Wednesday, May 21, 2014

2014 Secrets of A Successful Tasting Room

 
 
Over the last couple of months we've discussed some of the results from the SVB/WBM tasting room survey. There have been some fascinating discoveries and the ensuing discussion has been equally rich and enlightening. Wine Business Monthly published an article in the May Edition of their publication discussing some of the findings.
 
To finish that up, On May 15th we presented a live video telecast from the SVB Studios in Santa Clara California discussing findings of the survey. To improve the dialogue and give it added color, in addition to me and Cyril Penn, Sr. Editor of Wine Business Monthly, we also included two front line people: Mary Jo "M.J." Dale, VP of Marketing and Consumer Sales at Crimson Wine Group, along with Lesley Berglund, Co-Founder and Chairwoman of WISE Academy.
 
While biased, I think you'll agree the added content of the live video chat presented a wealth of current information and advice for the direct wine business. If you're interested, a reply of that event is available by pressing play in the above widow.
 
There we're a lot of questions from the 650 people who tuned into the event. The chat also contained a lot of exchanges between people who attended the live event. As is common in the wine business, there was a lot of winery helping winery. The full version of that chat can be found [here].
 
As promised, the panel took on many of those questions in the following redacted transcript. We hope you find the Replay, Tasting Room Slide deck, and the follow up questions below helpful in developing your own club and direct programs.

 
9:45 AM  @off2wine: Private tastings take more time vs public. Is there that much difference to bottom line? To loyalty repurchases?

MJ Dale:  Private tasting do take more time.  One option for main stream wineries is to offer both types of tastings. This allows the customer that is more wine interested to select a focused, more upscale tasting (higher priced) and the more casual visitor to enjoy the public option.  By staffing your best sales people with seated groups that are more wine interested, you will definitely boost sales and club conversions overall as they can work with a larger group.  The ROI for hour worked by the top sales person will definitely increase.

Rob McMillan: The average wine purchase in in a tasting room that employs a private or formal tasting, is more than double the purchase of that made in a standing Tasting Bar.

Lesley Berglund: If a private tasting experience is a good fit with you brand, then with proper execution it should pay off.  In my experience wine club conversion rates (# of new members / # of visitors) in  a standing tasting room bar are too often less than 5%.  Yes a private, seated tasting takes more time but with well trained (and properly incented) staff, your wine club conversion rates can be 20% or even higher for highly sought after brands.  Why so much higher?  More focused time to deliver a compelling brand story, build rapport and tailor the experience to the individual guests – all of which results in more wine and more wine club sales.
 
9:46 AM Ed T - Rising Stars, How do you make the personal experience when you are in a dense area of competitors and weekends you are swamped with the bus loads of tasters?
MJ Dale:  Many wineries are located in dense competitive areas, so rest assured you are not alone with this challenge.  By defining your tasting options (develop three distinct ones that are tiered into good better, best options) and making each of them distinctive from your neighbors—word will get out.  Customers like edutainment—learning something about wine & wine making without getting too academic.  Hands on food and wine experiences are the most popular with higher end consumers (Be sure to market the options online and with local influencers like hotels and restaurants.).  To dissuade the tour buses more interested in “sip and skip” --you can post signs welcoming only groups of 8 or less without an appointment. 

Rob McMillan:  A densely packed wine tourism route will bring big fish, small fish and junk fish. Many tasting rooms have greeters at the door who are trained to interview a taster and discern what they want. A small fish might go to a general bar and a big fish to a seated reserve space. The junk fish might need to be dis-incented with an appropriately large tasting fee - noticeably more than your neighbor if there are a lot of junk fish swimming in the pond. Getting the right people in the door allows the staff to focus personal time and attention.
MJ Dale:  Rob is right, getting the right people in the door is key. This starts with data analysis of your best customers and requires building partnerships with other high-end retailers or service companies that cater to the high end consumer.

9:47 AM  selliman: would the purchase averages be swayed by the private sit down experiences typically being at higher end properties? The bottle price at these level of properties is usually much higher.

MJ Dale: Purchase averages are definitely impacted by higher priced wine.  That said, even lower priced wineries  are experiencing success by offering one higher priced tasting experience.  Just be sure there is something unique about the sit down experience such as library wines, a food pairing, mini-wine growing /making lesson about each wine and varietal, or other form of learning fun.

Lesley Berglund:  Yes price points are often higher, but that’s not just what is driving higher average order values.  The private sit down experience allows guests to self select into this upgrade option.  They have sought you out.  They have planned ahead.  They are dedicating real time to the experience.  The payoff is they are ready, willing and usually do spend more.

9:48 AM  Cynthia: How do you determine the tasting fee and does the fee impact how the consumer views your brand? Ex: little to no fee equals low-quality wines? Of course the proof is in the tasting.

MJ Dale: First look to your neighborhood—what are others charging?  This is your starting point.  Next evaluate your brand and location—is there something special about your wines and or story?  How about your location in the area--a great patio, amazing views—something that sets you apart?  The more you can offer customers that is truly unique from the competition, the higher you can price the tasting fee.
 

9:50 AM  Brooklyn Winery: no East Coast numbers for slide 7
Rob McMillan: We did have a fair representation from both NY and VA. If we could get one of the AVA's to encourage winery participation in those regions, we'd be able to produce meaningful information and will hand it back to those organizations. Let me know if that's of interest.

9:52 AM  Cain: It would be interesting to see seasonality for customers that purchase nothing, as well as days of the week, type of wineries etc
Lesley Berglund:  Although the survey data did not capture this, in my experience metrics around wine order conversion rates are most heavily influenced by the staff actions or inactions:  Did they build rapport?  Did they tailor the experience to the guest needs (platinum rule)?  Did they pick up on buying signals?  Did they ask for the order?  Sometimes on a busy weekends - when you are three deep at the tasting bar - it is impossible to deliver this desired level of service, but that may be less about “non-buyers” (bus loads and bachelorette parties excepted) and more about staffing levels.

9:57 AM  Sofia Horvath: For new wineries, how soon do you dig into metrics of "who is your best customer?" e.g. Should you wait until you are in biz 2 years, 5 years, etc?
MJ Dale: With only two years of data you can learn a lot about customers!  If you are a small brand—start by sorting customers by total spend as well as recency and frequency of purchases.  Take the top 100 and search them on the web. You will learn a lot about them from public sources; these insights  can help you decide your DTC game plan.  For larger wineries with big databases—seek an outside partner to help you organize and analyze the data. Much is possible in this world of big data.

10:00 AM  Jim Morris: Question for panel.  We do not have a wine club currently, aspiring to embrace an allocation (2 releases per year/sell exclusively to our list) model.  Until we sell most of our wine via release......

MJ Dale:  Selling via a list is just fine to start.  Make sure you have excellent communications and customer support before, during and after each release to build customer loyalty and accelerate sales.  Allocation works best if you have true wine scarcity or build an operational model which carefully limits wine offered customers based on their past purchase. As you grow, you can transition to a wine club model. This model works best if you have a retail experience to first connect with customers face to face before selling the club.
10:01 AM  Odette Estate: I'm interested in attrition rate compared to type of tasting to correlate with slide 31

Rob McMillan: For SVB clients such as yourselves, we will produce a custom report and benchmark your performance against peers. You wont know who the peers are and wont be able to line them up, but you can see how you compare to good comps. Getting the information together is an involved process but I believe your Relationship Manager at Silicon Valley Bank is already in touch with management there and has that on the agenda. I will ask that she include your question in the presentation.

10:09 AM  WineStudies: What happened to cause the growth in average Wine Club retention rate from pre-recession 18 mos to the current 29 mos average?  That's a 50% growth rate.

MJ Dale:  A lot of factors are in play—and in some cases I suspect that respondents are just now learning how to measure this metric.  In addition, many newer clubs that are only ~ 3 years old, with smaller, more manageable and loyal followers could be impacting this number.  Larger, more established brands are not experiencing this increase quite as readily—but the improved economy is helping everyone.
Next year we need to guide people towards measuring average length of membership of customers based on sign-up date.  People that have signed up in the last few years may be less loyal than those that signed up five years ago.  This is how average length of a customer life is measured by outside industries and is called “cohort churn”.  The wine industry needs to start tracking this data to truly measure the health of our wine clubs.
 

10:10 AM  selliman: Just about every winery offers a club. Most follow the same recurring shipping & discount model. Could consumers be bored?

Mj Dale: Yes!  For the most part—many, many wineries are offering much the same club offering as their competitors.  Restaurants, country clubs and media outlets also offer wine clubs.  What is unique about your club (while staying true to your brand) that will help you stand out.

Rob McMillan:  I believe its a complex answer. I am in cult clubs and I do want the exact same thing over and over. But largely, people do get bored. Our survey data demonstrate that wineries who offer choice end up with better sales, and longer retention. That means substantially better lifetime Club Value. The part about discounts is a long conversation. Some wineries shouldn't be discounting ever, and others might find a place where that's important.
 
Lesley Berglund:  It is very competitive out there.  Club members can get bored, so making sure that you have compelling wine club benefits programs, tailor offers as you get to know your club members better and reward tenure (more love for those who stay longer).  Too many wineries are much more focused on getting new members than retaining current members.  Rewarding team members on growing retention is a great place to start - then creativity on how to do so better will follow.
10:13 AM  KatCMV: How important is it to keep the same fee? What if you lower it during the week and raise it for the weekend?
Rob McMillan: This was a discussion topic on the blog in another post. I don't know that there are metrics that support either choice. I think the thought is like a volume incentive like some toll roads: Cheaper if there is no traffic. If you are charging another rate during the week, I'm guessing that might appeal to locals. Some wineries have in the past used a drivers license to offer discounts to locals. My own sense is it depends on your neighbors. If you want to attract melon squeezers versus buyers, don't charge a fee or make it lower than your neighbor's fee - weekend or weekday. If it seems like an interesting strategy for your particular winery, I'd say put the test in play for 6 weeks and see where it gets you.
Lesley Berglund:  Fee flexibility can be a good things.  Especially if you want to price out the looky-loos on the weekend and encourage more mid-week traffic.  The challenge is in communicating this – on your website, to your local influencers who send you traffic – but it can be done.
10:28 AM  Pam: So why haven't wineries faced this online pricing challenge more intelligently - ? Isn't it time to bring this data into the slides and surveys
Rob McMillan:  I believe this was in response to my point about charging a higher price in the tasting room versus what people can find in a grocery store. I've had many conversations with people who've experienced just that, and it makes customers angry - like they've been cheated and are gullible. That's not the experience you want for a customer to have. Unless you are giving something else beyond wine for that purchase, in my opinion its a really bad precedent to have your wine sold in a grocery store down the street for more than what you are offering in the tasting room. Prices are on-line and available to you and others who have a cell phone and walk into your store. I'd suggest you should presume they have that knowledge and make sure that your pricing is in-line with that which you've helped establish in the market. As I said in the telecast -  its a higher margin sale for you, so why not make sure you get that sale versus the channel.
 

That's if for this year's production. Please promote this on your favorite social media platform if you thought the information useful. If you have any thoughts, questions, or comments, please log into the site at the upper right, and post your comment in the below space. I will respond to your post and I suspect Lesley and MJ will also be checking back with their thoughts too.
 



2 comments:

  1. Sip and skip, junk fish - more derogatory terms for some customers. Not at all helpful for an industry that is often thought of a pompous. Most wine drinkers started off drinking the lowest priced wine, when they were young. With education, over time, many move up to better product.

    IMO tastings should be priced to stand on their own. If you have personel that are doing tastings and don't sell much wine, I would look at the pourer, not the customer.

    ReplyDelete
    Replies
    1. RUS - Thanks for logging in and the comments. I truly appreciate them.

      I think you are right on a few counts. As far as junk fish being derogatory - I took a look at the definition which says: "tending to lessen the merit or reputation of a person or thing." I'd say that is exactly the point I'm trying to make. Its not intending to be insulting, rather to be instructional and using an analogy of trying to snare fish that swim by. You won't get the fish you want. You will get a mixture of good fish and junk fish.

      Wineries have to be better at measuring and then responding to places where they can make a better return. They don't make enough money and have to evolve. (See "How Much do Wineries Really Make" on this blog for detail.)

      But lets start with your second paragraph. "Tastings should be priced to stand on their own." How do you price that out? Is it based on the price of the wine poured? Perhaps fully loaded to include overhead? Should it include a fair profit? The real price of serving someone who wont buy, is the opportunity cost of not effectively serving someone who is a serious buyer. That might be the difference between $0 sales and $200. I don't think its reasonable to charge $200 so a tasting can stand on its own - and you can't charge to just cover sampling costs. There has to be a real sale that comes from that activity.

      With respects to the educational component, the same notion applies. Wineries can't spend the time educating a consumer who is drinking inexpensive wine in the hope they will buy your wine when they can afford it. This isn't Coke or Pepsi. When that consumer gets to the point of being willing to buy expensive wine, they - just like everyone else, will drink multiple producers wines. That kind of education is a sink hole with no meaningful return. That kind of education has to happen with community marketing money. Have all the wineries tax themselves and educate the consumer. (See "Is California Wine At a Pricing Inflection Point?" in this blog for more on that topic.)

      I fully agree with your other points about how palates evolve over time, and how the industry has been viewed as pompous or elitist in the past. We bring that on ourselves by marketing the business as "Lifestyles of the Rich and Famous" when in fact its really more like family farms and hard-working labor that puts this product on the tables. Conspicuous consumption is dead at this point, but the stench lingers and more needs to be done to promote the true ethics and values of the people who work here.

      And as far as looking at the pourer, I'll agree that there is a lot of work needing to be done to professionalize the sales function on the direct to consumer front. We are asking those folks to have wine knowledge - along with hospitality and sales skills. Selling luxury goods isn't going to work if you are paying a 22 year old minimum wage for their efforts.

      Thanks again for offering thoughts that are slightly askew of the OP offered here. That debate is needed to find improvement. All sides have to be heard.

      Delete

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