There was a lively discussion on Twitter last week about what to do for wine club members that are dropping out due to changes in their economic situation. Since I just wrote about what wineries can do to help retain wine club members, I thought this would be a good follow up topic. So what can a winery do when members call to cancel?

When a wine club member calls to cancel a membership it is important that the person answering that phone call be understanding of the difficult situation in which people find themselves. This sounds like an obvious statement, but too often winery staff seem to take personal affront to a membership drop. It is hard enough for people to call and acknowledge a situation they may find embarrassing. The last thing they need is a wine club manager haranguing them. It’s not personal; it’s just life. What is most important is that the winery keeps the wine club member as an active customer. This means at minimum keeping the customer on the email list and informed of winery events and sales.

Vintner Jeff Stai at Twisted Oak (@ElJefeTwisted on Twitter) goes even further. He gives wine club members who may think they need to drop their membership the option of retaining their wine club perks while temporarily suspending their shipments. This is a great way to hang on to good customers and it keeps them in the loop for winery sales and events. Eventually the economy will turn around and the customers with whom you are still in contact will be your best bet as returning wine club members before you even reach out to new customers.

Another thing that a winery can do when a member drops out is to send a personal note and some kind of gift from the winery. Travessia Urban Winery’s Marco Montez (@Travessia on Twitter) sends a bottle of wine with his note thanking them for having been a part of the club and hoping to see them in the future. Wow! Now that is caring customer service. The personal contact made by a hand-written note is important in keeping a good relationship with the customer, especially if the cancellation is due to financial hardship. For a large winery that is experiencing a significant attrition, sending a bottle of wine may be cost-prohibitive, but there are other options. The gift of a simple logo corkscrew can be just as effective. The most important part is that the note be hand-written, person-to-person, and that it conveys the good wishes of the winery.

Above all, keep in touch with your former wine club members whenever possible. Don’t forget to still include them in the life of the winery with party invites, email updates, birthday and anniversary contacts, and the occasional “Hope things are going well” note. Just because someone cancels a wine club membership does not mean that they no longer drink wine or they don’t want to continue to enjoy yours. A former wine club member can still be a great customer.

I recently spoke to a number of wineries that participated in the annual “Winter Wineland” event sponsored by the Russian River Wine Road. I wanted to get a sense of how wine consumers are spending this year. The responses I got were fairly consistent. “Turnout is down, but sales are up.” This prompted me to ask the question, “Why were sales up?” The answer – strong discounts. Of course! This makes sense. Wine lovers are still wine lovers, but everyone is feeling the pinch to save money so discounts are a natural fit. But, is this good for the winery? Before answering this question, it’s important to explore what prices mean to consumers and how it affects their view of a wine.

Most wineries are now aware of how bottle price affects consumers’ perception of quality. If this is news to you, check out this study from Stanford. This poses a particular question. What affect does discounting have on consumers’ perception of quality? Here is my answer: In a free market economy, consumers perceive the lowest average price to be the right price. I use lowest average price because consumers see “blowouts” and going-out-of-business sales as fundamentally business-based and not a reflection of quality. The price from a winery or from a regular retailer is considered a correct price and reflects the true quality of a wine. Therefore, when a winery discounts its wines on a regular basis, the discounted price becomes the right price and the perception of quality is diminished. This can have long term effects on winery pricing, making it very difficult to then sell the same wine at the pre-discounted price. What is a winery to do in these times that cash flow is so very tight and consumers are looking for bargains?

Give discounts on non-wine charges. The biggest non-wine cost to consumers is the cost of shipping. Giving a discount on shipping protects your bottle price and gives concrete savings to consumers. Consumers know that wineries have little control over shipping costs, so sharing part of the cost puts you in partnership with your customers and lets them know that you are conscious of the extra money they spend to get your wine; we are all in this together. There are different ways to give shipping discounts and the method the winery uses should be based on where the bulk of their customers are located and which customers they want to target. A percentage discount is the easiest from the winery standpoint but gives a better deal to customers that are farther away and may not be perceived as such a value to consumers that are close by or in-state. Another option is to give one discount for in-state sales and another for out of state. While a little more difficult to set up this allows the winery to better target its customers. And don’t forget the value of the word FREE. While the TTB strongly frowns on the word free used in connection with wine, it’s a great tool for non-wine incentives.

Discount Older Vintages. Cleaning out the cellar is a good way to generate cash flow. Consumers generally accept that wineries change their prices slightly with new vintages. Discounting older vintages – even if it is just last year’s – has little effect on the quality perception of current release wines. Since wine is perceived to get better with age, consumers see added value in a wine that has been cellared at the winery. By all means, use discounts on older vintages to generate cash flow.

Connect Discounts to Events. If cash flow is a must have, and the previous two ideas have been tried, then the only option is to discount current wines. The key to this is to connect the discount to a particular event and give the discount an ending date. By connecting the discount to an event the winery can attempt to disconnect the discount from wine quality. This can work as long as the winery provides a strong cutoff date for the sales ending and does not follow the sale event with another sale event. There are many options for sales events in the coming month – Valentines Day, Lunar New Year, Presidents Day, etc. So, get out the calendar and plan your sales events. To make a good event it’s important to let your customers know in advance that you’ll be having a sale. Planning ahead is key.

Even in the uncertainty of the current economy it is possible for wineries to generate good cash flow while protecting the integrity of brand pricing.

As a big fan of wine clubs, I’m always amazed when I speak with wineries that don’t offer a wine club option to their tasting room clients. Recently, I’ve been hearing more and more wineries down-playing their wine clubs and deciding not to push club memberships. They are concerned that in a weakening economy people will not want to add to their financial burden. Wineries are concerned that consumers will quit the club just as quickly as they join. There is some cause for concern as wineries are certainly experiencing a higher than usual drop out rate. However, there are still some things that you can do.

First, a case for continuing a robust wine club:  Wine clubs are a winery’s best source for high margin cash flow. It is your club. You have to ability to set shipment dates that meet your cash needs. A February or March shipment brings in much needed cash when tasting room sales are low. Wine club shipments provide direct contact with customers who are not regular tasting room visitors. Let’s face it, most tasting room customers are tourists. They’ve come to the area on vacation or to visit local friends. In a weekend trip, they may have visited 8 to 10 wineries. But, your winery stood out and they signed up for your club. Now you need to remind them why you were special. Wine club members are your best supporters. People like to share their special finds with friends and they will often bring their shipments to parties where they can talk about your winery. This is the absolute best type of advertising and exposure that a winery can get. You’ll often find these people will then seek out your tasting room when they visit. If your wines are in distribution, being “top of mind” from a friend’s recommendation provides one more reason for people to chose your wine from a list or pick it up off of a shelf.  Wine club shipments lead to follow up sales. A typical wine club shipment gives the customer one bottle of two to four different wines. So once the wines are tasted, and enjoyed, the winery has the opportunity to entice the consumer to purchase a bottle of two of their favorites. If you don’t think this works, please think again. An average winery will get 100% of the wine club shipment price in follow up sales over the course of a year. But, this only holds true if the winery follows up with targeted emails and/or phone calls.

So now that you have a Wine Club, how can you keep your customers? The key to holding on to wine club customers is connecting with them on a personal level and letting them know that they are special. This isn’t meant to be corny. Wine club members are the most important customers for a winery and they need to know that you value their membership. Send them a gift. This is the time to acknowledge a birthday, or if you don’t keep birthdays in your records, the anniversary of their joining the wine club. A small gift like a printed corkscrew is a nice surprise that lets your customers know that they’re not just numbers to you. You can include a special discount coupon for that month as an incentive to visit the website and make an on-line purchase. Release a Library Wine to the wine club. Members-Only sales give added value to being a wine club member. Every wine club gives a discount, but to stand out you need to add extra value to the membership.  When people are looking at which memberships they’re going to keep, you want to stay on that list.  Send regular, targeted emails. These days, people have a lot of junk coming into their emails and you don’t want your emails to become part of the junk. Sending emails on a regular basis, whether that be once a month or once a quarter, allows people to anticipate your emails so that they don’t get lost. Targeted emails are more likely to be opened and acted upon. Personalize the shipments this year. You want to connect with your customers and remind them that you’re not just a company, but a group of people. One on the best ways to do that is to include a personal note with the shipment. Now if you have a lot of customers you may have to go with a pre-printed letter, but make sure each is hand signed. Also, if you don’t already include tasting notes and a recipe with the shipment, this is a good time to add those so that you can again add value to the shipment.

I hope this helps you take a new look at your wine club. A down economy doesn’t have to mean a drop off in wine club sales. You’ll need to put in some extra effort, but it will pay off in spades.

I was at WITS – the Wine Industry Technology Symposium – last week when one of the Speakers in the General Session implored the audience to be “a niche leader.” This got me thinking: What does that really means, and how do you do it?

I decided to start with the definition of niche, specifically niche market which is the business context for niche. Wikipedia defines a niche market as “a focused targetable portion of the market.” Focused and targetable. This is really the key for most businesses. I want to concentrate on focused because I find that many businesses are deplorably unfocused, with only have a vague definition of what they do. This leaves the core business open to interpretation and can lead to poor and scattered use of precious resources. You’ve seen these businesses, they always have a “new project” in the works, but their projects never quite deliver expected results. The problem is that by leaving their business definition vague, they haven’t defined what they don’t do. They end up running after the “Idea-du-Jour”, only to find that their limited resources are stretched too thin. When that idea does not immediately solve the problem as they had hoped, they are on to the next one. The remedy is simple, just not easy.

I recommend starting by answering these questions:

1. What are the strengths of your core personnel, specifically your owners?

2. What can you offer that is unique?

3. What are you passionate about?

4. Are you driven by quality or by price?

Once you’ve answered these questions you should have the frame work of a business definition. Now you need to focus. Think about your resources, both financial and personnel and make a determination of what you can do better than your competition. Are you a great winemaker, a good grower, are you cash strapped or flush, are you innovative or technologically astute? If you need, rank your strengths and focus on the top two or three. Great businesses are driven by their owners’ passion. How can you express that passion in your business? If your passion has no relationship to your business, this is a good time to rethink your business. And the last question, how will your decisions be driven? This is a choice people are loath to make, but it is a necessary one and one best made upfront. I am not saying that quality and price are mutually exclusive, but there comes a point in every business where you must decide which will take precedence, the price (both the cost and the price to consumer) or the quality.

When you have your answers focused into a concise message you’re ready to think about your target market, but that is another post.

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In the wine industry we have a tendency to focus on what’s in the bottle and forget about what’s on the bottle. There is a romantic view of wine that’s centered on our experience with the contents of the wine glass. This can lead us to discount the importance of the brand and its packaging. But, wineries do so at their peril. Now, I’m not going to suggest that the utmost of care is not important in making a wine. But, I am going to suggest that as much time and effort should be spent caring for the brand as is spent caring for the wine.

Before I go farther I want to clarify what I see as the “Brand”. The brand to me is everything the consumer contacts that is not liquid. This includes: the name, label, packaging, pricing, press releases, take-aways, the winery and tasting room, the website and the people who represent the brand. All of these go toward the consumers’ image of your brand. Taking proper care of your brand is no small feat, but the rewards are great.

The first step in caring for your brand is determining your brands persona. This is the image of your brand that will dictate all of your branding decisions. Pay special attention to how this persona relates to the owners or key players in the winery and how it speaks to your target market. Is this brand hip and cutting edge, or is it a classic beauty? Is the brand green and eco-friendly, or high end luxury? The brand persona must reflect the values of your target market.

The next step is getting the brand to stick in the minds of your consumers. This is the key to repeat sales. To do this your message must be consistent. Everything in print and on the internet should be based on the same template – the format, colors, font, writing style, logo and slogan all must be consistent. Your packaging should reflect your brands persona. A cutting edge brand has a cutting edge label and can use non-traditional closures, while a classic beauty should have a traditional cork closure and classic label. And, your tasting-room and events should speak to the persona of the brand. All of these combine to make a brand “stick.” If one of them is inconsistent the consumer is turned off and confused.

Your brand is key to repeat customers. A good brand will always be at the tip of the consumers tongue and instead of googling “black cherry, hint of tobacco, great night out with lover” to find your wine, your consumer will be able to google your brand.

Oft times in the wine business, the jump from home winemaker to winery owner happens overnight. You wake up one morning and decide, “Today I will start a winery.” Sometimes, this is drawn from a love of wine and a slow accumulation of bottles over the years, coupled with a lot of extra cash. Other times your spouse says to you, “We can’t afford for you to keep making all this wine just for our friends. Either you find a way to sell it or you find yourself another hobby.” So you figure, “A lot of people have small wineries…boutique wineries are hot… and my wine’s pretty good. How hard can it be?” You go out that day, apply for a bond and contract for 10 tons of fruit.

If you have a small winery this may sound familiar. But, there is a crucial piece missing in the story – the part where you plan your business.

All too often people start wineries only to find two or three years down the road that they’ve run out of funds and sales are not what they expected. They skipped that daunting task of writing a business plan – hoping to make it up as they go along. The problem is that the winery business is extremely capital intensive with expenses coming one to two years before sales. The market is brand-focused. How you design and market your brand has a large impact both on what outlets you can use for sales and what prices you can charge. How do you direct your resources to best sell your wine? To top it all off, government regulation can be daunting.

Well, the good news is that it is never too late to plan for the future and there are people who can help. One of the reasons we started winery business consulting is because we’ve seen both the make-it-up-as-you-go-along method and the start-with-a-strong-plan method. The fact is that when you start with a strong plan there are fewer surprises. You know what it will cost, when it will cost and when you can expect to see returns. You can plan your production and inventory before you sign a long-term grape contract. Then, when things change – as they always do – you can adjust with confidence.

If you haven’t yet made a business plan, this is a good time to start. If writing a plan is just too daunting, give us a call.