Let’s face it; we all love a good deal. And in an environment where there’s a surplus of wine consumers have more choice than ever before. Good value wines have never been so accessible and with almost 3,000 different brands (and that’s just domestic wine brands) to choose from there’s always a new wine for the consumer to trial.
But as a brand it’s the frequency and depth of discounting that needs to be a core consideration as you plan your marketing. Whilst a quick cash injection might help with cashflow to pay some short-term bills, it can also be potentially damaging and erode the positioning and equity in your brand over the long term.
This week I sat on a panel at Wine Tech conference with Paul Evans from Winemaker’s Federation of Australia, and David Gluzman from Blacksquare to discuss the topic of Discount Demand: Ways for the Wine Industry to prosper.
It’s a pertinent discussion and a conversation that’s often raised with our clients when we’re helping with their marketing strategies. The challenge is not unique to wine brands and in an environment where retailers are all looking to grow market share the lowest price guarantee is often something that they resort to and it leaves brands, distributors and smaller players scrambling to work out how to compete.
And yet this aggressive price discounting does not seem to be working. AZTEC at a recent Wine Communicators of Australia seminar (June 2015) highlighted the trend that 65% of retail wine sales are now sold on promotion, and we’re not seeing category growth from this promotional behaviour. Consumers are just switching between brands and it’s not growing the category nor introducing new consumers to the segment. AZTEC found that in a lot of cases, the perceived value of the products from consumers was higher than what they were paying – but the promoted prices continue and a downward spiral is in place where consumers begin to expect a certain price. Surely it’s time to take a step back and re-think how we’re marketing our wines and collectively start to take a different tact so all channels maximise margin before it’s too late and perceptions of value are changed forever.
The role of price in the broader marketing mix is evolving
rice will always be part of the marketing mix. For those of us classically educated in marketing it’s been engrained into us as one of the 4 Ps to think about in how we market our products. However, smart marketers have recognised that this thinking has evolved and recognise that there are other levers to leverage to drive sales. One of the marketers who I have great admiration for Andy Lark (ex Chief Marketing Officer of Commonwealth Bank) talks about how the 5 new P’s of marketing have evolved in the virtual era and how now it’s about thinking about “participating, producing, playing, place and purpose.” This changes the mix of marketing investment and forces brands to do things differently from how they have operated in the past if they are going to remain relevant. Andy noted, “If 90% of what you spend this year is the same of last year, how can you do all the new stuff you need to do?”
The continual growth of smartphone and mobile devices have made price comparisons simple with constant internet access allowing consumers to search and research products in a convenient format. Consumers don’t want to feel ripped off, but not all segments of wine consumers are interested in the cheapest price and there are other ways for brands to grow sales without resorting to discounting.
Positioning your winery for longer-term growth: 5 tips to consider:
How you position your wines in the market depends on many different factors – the volume that you’re selling, where your historical sales channels and legacy sales volumes come from, the size of your marketing budget, resources you have available and what consumers and price points you’re focusing on.
However, there are other elements that wineries can focus on, regardless of size and over the longer term these initiatives may help to shift the reliance on price.
Here are five things to think about:
1. Create an amazing customer experience
Capturing the hearts and minds of your consumer and making them feel valuable is one way to stop the immediate focus on price. It’s become the new mantra of marketers and why we are seeing brands appoint Customer Experience Managers and looking at the customer journey to understand how they can make a difference and grow market share.
With great customer experiences comes consumer advocacy about your brand and there’s a direct correlation between advocacy and long-term profitability. Great brand experiences fuel word of mouth marketing and are a trustworthy source of intelligence for consumers when they are making a product choice. Wine Intelligence 2012 research found that word of mouth recommendations are the most important channel for wine information. So how are you creating a tribe that’s loyal and talking about your product?
Experiences don’t necessarily have to cost a lot of money. Sometimes it’s the way that you interact with your potential customers, sending them hand written notes of thanks or acknowledging them properly when they come into cellar door that can make a big difference around how they feel. Ask yourself whether you can create some more theatre in your Cellar Door and entertain the customers or ensure that you cater for a range of different groups to make them want to return and spread the word about your brand.
2. Invest in your brand
Growing your direct to consumer sales and brand awareness requires ongoing investment. The brands who are winning in the direct to consumer space have continue to invest in building their community. They have resourced their Cellar Doors appropriately and invest in having the right staff and infrastructure in place.
Think about what you are going to do to acquire new customers as well as retain your existing customers. This could be through face-to-face events, specific brand initiatives or partnerships that will ensure that you continue to have visibility and stay top of mind. Don’t underestimate the power of referrals and repeat purchases. It’s not just the initial sale that you need to focus on as repeat customers on average spend 67% more than new customers. After sales service, communications and a developing a compelling loyalty proposition around your brand can also lead to long-term revenue growth and higher consumer engagement.
3. Tell your brand stories consistently
With so many product choices the family owned winery with iconic vineyards story does not necessarily cut it anymore – it’s not unique and there are so many brands singing from the same songbook.
Brand communication and storytelling are an essential part of building your brand and yet it’s often an area that is neglected and crafted by those without the skills to tell the story in a way that’s meaningful. Make your brand narrative authentic, attainable and tell it consistently. Look at other categories like fashion and spirits for inspiration.
Bega Cheese is a classic Australian example of a brand who shifted the focus from price back to it’s brand values by continuing to tell the stories of provenance featuring dairy farmers from NSW town of Bega.
We’ve also seen first hand success working with wineries to craft stories that are not about selling a product, but helping consumers retell the story. Best’s Wines Story of Shiraz booklet is a classic example – it does not talk about the price of the products, but instead gives consumers materials to draw from to tell their own stories when they purchase the wine and help authenticate their purchase decision when they are buying a super premium bottle of wine. It’s these stories that then remain top of mind when consumers are making a purchasing decision and keep them returning.
4. Personalise, target and segment your communications
Delivering on what your customers want is important, particularly when you are selling directly to the consumer. It’s not hard to start to work out what resonates with your customers and then service them according to their preferences, particularly when you have a Cellar Door that you can use to facilitate conversations.
For example, rather than sending out the same email communications to all customers, think about how you can personalize, differentiate and send out more segmented messages to particular groups of people. It could be as simple of giving first access to new vintages to those who have bought from you previously or ensuring that if you’re talking about an event to a specific group of postcodes that are within the vicinity to attend.
Ensuring that you have a good CRM (Customer Relationship Management) program in place to target your consumers is imperative and there’s software now available with websites like Blackboxx, Vin65 and Cru.io that help you capture customer preferences. Email systems like Mailchimp and Campaign Monitor can also help to improve your email communications and monitor results. But the data needs to be captured from the consumer upfront and built upon as part of your ongoing dialogue and this often means mindsets and sales processes are changed to ensure you ask the right questions.
5. Innovate and think about how you can do things differently
Think about how you can challenge existing conventions and challenge the norm by doing things differently. Innovation can take many forms – from engaging events, leveraging new mediums, thinking differently about the customer buying challenges and how you’ll respond.
The well documented case of Hyundai’s Assurance program launched in 2009 is a good example of looking beyond the discount deal and putting a program in place to meet a customer need when competitors were resorting to discounting. While US auto sales were plummeting, Hyundai tapped into the emotional concern of people concerned about losing their jobs and put guarantees in place to have the cars returned. Hyundai increased sales by 8% during the period and in the volume of cars returned was minuscule in comparison to the uplift.
Understand your customer and be conscious of their needs and tailor your marketing accordingly. Technology will continue to evolve and wineries need to be future proofing and thinking about how you’ll meet needs into the future.
I’d love to hear your thoughts about other initiatives you’ve seen employed by brands to reduce the reliance on price.