By Jeff Stevenson
What we expose in this the first of two articles is the truth behind what is really driving direct-to-consumer (DTC) sales, specifically sales made with direct customer interactions over the telephone.
VinoPro has have compiled data from more than $8 million worth of direct-to-consumer sales made for its strategic partners from Jan 1–Dec. 31, 2012. This is data based on real sales that occurred from actual interactions with customers and sales made over the telephone. Some of this data is surprising, because it contradicts much of what you have heard over and over.
More than 50 different brands are represented and over 60 different sales representatives made the sales. What we learned from this exercise is that there are several myths in the DTC wine sales space that tend to permeate the thinking of those in the business. Real data should really be used instead, and is presented here for your immediate use.
Myth No. 1: Millenials matter.
It’s not that they don’t matter, but they don’t matter very much. The following chart is based on more than $8 million dollars in sales and illustrates that Millennials are not buying very much premium and ultrapremium wine.
In fact, 84 percent of our buyers are older than 40, and 62 percent, over 50. This makes perfect sense: Millennials have less money to spend, so they spend less.
What does this mean to you? That brings us to myth No. 2.
Myth No. 2: Social media matters.
OK, we admit it: social media is great for branding. It’s crucial to be speaking directly to your aspirational and future customers, but social media is terrible medium for selling wine, especially to your Boomer customers. Ask yourself how much wine you’ve actually sold using social media.
A recent Pew Research Center report found that only 42 percent of Americans aged 50 and older are on Facebook, and only 18 percent of Twitter users are over 45. Seventy-seven percent of Pinterest users are under age 45.
As for income, only 11 percent of Facebook users make more than $100,000 a year, and only 9 percent of Pinterest users make more than $100,000 per year. Sure it’s important to have a basic social media strategy, but if you’re a premium or ultrapremium wine brand, you shouldn’t expect to see a significant monetary return on your investment in social media any time in the near future.
Myth No. 3: People are buying lots of wine when they visit you in Wine Country.
According to the 2012 Napa Valley Visitor Profile report, the average Napa visitor spent $485.87 per day while in Wine Country but only $40.06 per day on wine! Given that the average visitor went to 4.1 wineries or tasting rooms during his/her visit, that means they spent about only $10.00 on wine at each winery.
What does this mean to you? You should be asking why your tasting room isn’t converting more visits into sales, or at least collecting visitor data before they leave. We would advise implementing an aggressive data-capture program, or you will be watching years of potential sales walk right out the door.
Also, providing more extensive sales training for your tasting room staff and using the data you collect to reach out to your potential customers with personalized attention via phone calls and emails can all produce a dramatic increase in your sales.
Myth No. 4: Discounting is the only way to sell wine directly to consumers.
When was the last time you saw a “buy one, get one” at a Ferrari dealership? Have you ever tried to buy an Apple product for a discount? Have you ever purchased a bottle of Screaming Eagle because they slashed their prices?
Discounting does three things really well:
- It devalues your brand.
- It “trains” customers to expect this every time.
- It means you have to sell that much more just to break even.
Are you a fan of running 50 percent off sales? Half off means that you actually have to sell twice as much wine just to break even. Here are some tips to increase your DTC sales without discounting:
- Since wine ages really well it should be more expensive as it ages in your dark cellars, not less expensive or discounted. Library wines should be priced at a premium — and offered only to your best customers.
- Contrary to what others think, we feel you should raise your prices modestly every year. Strategic price increases of 5 percent to 10 percent are easily absorbed by the customer base. We have had zero pushback on this strategy for all of our brands that take this advice and implement it.
- For some reason, customers lose all sense of math or logic when you provide shipping incentives on orders. They will buy an extra $1,000 to save $50 on shipping without discounting. For those not following along, that is 5 percent off vs. a 10 percent discount = $100.
- Consider using these magic buzzwords to bring value to your brand and your wines instead of discounting: “Exclusive,” “library,” “sells out every year,” “club member favorite,” “signed bottles from the winemaker!” “only 150 cases made” and “going fast!” These phrases create a sense of urgency.
Using real-life data when making strategic decisions is the smart thing to do. Don’t be sold on untested methods or waste your time on marketing gimmicks that sound too good to be true.
Jeff Stevenson (firstname.lastname@example.org) is chief executive officer of VinoPro, a Santa Rosa-based direct-to-consumer wine sales, marketing and technology solutions company that sells wines for Constellation Brands, Jackson Family Wines, Treasury Wine Estates, Iron Horse Winery, Benzinger Family Winery and many other individual brands. VinoPRO was recently named to the Inc. 500 list at No. 236 for attaining 1,818 percent growth over the past three years.
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