Wine Discounting Is Not the Problem
Marketing expert tells wineries that consumers have changed
Pam Danziger is president of Unity Marketing, based in Pennsylvania, and the author of several books about marketing and consumer behavior. She told the winery sales and marketing professionals attending the Direct to Consumer Wine Symposium in Santa Rosa that what their customers value in luxury goods has changed.
Yes, Danziger said, in some cases, luxury goods makers including wineries may need to lower prices. When posh Coach bags passed the $300 mark in 2009, sales slowed, so the company reduced the price by about 10%. The change boosted volume sales enough to cover the reduced price per bag and raised profit, she said.
The task for wineries, however, is not solely about reducing prices, it’s about raising the perceived value of the wines they sell to appeal to an increasingly selective audience, according to Danziger. “The challenge is to convince customers that they’re getting a $30 bottle of wine for $20.”
Luxury spending declined
Unity marketing conducts quarterly surveys of 1,250 luxury consumers with household incomes of $100,000 and above. The surveys found that luxury spending has increased 45% since the first quarter of 2009. The jump from the second to third quarter of 2009 was the most dramatic since the recession began, she said. It was a release of pent-up demand, in her view, and explains why luxury goods spending declined somewhat through the third quarter of 2010.
Danziger perceives that consumers, and especially luxury goods consumers who tend to be college-educated and business-savvy, are using their brains to shop rather than just their purses as in the 1990s or mid-2000s. A roaring consumer marketplace is not immediately around the corner.
“Don’t buy it,” Danziger said. “We are in a different place, and we are not going back to that boom-boom time that we all remember, not until about 2020.”
Marketing advice to wineries
Danziger’s advice to wineries included keeping the message simple, and incorporating these suggestions:
• “Young affluents,” consumers from 35-44 with $100,000 household incomes rank significantly higher in long-term value to wineries than older or younger groups.
• Still, invest in and partner with the millennial generation. Use marketing strategies that have buzz, like Greyhound’s new Bolt Bus division that uses social media for marketing and offers $1 tickets from Washington, D.C., to Boston to the earliest customers to reserve.
• Develop a product line with good, better and best tiers. “It’s a good time to up your price at the best end, and find an improved good-better-best scale.”
• Find ways to make your brand memorable. Emphasize the authentic qualities of your wines if that provides differentiation.
• Try new packaging. For people who can’t remember milk in glass bottles, glass is a cool package for milk. Maybe box wines or other options are cool to consumers who’ve seen nothing but glass.
• Trade vertical integration for virtual integration. Maybe every wine company doesn’t need to own its vineyards and production facilities, she said. “Hermes and Louis Vuitton don’t raise their own alligators.”
Direct sales up 25%
American Express Business Insights conducted special research about wine buyer behavior for the symposium’s parent organization, the Coalition for Free Trade. As presented by Marc Andre Roy, the research used transactions with American Express cards to take a broad view of U.S. wineries’ direct sales.
Year-on-year growth in this category through October 2010 was about 25% in dollars spent, Roy said. (It was nearly the same result as the 26% growth that the Wines & Vines/ShipCompliant Shipment Model found for DtC shipments in November 2010.)
American Express tallied winery direct sales and online direct purchases, and compared them with three-tier sales at wine retailers. Interestingly, Roy said the study found that 12% of customers purchased from both direct and three-tier channels. “There is an overlap, there is a synergy that we have seen,” he said.
Biggest turnout yet
The Direct to Consumer Wine Symposium saw paid attendance increase from 260 last year to 375 this year, and hosted another sold-out trade show, according to Jeremy Benson of Benson Marketing, one of the organizers.
Proceeds from the symposium go to the Coalition for Free Trade and Free The Grapes!, two organizations that work with local winery associations and industry representatives to increase the number of legal direct-shipping states.
To find out more about the symposium, go to dtcwinesymposium.com. Attendees will receive an e-mail with password that allows them to download speaker presentations.