Red or White wines? Sauvignon Blanc or Chardonnay? Are you interested in Food & Wine pairing suggestions? Have you ever visited our Tasting Room? Don’t be afraid to ask – but also be prepared to do something with the information once it arrives.

Find a place in your database to store the valuable consumer information you are given, and make sure it’s accessible for data segmenting (i.e. add each data point as a field on its own – not in a general notes section that will potentially hold a mix of information). And be consistent in your terminology – in order to easily sort and pull together a usable list from your database, all entries should be made using pre-defined, searchable keywords. Be sure to use consistent spellings or abbreviations for those keywords, and be cautious of importing directly from consumer inputs or you’ll end up with more data cleansing exercises than you bargained for.

Manage Expired Credit Cards

While most information sitting in your database is static, one data point actually loses validity over time: Credit Card expiration dates. As time passes, expiration dates arrive, leaving revenue on the table if we don’t actively manage updates.

For anyone running a Wine Club, it’s mandatory you focus on cleaning up those expirations in advance of a Club run. Run a monthly report to identify expiring Credit Cards and update as appropriate. Not only will it save you from last minute scrambling to contact Club Members with pending expirations, but will also ensure you are getting the most out of your potential Wine Club revenue. If you’re consistently losing Wine Club shipments due to expired credit cards, you’re letting revenue go.

One winery I recently worked with set a goal of reducing the percentage of expired credit cards on their Wine Club list by just 2 points annually. We knew we couldn’t keep up with all expirations, but for those two percentage points of members we were able to recapture, we recognized $48k of potentially lost revenue in the year. A few extra hours of phone calls a month, with a couple of email notifications thrown in, all providing a nice return.

By ensuring your customer database is complete, up to date, de-duplicated, consistent and cleansed, your Direct Marketing initiatives are sure to be off to a good start. For more information, tips and tools for direct marketing and data management, visit www.usps.com or www.the-dma.org.

Probably one of the biggest misconceptions about websites is that they are consumer magnets. I think of them as lemonade stands… in the middle of the desert. If the stand is not right next to a busy highway and there are no HUGE billboards pointing in the direction of the lemonade stand, chances are no one is going to find it - or even look for it. Even more likely is that there are millions of other lemonade stands, just like yours, dotted here and there on the landscape. How will you differentiate yourself from the throng? Selling pink lemonade might not be enough.

Make sure someone is in charge.A website (ecommerce) is another channel (like a tasting room) that resources must be allocated to. Not only should part of the marketing and operations budget be alloted for this channel but so should personnel. Too often the tasting room or wine club managers are asked to handle ecom, almost as an aside and the channel doesn’t get the attention it deserves. Hire a direct sales manager to: maintain your “virtual storefront” including keeping products up to date with those available in the tasting room, cultivate loyal customers by communicating with them on a regular basis, and deliver information (on your site) in a consistent and effective manner.
Make sure there are lots of signs, with arrows. Point people towards your site; tell the world. Make sure all collateral materials have your URL printed on them, including labels and corks. Let your tasting room visitors know they can purchase your wine after they return home - on your website. In addition, keeping your content fresh and changing it often along with good keywords will help your SEO and keep your customers returning again and again.

Unfortunately, building a website will not generate sales, but treating your Direct-to-Consumer channel as an extension of your tasting room is a step in the right direction.

Preparing Your Business for 2008

What is Your Plan?
It’s that time of year again; time to look back at where you have been, but more importantly, time to look ahead to the new year. While making resolutions is often part of your New Year’s activities, when it comes to running a winery business, setting business resolutions are equally important. Planning ahead by calendaring your marketing campaigns and anticipating the outcomes are key factors in measuring and optimizing your Return on Investment (ROI).

Where are Your Plans Taking You?
If you don’t know where you’re going, any bus will take you there. First, know your business then translate your understanding of your business into attainable goals. Second, what are your sales goals for each channel? Think by and for individual channels – ecommerce, tasting room, wine club, and telephone – and leverage the nuances of each. Create goals and plans to reach those goals for each DIRECT sales channel. Third, plan, monitor, and reassess your goals as necessary.

The first step to setting and achieving your winery DIRECT sales goals is to get on the right bus. What are the key goals to have? Wineries who can execute strategies which achieve all of the following five goals within each of the sales channels have the greatest success.

1. Effectively build your unified database
2. Increase online orders month over month
3. Build loyalty among customers
4. Build your Wine Club membership
5. Reprioritize your time to maximize ROI

How are You Getting There?
Once you know where the bus is going, you can help navigate the best way to get there. Take these five goals and translate them into strategies for each sales channel. Here are some examples that can be utilized in different sales channels:
1. Build your database by collecting 50 new contacts in a month. For your strategy, try putting a ‘fish bowl’ in your tasting room to collect business cards.
2. To increase online orders month over month, set a goal of an increase of 3 additional orders each month. To increase orders, try a promotion for free shipping or a telemarketing campaign.
3. Build loyalty among customers by offering pre-release specials.
4. Build your wine club membership by allocating select SKU’s to reward club members and utilize a club-exclusive area.
5. Reprioritize your time to maximize ROI: Instead of stuffing envelopes and lickings stamps for a mailer, send out a targeted email blast to subsets of your database.

Whatever strategies you decide to implement, calendar your marketing plans in advance to leverage against these goals. Whether it’s email blasts, customer loyalty programs, or winery events, have a plan in place on a monthly basis for the entire year, but continue to reassess and reschedule.

Who is Driving?
Now that you know what bus you’re on and where it’s going, assign a competent driver to ensure your bus arrives where you need it to go. Most wineries are so busy with the overall business management that the person who is in charge of ecommerce is also in charge of fifty other things, the same can be said of the Tasting Room Manager. The romancing of a hospitality employee up-selling in a tasting room is much different than Internet commerce. Their expertise in face-to-face interaction and salesmanship does not translate the same way to a customer behind a computer screen. Both require a different mentality to gain sales and customers in each arena, so ensure your driver is the best for that roadmap.

Save yourself time and energy by being proactive – plan in advance and be organized. Use helpful tools to keep your business goals on track with reminders and a calendar. Make sure everyone on the bus agrees with the destination; then, get down to business.

Remember, DIRECT is the best way to Communicate with, Acquire, and Retain your customers.

Maximizing OND

You may be knee deep in grapes with the harvest season in full swing, but the busiest season for ecommerce is rapidly approaching: October, November, and December (OND). Traditionally this is the time of year when the ecommerce channel develops a spike in sales for the last quarter of the year. We all understand there is money to be made, but here are a few suggestions to capitalize on OND and exceed your goals.

Holiday Decor
Have you noticed while surfing the net many businesses spruce up their website for the holiday/OND season? It’s no different than the brick and mortar stores putting up seasonal displays – it puts people in the mood to spend. Changing the look and feel of your website and communications is cost effective. More importantly, you can gain a significant return on your investment without much effort. Additionally, streamlining your purchase paths and highlighting specials and holiday offerings will also increase sales. Make sure to place your gift offering in a highly visible area.

Gift Packages
The holiday season is the gift-giving season, so make it easy for your customers to purchase gift packs and gift baskets. Build around compelling price points (psychological price barriers like $99). Many companies are willing to partner up, so use your connections and make the most of your gift packs. Try basket companies that offer wine as part of the package, or wine and chocolate, wine and cheese…the list goes on. If you can, offer consumers the option of purchasing greeting cards to accompany the gift. If nothing else, create wine bundles on your website which will not only increase the average dollar per order but also make gift-giving easier. You may want to offer discounted shipping for early ordering, and be sure to indicate drop ship dates to ensure delivery time before the holiday.

Wine Club Gifting
Wine club shipments make excellent gifts. You can post a club shipment (as a gift set) on your website and offer 3 months, 6 months, or 12 months for customers to order. You might want to provide a discounted price proportional to the length of the gift membership. For example, a three-month membership for a $40 shipment would be $120. You may want to offer it for $109 (psychological price barrier) or offer and additional 5% off. When sending out the gift memberships, be sure to include additional promo materials about your product or brand. These are future customers that you are trying to gain. You can specify a different “in-box program” for these gift memberships with your fulfillment partner – make the box fun to open by having value-adds with your shipments like a corkscrew, vineyard dirt, etc.

Corporate Gifting
Another way to maximize the potential of OND with increased sales and brand awareness is corporate gifting. Many corporations like to give the gift of wine to their employees. This is an ideal way to reach a wide range of new customers in one purchase. You and your staff should compile a list of friends and various businesses and create a sales strategy.

Prepare your strategies for OND now so you that OND won’t leave you in the dust!

Remember, DIRECT is the best way to Communicate with, Acquire, and Retain your customers.

At Inertia we diligently advocate customer intimacy—knowing who you sell to. A good idea is to understand your top 50 customers by volume, dollars and particular products. Predominantly, you’ll find these customers in your database based on wine club, general commerce or allocation purchasing.

This knowledge of your customers can result in even more targeted marketing and better customer service, both of which can be converted to sales and customer retention.

In this post I also want to tip you off to a pretty nifty market segmentation research tool (most of the information you can glean for free) that you can further use to understand your customers background.

First, simply, market segmentation is:

The process in marketing of dividing a market into distinct segments that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way and promoted in a certain way.

A market research software company called Claritas provides a good amount of online data that can be used for small businesses to understand their customers based on destination zip code. Their “for purchase” software tool is called PRIZM NE and it defines every household in terms of 66 demographically and behaviorally distinct types, or “segments,” to help Fortune 500 marketers learn about customer likes, dislikes, lifestyles and purchase behavior.  The 66 segments are numbered according to socioeconomic rank (which takes into account characteristics such as income, education, occupation and home value) and are grouped in two different ways:

* Social Groups: 14 groups based on urbanization and socioeconomic rank
* LifeStage Groups: 11 groups based on age and presence of children at home, as well as socioeconomic rank
The benefit here is that unless you’re Proctor & Gamble you don’t need to buy this software, a lot of the topline information is provided online for free.

Now, before I ask you to do a zip code search, it’s going to be helpful to familiarize yourself with the 14 social groups found at this link.

Now that you understand the broad ranges of the demographic categorization, let’s go to this web site whereby you can do free zip code searches.

So, let’s do an example, say you’re an Oregon winery and you have a couple of great customers in Naperville, Illinois with a zip code of 60564 that buy your $35 Pinot Noir.

By going to this zip code search site, you can now glean that those in this zip code are made up of the following demographic market segments:

1) Country Squires
2) Executive Suites
3) Kids & Cul-de-sacs
4) Movers & Shakers
5) Winner’s Circle

A quick study of each of these is going to give you lifestyle traits as well as income and a general feel for overall affluence based on household income.

Generally speaking, this information can only be used as a guideline for understanding and marketing to your customer, but if you know that your buyers, based on zip code demographics, are likely educated, affluent, drive a luxury vehicle and vacationing at resorts, then tackling this sub-set of your total database with a custom library program offer becomes all the more interesting doesn’t it?

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.