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A winery digicom manager on his job

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Mark Gordon is senior digital communications manager for La Crema Winery. He oversees all digital media outreach for the company’s various brands, including social media, blogs, and web development and design. He’s also my colleague. I interviewed the 46-year old recently in Healdsburg and began with a tough question.

SH: Aren’t you too old to really “get” social media?

MG: I’ve been involved in the web since its infancy. What you tend to find after a while is what goes around comes around. Something that’s being touted as new and innovative is something most likely that’s been done before. A case in point would be Facebook. It’s AOL done right–an evolution of that. And I bring a varied background. I cut my teeth in journalism, back when cutting-and-pasting was actually cutting and pasting things! So having a good foundation in writing, wordsmithing and knowing the basics of journalism helps on digital, because it all comes out in storytelling.

On a scale of 1 to 10, how important is social media to a winery?

I’d say that social media is probably an eight. But marketing yourself digitally is a ten. By that, I mean social media is a tactic, but there are other tactics out there as well. The key is in finding the right blend that resonates with whom you’re trying to attract as a consumer.

What social media channels do you work with?

All the usual social media suspects: Facebook, Twitter, Instagram, Pinterest. That’s where we play the most, as far as social’s concerned. All those channels are designed to drive people towards our own properties, particularly those that have blogs, where we can tell more long-form storytelling and deliver more meaningful messages. Pulling that circle out a little wider, I’d say then you talk about sites where link-sharing is important: StumbleUpon, or reddit, or some of the “food porn” sharing sites, like foodgawker. And then another circle is getting relationships going on with other influential publishers, so your message can be carried outside your sphere of influence.

One year, MySpace is big; the next, no one uses it. How do you stay on top of social media’s fast evolution?

Agility. As a digital strategist, the important thing is to look in your crystal ball and see where you think things are trending. I mean, Facebook is the textbook example of a channel where the strategies have changed due to the fact that Facebook now is essentially a pay-to-play entity. Knowing that, and being able to see ahead of that last year, we decided to pivot towards more authentic storytelling.

What is the role of wine bloggers?

Wine bloggers are in the mix. They can be influencers, people who can help carry a message on behalf of a brand. For us, one of the most important things for wine bloggers is obviously that earned hit.

What does that mean?

“Earned media” means a blogger writes about one of our brands in a manner in which they’re not paid for their work. So we get them samples, or it happens completely organically that they review one of our wines, and that’s a super-valuable thing for us as a company to have those impressions out there on the web.

What about paid wine bloggers?

We call it “influencer outreach.” It’s identifying folks who resonate with our core consumer, and finding ways to work with them. In some cases, it may be something where we pay them as essentially a journalist for hire, to not only write stories on our behalf on their blog, but through other channels. If they have a big following on Pinterest, maybe we do something with them. If they’re influential on Facebook, maybe we ask them to post on our behalf.

Is that all transparent?

It is transparent. The Federal Trade Commission now requires any sort of paid content marketing to be disclosed. So all the folks we work with disclose that.

La Crema just launched, with your help, Virtual Vintner last Monday. What is that?

Virtual Vintner is a crowd-sourcing platform where we’re tasking members of our community and people who are enthusiastic about wine and winemaking techniques to help us craft, from grape to glass, the next La Crema wine. We start off with the decision that will set the course for this adventure, which is whether you want to make a Pinot Noir or a Chardonnay. And from there, it becomes a choose-your-adventure style program. At each step of the journey, we’re not only asking folks to make decisions, we’re giving them the tools they need to make a decision that resonates best with what their personal tastes are, and educating them on the process of winemaking.

How long does the contest last?

We don’t consider it a “contest.” There are contest elements within it, but it truly is an interactive journey. Within that map of different elements—the varietal, the region, the vineyard, the barrels and so forth–we’ll ask people to make a series of choices.

Will there be winners?

Over the various stages, every time you vote, you’re entered in a sweepstakes, and the winner of that particular sweepstakes will come out to Sonoma County for a one-on-one at La Crema, to meet with winemaker Elizabeth Grant-Douglas, maybe get to do some barrel sampling.

So they get a nice vacation!

They get a nice vacation, yeah. And there will be other “contests” as well. Once we get the wine into barrel, Virtual Vintner will have a flavor-describing contest, where participants will have this ability to assume what the tasting profile on that wine might be. They’ll write up a series of tasting notes, and whoever comes closest to what our expert panel determines the flavors to be, will win another prize.

How can people learn more about Virtual Vintner?

You can go to LaCrema.com, or directly you can go to vv.lacrema.com.

  1. Bob Henry says:

    Steve,

    Regarding this statement . . .

    “On a scale of 1 to 10, how important is social media to a winery? I’d say that social media is probably an eight. But marketing yourself digitally is a ten.”

    . . . with no disrespect to Mark, I would respectfully demur.

    Getting “boots on the ground” sales reps knocking on doors and securing wine store shelf placements/restaurant wine list placements is a TEN on hierarchy of sales and marketing importance.

    “Making the cash register ring” trumps all else. That happens in a brick-and-mortar physical space — not a “digital space.”

    And social media/digital marketing is a distant low digit number.

    We don’t have consistent empirical evidence that social media/digital marketing efforts actually SELL things. And sell them in the unit volume needed to support a venture on the scale of Jackson Family Wines/Kendall-Jackson.

    (Those who didn’t catch my earlier comment on social media and ROI can click on this link:

    http://www.steveheimoff.com/index.php/2014/06/24/another-study-on-social-medias-failure-to-live-up-to-expectations/)

    Each medium of communication has its place in carrying on a “dialogue” with the public (and by extension, the wine trade).

    No one medium is a panacea to your marketing challenges.

    ~~ Bob

    (Once again I would strongly urge consumer packaged goods marketers such was wineries and their partners in the channels of distribution to seek out and read this invaluable tome:

    http://www.amazon.com/Why-We-Buy-Shopping-Updated-Internet/dp/1416595244

    An example of what Stanford business school professors Jeffrey Pfeffer and Robert Sutton characterize as “evidence-based management” [evidence-based marketing]:

    Abstract of article: http://hbr.org/2006/01/evidence-based-management/ar/1

    Book: http://www.amazon.com/Facts-Dangerous-Half-Truths-Total-Nonsense/dp/1591398622 )

  2. Bob, I feel like your argument stems from the insecurities that a traditional salesforce feels in today’s world. It’s understandable, but misguided.

    I can’t speak for Mark but I doubt he was saying social media and digital marketing trump “boots on the ground” in relative importance. Setting up a tasting room where you can make cash registers ring and sending sales reps around the state to various events where they can interact with customers in real life certainly may be effective, but that doesn’t make those strategies mutually exclusive from digital marketing. I don’t think the relative worth of digital marketing vs. traditional outbound strategies should be compared against one another.

    When it comes to “evidence based management” (or what we might call “lean marketing” and iterative product design in the digital world) there’s no better place to measure the effectiveness of campaigns than across digital mediums. It’s easy to see the smallest tweaks of a Facebook advertising campaign impact the bottom line; a change to ad copy doubles CTR, or perhaps running ads in the evening instead of morning lowered your CPC threefold.

    Comparatively speaking, digital marketing uses a scalpel to carefully sculpt effective campaigns, while traditional sales approaches rely on a shotgun in the dark to hit the target. Consider the cost of setting up a tasting room, or sending a salesperson to pour wine all day at Ft. Mason with what it might cost to get earned media ($0) or reach consumers through a blog, or other online channels and your argument becomes even weaker.

  3. Bob Henry says:

    Mike,

    I never stated or implied that tasting room activities or sales reps making appearances at events were mutually exclusive from digital marketing.

    My assertion is this: If social media/digital marketing is a “ten” on the hierarchy scale, then boots on the ground sales reps knocking on doors, establishing opening order accounts [a sales transaction], and taking replenish orders [a sales transaction] merit a Spinal Tap-like guitar amplifier “eleven”?

    “Evidence-based management” is all about measuring your results.

    What is the evidence that a specific Facebook posting directly led to a sales transaction? What is the mechanism build into that specific Facebook posting that directly took the consumer to an e-commerce site to purchase the product?

    I don’t see a measurement method here. As the character Jerry Maguire implored: “Show me the money.”

    Direct marketers can measure their efforts through promo codes built into sales offers, dedicated toll-free phone numbers, and links to e-commerce sites.

    The relative worth of digital marketing vs. traditional outbound strategies SHOULD be compared against one another. They both fight for a piece of the marketing budget. And the evidence of their effectiveness rationalizes their continued funding and implementation.

    “Comparatively speaking, digital marketing uses a scalpel to carefully sculpt effective campaigns, while traditional sales approaches rely on a shotgun in the dark to hit the target.”

    Not true. Direct marketing efforts are rifle shot approaches, not shotgun approaches. Example: retaining enthusiasts who procure products by being on the winery’s mailing list. You are communicating with proven patrons. There is zero targeting waste.

    I don’t feel a salesperson has any reason to feel insecure about his/her place in the ecosystem of wine sales.

    As Paco Underhill repeatedly underscores in his book (supported by other researchers), brand specific selection decisions happen literally at the last moment when the consumer is in the store aisle — not beforehand.

    In a wine store, one-to-one personal selling on the floor qualifies and closes the deal. Enables enhanced revenue “upselling.” Allows the salesperson to establish a relationship with an anonymous customer, and convert that person into a known client. By nurturing that relationship through after-sale service, that client over time becomes a loyal patron. And the best loyal patrons become rabid evangelists for the store.

    In a grocery store, the consumer is on his or her own. Impersonal selling through end-aisle displays, in-aisle shelf positioning between waist and eye level, innovative packaging, shelf talkers, in-department signage, and promotional pricing prompt a consumer to reach out and grab one bottle over dozens of “parity” others.

    Impersonal selling via social media/digital marketing can’t achieve those results. Only personal selling can.

    As for digital advertising (marketing), the dirty little secret is how wasteful it truly is.

    Recent investigative articles from The Wall Street Journal.

    March 23, 2014 headline: “The Secret About Online Ad Traffic: One-Third Is Bogus”

    Link: http://online.wsj.com/news/articles/SB10001424052702304026304579453253860786362

    May 26, 2014: “Bots and ‘Drone Pools': The Deep Bag of Tricks in Video-Ad Fraud”

    Link: http://online.wsj.com/news/articles/SB10001424052702304893404579530000548363992

    July 14, 2014 headline: “Advertisers Join Forces To Fight Online Ad Fraud”

    Link: http://blogs.wsj.com/cmo/2014/07/14/advertisers-join-forces-to-fight-online-ad-fraud/

    ~~ Bob

  4. Bob Henry says:

    An elaboration to my 1:45 am comment awaiting moderation:

    “Impersonal selling via social media/digital marketing can’t achieve those [customer to client to patron to evangelist conversion] results. Only personal selling can.”

  5. It’s pretty amazing that you can dismiss entirely the benefits of online marketing when it’s clear as day how well it works when done right. What’s also clear is that you haven’t really engaged in any serious online marketing strategies, otherwise you would know it’s very easy to measure performance.

    To answer one of your questions about finding evidence for FB ads converting to sales… We use FB to market to very targeted audience segments using their “Custom audiences” feature, like our mailing list subscribers for example, delivering a sponsored post or ad that mirrors the latest email campaign they received that morning. Cross channel marketing like this adds impressions and we include a tracking conversion pixel provided by Facebook on our checkout page to measure the effectiveness of those campaigns. We get insanely low CPC, around .10-15 cents when using tight targeting methods like that.

    Whether our goal is to drive a sale or an email signup, we measure results closely and use the tools at our disposal to figure out ROI and conversion rates. The marketing funnel doesn’t always dictate a sale either; for us it might be getting traffic to a blog post to gain more exposure to a brand or generating an email signup.

    The fact is new marketing methods (re: digital) have exponentially more reach and a much more precise ability to gain quick insights through analysis and measurement when compared to traditional, outbound marketing. Most of the time there are simply too many metrics, unlike say, running an ad in Wine Spectator or putting a billboard up where you have barely any way to measure the reach or conversions. Our biggest challenge is pinning down the metric that matters. But that’s not really an issue once you understand how to use the tools at your disposal.

    Those WSJ articles about click fraud are irrelevant to this discussion and don’t touch on any specific campaigns, channels, or figures really. We don’t worry about fraudulent traffic from ads. Like I said, we pinpoint our target groups when doing media buys and I know based on the cost per 1000 impressions, clickthroughs, conversion rates, etc that it works very well. We track everything with Google Analytics and use many other tools to measure things. The internet provides a dearth of media companies and places to buy traffic so I imagine it can be a problem for companies spending millions, but fraudulent traffic is not something that concerns me in the least.

    At the end of the day, we spend very little on online marketing and have a great return on investment. Countless reports prove that inbound/digital marketing costs much less than traditional sales tactics. Judging by La Crema’s success with their blog and other channels, I imagine they have also greatly increased their brand’s reach and sales as a result. You are correct that when deciding a budget, outbound vs. inbound should be compared.

    All of this isn’t to say your sales methods don’t work or are ineffective. It’s simply to let you know you’re wrong about digital marketing. People like you keep the wine industry chained down in the dark ages. Perhaps you should put down Paco’s book and read something by Eric Reis.

    http://www.marketingprofs.com/charts/2012/7243/inbound-marketing-leads-cost-61-less-than-outbound

    “The most debilitating affliction in business is fear. Fear of changing what’s worked for so long.” http://www.impactbnd.com/blog/inbound-marketing-vs-outbound-marketing-cost

  6. Bob Henry says:

    Mike,

    I have stated I subscribe to the philosophy of “evidence-based management.”

    If I am wrong, I will admit so.

    And that why I ask the question about measuring your results using social media/digital marketing.

    I don’t wish to be ignorant if this new sales channel works.

    So your reply enlightens me.

    You state you are targeting existing customers on your mailing list.

    That’s the low-hanging fruit.

    How successful are your campaigns in acquiring new, first-time customers not on your mailing list?

    Folks who actually buy things — not just ask to be added to an email blast or receive a periodic printed mailing?

    Most wineries that embrace social media/digital marketing have one overarching objective: did it generate a sale?

    That’s a high standard to be held to.

    You state that you have other ambitions for your campaigns than revenue generation: “The marketing funnel doesn’t always dictate a sale either; for us it might be getting traffic to a blog post to gain more exposure to a brand or generating an email signup.”

    I have stated that social media/digital marketing has its place in brand building — alongside public relations and event planning and paid media advertising and in-store trade promotions.

    I took a look at

    http://www.marketingprofs.com/charts/2012/7243/inbound-marketing-leads-cost-61-less-than-outbound#sthash.zoJJlHTk.dpuf

    Let’s define the HubSpot study’s terms:

    “Common inbound marketing programs include organic search, various forms of social media, and blogging.”

    “Traditional outbound marketing techniques include direct mail, print advertising, and telemarketing.”

    Characterizing the universe of companies analyzed by HubSpot:

    “. . . companies with outbound marketing-dominated strategies — those that spend more than 50% of their lead-generation budgets on outbound marketing channels . . .”

    I conclude that the reported results are aggregated across multiple industries, multiple product categories.

    Better would be a narrower analysis of CONSUMER PACKAGED GOODS companies, and CONSUMER LUXURY LIFESTYLE GOODS companies — which defines the WINE industry.

    Do you know of or can you procure from HubSpot any corroborating evidence that WINERIES were included in the analysis?

    If not, then the metrics cannot be applied without qualification to the wine industry.

    Finally, I have revealed my background: a business school educated, ad agency trained marketer who has held brand manager, product manager, ad manager and marketing manager positions at consumer goods companies and retailers. Complemented by work consulting for wine stores and restaurants. That’s my “boots on the ground” first-person experience.

    Mike, would you like to self-disclose a little bit about yourself and your social media/digital marketing background? Industries? Employers? Clients?

    ~~ Bob

  7. Bob Henry says:

    A postscript.

    Mike, what percentage of your winery employer’s/client’s unit sales revenue comes from Direct To Consumer?

    Let’s define DTC as sales made through the tasting room and from the mailing list.

    I suspect that if your winery employer/client has any “scale,” that unit volume percentage is a single digit. And the churn on those mailing list customers is high, rarely continuing through the third or fourth reorder cycle.

    If your winery employer/client abandoned the three-tier distribution system, abandoned “boots on the ground” sales reps knocking on doors and garnering retail store shelf placements/restaurant wine list placements, and relied solely on DTC . . . would it survive?

    Better yet . . . would it thrive?

    (Shipping one unit at a time to consumers is a pain in the ass. Likewise a three pack or six pack or even an entire case.)

    All the social media/digital marketing efforts in the world couldn’t make up the huge unit volume lost from abandoning mainstream distribution channels.

    Steve Heimoff’s new employer could never have scaled to its current multi-billion dollar enterprise value through DTC.

    Only the “outliers” like Screaming Eagle and Harlan can thrive on that business model. (They perhaps being the few real examples of The Long Tail theory in action.)

    Social media/digital marketing-attributable unit volume is the proverbial tail that wags the dog. A welcomed new sales channel — but it won’t pay the bills.

    The three-tier distribution remains the chosen path to generating sustainable sales revenue and market share.

    Cite me the case studies[*] that support your position.

    Truly I’d love to read them and be proven wrong — because that means I have one more effective tool in my marketer’s toolbox that “makes the cash register ring.”

    ~~ Bob

    [*Any from The Wine Institute? From the Interactive Advertising Bureau? From Facebook? From professors at business schools?]

  8. Bob Henry says:

    A second postscript.

    Mike, I took your advice and clicked on this link to Impact Branding and Design’s website:

    http://www.impactbnd.com/blog/inbound-marketing-vs-outbound-marketing-cost

    I read John Bonini’s opening quote for his POV:

    “The most debilitating affliction in business is fear. Fear of changing what’s worked for so long. Fear of failure. Fear of spending or losing money.

    He also cites these statistics:

    “The average cost for one outbound marketing lead is around $332 compared to the significantly lower $134 cost of an inbound lead.”

    John Bonini’s POV proffered link to Tony Faustino’s personal blog as the source of those statistics:

    http://www.socialmediareinvention.com/2010/02/20/

    And what did I discover?

    Tony cites “5 Insights From HubSpot’s The State Of Inbound Marketing 2010 Webinar.”

    The first insight:

    “Insight 1 – Cost Per Lead for Inbound Marketing Channels is Significantly Lower Versus Outbound Marketing Channels

    (Slide 5) Inbound marketing channels (i.e., social media, blogs, SEO – organic / natural search, PPC – paid search / Adwords) cost per lead averaged around $134. Outbound marketing channels (i.e., telemarketing, TRADE SHOWS, direct mail) cost per lead averaged around $332 per lead. Thus, inbound marketing lowered costs per lead by 60%.”

    Mike, a triple digit cost per “lead” (note well: not cost per “action/sale”) — inbound $134, outbound $332 — clearly represents business-to-BUSINESS marketing, not business-to-CONSUMER marketing.

    The proof that these are B2B statistics is John’s reproduced bar graph from HubSpot titled “Inbound Marketing Dominates Marketers’ Top Lead Sources”: a bar is labeled “TRADE SHOWS.”

    Categorically, consumers don’t attend trade shows. Only businesspersons attend trade shows.

    No winery in it right mind would spend $134 “on average” to garner an inbound lead. Spend $332 to garner an outbound lead. (And again, these are leads, not sales transactions.)

    Even if every lead resulted in a sale, the revenue generated from a case of wine would be profitless @ $134 CPL, and represent a huge loss @ $332 CPL.

    Tony’s personal blog from which you cite your statistics lists
    Mike Volpe, VP Marketing at HubSpot, as the co-author of that 2010 analysis/report.

    I dropped a note to Mr. Volpe, asking him to clarify the universe of companies studied, whether any included consumer packaged goods companies/consumer luxury lifestyle goods companies/domestic wineries, and whether these statistics can be projected to business-to-consumer marketing campaigns.

    If the answer that comes back is “No,” then this would be an example of innumeracy: not understanding the nature of the research, not understanding the reported results.

    GIGO as they say in Silicon Valley, where I went to business school.

    ~~ Bob

  9. HI Bob

    First, thanks for the spirited discussion. It’s always fun to hear different perspectives and I appreaciate your point of view. Let me try to address your main questions as concisely as I can.

    Regarding my experience, I majored in English and worked in the marketing dept. at various tech companies, mostly involved the CRM realm. Most recently I spent 2+ years as the marketing services manager at eWinery, and consulted with dozens of wineries on their DTC approach. Those included some of the largest names that have huge distribution to very small family run wineries with almost no distribution or active ecommerce. For obvious reasons I’d rather not reveal specifics on those clients. Plus, that would entail an entire blog post in itself to explore the individual successes and failures, along with why I think the wine industry remains on its heels when it comes to the digital age.

    I participated in SSU’s program for continuing education last year, leading the “Practical strategies for increasing ecommerce sales” class http://www.sonoma.edu/exed/wine/ – you can find a small portion of the class here http://www.slideshare.net/mmeisner08/e-commercewine and I also gave several speeches at other conferences and gatherings, including http://www.slideshare.net/mmeisner08/content-marketing-strategy-for-wineries-22220433

    I’m currently involved in a new venture, partnering with a longtime supplier of high end wines that has traditionally relied on a large sales force hammering the phones all day so I have a particularly relevant position as the person who is taking charge of building a new arm for their business. Again I’d rather not disclose specifics here, but would be happy to chat with you in private, outside these blog comments.

    We do rely on our mailing list as a primary source of sales, and since every subscriber is a brand new lead I wouldn’t say they are necessarily low-hanging fruit. Let’s just say they are the fruit. As for the success in acquiring new first time customers, we are really only a few months old but I’m happy with the results of acquiring new customers so far. We follow up on these leads with old phone calls to bring a more personal connection and immediacy to encouraging them to become a club member or buy wine.

    I wanted to address the idea that social media must be directly tied to sales, which I think is a huge fallacy. Social media is generally a top of the funnel marketing activity, meant to generate impressions for a brand, create discussions, and share a brand’s personality. Of course, we do use it to focus on sales at times. For example, if we sent an email campaign for a certain product, we also use retargeting to reach that same audience segment on Facebook, delivering an advertisement that mirrors that campaign. We call it omnichannel marketing. Honestly though, I think the idea that social media activities must be measured by one primary metric, i.e. sales, completely misses the mark. One of my favorite sayings in response to that idea is “What is the ROI on your mom?” – in other words, do you measure your friendships primary on the amount of money that each person gives you directly, or does that yardstick take into account the support they offer during a hard time, and the engaging conversations you have with them?

    As for the Hubspot study, I realize they have their own motives for publishing things like that and unfortunately I can’t reference any focused studies on consumer luxury goods at this time.

    Although these may have some relevant insight into our discussion:
    http://scionadvisors.com/cms-files/docs/March_2012_article_WHAT_WILL_IT_TAKE_TO_SCALE_ONLINE_WINE_SALES_TO_A_BILLION_DOLLAR_.pdf

    This report includes solid insight into the effects of social media on driving sales, including Constellation’s efforts which generated $17 million in incremental sales: http://academyofwinebusiness.com/wp-content/uploads/2014/07/SMon06_Tach_Liz.pdf

    While it focuses mostly on social media’s influence on sales, the above report does provide some nice insight into this discussion.

    You are probably familiar with SVB/Wine Institute reports, which touch on these topics and the impact on the wine industry. Honestly I’m too lazy to dig through their reports to find more ammo for the discussion and simply had enough coffee yet. I imagine places like Jordan, Whitehall Lane, Lynmar Estate and Ridge have seen nice bumps in sales as a result of their blogging/seo/social media/etc efforts, but that’s just an anecdotal assumption on my behalf. I could be wrong. And actually, Red Cap Vineyards is a small family owned winery on Howell mountain that has seen a giant surge in club members and sales for their relatively new label, 100% of which can be attributed to the efforts of my good friend who manages their social campaigns. They deserve a case study in using Instagram to achieve that growth.

    To briefly touch on your postscript comment, I don’t think many wineries would survive if they relied solely on DTC sales. Suggesting that a winery abandon distribution, tasting rooms, pouring events would be asinine. I would never tell anyone that traditional “boots on the ground” sales should be dismissed as ineffective. So I can’t prove you wrong there, but again I never said those methods don’t work, did I? To be clear I think both outbound and inbound strategies have their place in driving sales.

    I get the feeling you think the various digital approaches has little value. I will say that small increases in DTC sales for a wineries can result in exponential profits. Lower direct marketing via online channels brings higher ROI and larger profit margins. These are a few of the reasons DTC sales have grown 10+ percent or more year after year, which is more than 2x that of other direct-to-consumer goods in almost any other market.

    Some questions for you:
    What do you think drives these numbers? See: http://www.winesandvines.com/template.cfm?section=widc&widcDomain=dtc
    Why do you feel social media must be tied to sales as a primary metric of success?
    If a winery’s DTC figures only account for a single digit percent of overall sales do you think the activities that drive those sales should be abandoned?
    Given the rise of millenial wine consumption, what sort of impact on DTC sales do you think that might have five or ten years down the road?

  10. Bob Henry says:

    Mike,

    Whenever I engage social media marketers in a debate about its effectiveness in “making the cash register ring,” I am reminded of American psychologist Abraham Maslow’s concept (circa 1966) known as the “law of the instrument”: “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”

    I have said before, and reiterate now that social media marketing has its place in brand building — alongside public relations and event planning and paid media advertising and in-store trade promotions.

    But none is a panacea for what ails the wine industry.

    Paid media advertising and public relations likewise “generate impressions for a brand, create discussions, and share a brand’s personality.”

    Like social media marketing, paid media advertising can be bought on a Cost Per Thousand basis.

    And like social media marketing, direct response paid media advertising can be bought on a Cost Per Action basis.

    You cite Constellation’s social media marketing efforts generated $17 million in incremental sales.

    Let me cite this report: “Constellation Brands Reports Fiscal 2013 Results and Fiscal 2014 Outlook”

    Their net sales were $$2,796 million and operating income was $523 million.

    $17 million represents six-tenths of 1% of their net sales. Restated, that represents an incremental hourly sale revenue of $1,941 (times 24 hours in a day and 365 days in a year). Contrasted against Constellations’s $319,178 hourly sales revenue.

    Clearly, $1,941 is a rounding error level of sales revenue.

    I am familiar with SVB/Wine Institute reports. Author Rob McMillan is a “pen pal” — a fellow Santa Clara University business school grad.

    I agree that DTC sales via online channels can bring higher ROI and larger profit margins.

    But that is not intrinsic to social media marketing.

    The winery is retaining two extra profit margins on such transactions: that otherwise earned by the wholesaler, and that earned by the retailer.

    Those same higher ROI and larger profit margins can be garnered by a winery that eschews social media marketing. The alternate medium of communications could be telemarketing, outbound faxes, and direct mail campaigns.

    Q: “What do you think drives these numbers?” See: http://www.winesandvines.com/template.cfm?section=widc&widcDomain=dtc – See more at: http://www.steveheimoff.com/index.php/2014/08/19/a-winery-digicom-manager-on-his-job/#comments

    A: I think more wineries that fall into that middle tier of production — between 3,000 and 15,000 cases annual — that Wine Spectator reports are are experiencing difficulties partnering with distributors, have turned to social media marketing as a new sales channel.

    Q: “Why do you feel social media must be tied to sales as a primary metric of success?”

    A: In these challenging economic times, the answer is “yes.” Every precious dollar expended on trade and consumer marketing has to generate a multiple in sales revenue. Has to justify its inclusion in the marketing mix budget.

    Q: “If a winery’s DTC figures only account for a single digit percent of overall sales do you think the activities that drive those sales should be abandoned?”

    A: No, based on a marginal revenue/marginal cost and diminishing returns analysis.

    If the very next incremental dollar expended on (say) continued direct response advertising garners a lower incremental sales revenue than would that very next dollar alternately expended on social media marketing . . . then spend that next buck where the ROI is higher: social media.

    Q: “Given the rise of millenial wine consumption, what sort of impact on DTC sales do you think that might have five or ten years down the road?”

    A: From a demographic perspective, five or ten years down the road as the “Millennials” (Gen Yers) — ranging in age from 18 to 33 — age, they will take on many of the traits of their older (and increasingly middle-aged) “siblings, the Gen Xers.

    Examples: buying houses; having kids.

    (See this Pew Research Center study: http://www.pewsocialtrends.org/2014/03/07/millennials-in-adulthood/)

    Similarly, the Gen Xers as they continue to age will take on many of the traits of the Baby Boomers.

    Ten-plus years down the road, marketers will have to begin addressing the demographic group that comes after the Millennials. (The “post-Millennials”?)

    ~~ Bob

  11. Bob Henry says:

    Erratum on my 2 am reply to Mike awaiting “moderation.”

    Q: “What do you think drives these numbers?” See: http://www.winesandvines.com/template.cfm?section=widc&widcDomain=dtc

    Strike this Gremlin from my copying and pasting text:

    – See more at: http://www.steveheimoff.com/index.php/2014/08/19/a-winery-digicom-manager-on-his-job/#comments

  12. Bob Henry says:

    Mike,

    One more postscript.

    Regarding DTC via winery tasting rooms and Rob McMillan’s SVB on Wine blog, I commend the reading of this posting — if nothing else, for the accompanying bar graph exhibit labeled “Melon Squeezers”:

    “What Percent of Tasting Room Visitors Buy Nothing?”

    (Spoiler alert: “on average” about 35%.)

    Link: http://svbwine.blogspot.com/2014/03/eliminating-melon-squeezers.html

    Link to the 2014 Tasting Room Survey:

    http://www.svb.com/pdf/2014-wine-tasting/

    Link to the transcript of the live video telecast “chat”:

    http://www.svb.com/pdfs/tastingroomsurvey_slides.pdf

    A link to the 2013 Tasting Room Survey:

    http://www.svb.com/pdfs/tastingroomsurvey_slides.pdf

    ~~ Bob

  13. Bob Henry says:

    Coincidentally, a wine industry marketing organization sent me this e-mail today:

    http://beveragetradenetwork.com/en/btn-academy/how-to-get-five-million-users-to-see-your-brand-on-youtube-for-free-338.htm

    My push-back:

    How many of those who viewed this “gone viral” video actually bought a bottle of this wine?

    Frankly, I was not familiar with this winery before viewing the video.

    The video does nothing to inform me about the “brand” itself.

    I’ve never seen this brand on the shelves of a wine store in Los Angeles.

    I’ve never seen this brand on the wine list of any restaurant I dine at.

    The upshot: if I can’t conveniently buy the product in a store near me . . . I’m sure not going to go out of my way to hunt it down.

    Brand recognition does not translate into sales. (If it did, we 114 million Americans who tuned in to The Super Bowl would be buying the products we saw advertised on it.)

  14. Bob Henry says:

    And this postscript to the Mirabeau viral video “success story.”

    I plugged their brand name into Wine Searcher to see what result I would get:

    http://www.wine-searcher.com/find/mirabeau+cotes+de+provence+rose/1/usa

    (Spoiler alert: TWO total wine merchants in all of the Unites States — Calvert Woodley in the District of Columbia and Gary’s Wine & Marketplace in New Jersey.)

    Is this an example of “The operation [marketing effort] was a success . . . but the patient [brand] died” [trying to get distribution]?

  15. Mike,

    You’re not going to like this comment.

    I heard back today from Mike Volpe, VP of Marketing and co-author of the report whose metrics you cite on inbound versus outbound marketing costs.

    From: Mike Volpe
    Date: Wed, Sep 3, 2014 at 9:34 AM
    Subject: Re: Renewing my “modest” request for assistance: “The State Of Inbound Marketing” report/webinar
    To: Bob Henry

    Thanks for reaching out. Unfortunately, we do not have good data on the CPA / CPL for B2C companies, about 70% of our customers are B2B. Also, these numbers depend a lot on your margins, your average order size, and your amount of repeat orders. A software business like Dropbox has very low COGS and can spend more on customer acquisition as compared to a business like Wayfair that has to buy furniture at wholesale and then ship it. At the same time, I bet Wayfair’s average order is $300 and Amazon’s is $30 probably, but Amazon has a high repeat rate.

    Thanks,
    Mike

    So what’s the “take away”?

    http://www.marketingprofs.com/charts/2012/7243/inbound-marketing-leads-cost-61-less-than-outbound#sthash.XOfa1awX.dpuf

    Not valid for consumer goods marketing.

    http://beveragetradenetwork.com/en/btn-academy/how-to-get-five-million-users-to-see-your-brand-on-youtube-for-free-338.htm#sthash.XOfa1awX.dpuf

    Wildly popular viral video hasn’t yielded shelf placements in U.S. wine stores (from perusing Wine-Searcher listings).

    http://www.cbrands.com/news-media/constellation-brands-reports-fiscal-2013-results-and-fiscal-2014-outlook

    Constellation’s marginal revenue from online sales is a rounding error.

    So what do we conclude?

    “Boots on the ground” sales reps knocking on doors and making one-to-one presentations (reinforced by post-sale support) garners wine store shelf placements and restaurant wine list placements.

    And those brick-and-mortar establishments sell the lion’s share of bottles of wines to the general public.

    Online wine sales is not a “disruptive” technology.

    Consumers still like to shop in stores. Chat up “taste maker” wine merchant personnel. Sample wines for consideration in wine store wine bars. And augment those experiences by reading the wine press — analogue and digital.

    Mike, this is what I mean when I invoke the term “evidence-based management” coined by Stanford professors Jeffrey Pfeffer and Robert I. Sutton .

    Harvard Business Review abstract:

    http://hbr.org/2006/01/evidence-based-management/ar/1

    Book based on article:

    http://www.amazon.com/Facts-Dangerous-Half-Truths-Total-Nonsense/dp/1591398622

    ~~ Bob

  16. Mike,

    Not to sound like Lt. Columbo whose classic inquiry line was “Excuse me, sir . . . just one more thing?”

    You cite this advisory service:

    http://scionadvisors.com/cms-files/docs/March_2012_article_WHAT_WILL_IT_TAKE_TO_SCALE_ONLINE_WINE_SALES_TO_A_BILLION_DOLLAR_.pdf

    I checked out the company’s website. It is non-functioning.

    A note left by one of the founder’s on the home page:

    “After a decade and a half of serving the growth planning needs of over 130 private business owners, Scion Advisors’ business partners are moving onto new horizons.”

    They have gone out of business.

    An example of “Do as I say — not as I do?”

    ~~ Bob

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