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Google and Wine Allocations Make Interesting Bedfellows

How does an allocated winery, with a superstar consulting winemaker, in a competitive environment, get more sign-ups for its allocated list? 

That’s the million dollar question, or, perhaps, it’s the $4-7 dollar question, which is around the cost of a click for the word “wine” from Google Adwords.

By way of background, I use web-based Gmail for my email.  The web interface for Gmail includes context-based advertising from Google Adwords.  Ads will show up when the contents of my email indicates a particular subject matter.  As you can imagine, on a daily and weekly basis I’m receiving and sending a great deal of email that contains the word, “wine.”  Interestingly enough, over the last several weeks, on at least a daily basis when I get an email with the word “wine” in it, I get a Google Adwords ad for Fantesca Chardonnay and their 2008 release of Heidi Barrett’s Chardonnay, her first for the winery where she’s had total control from grape to glass, and the only Chardonnay she makes as a consulting winemaker.  Interesting. 

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This is mostly interesting because Fantesca’s call-to-action once you click through to their web site isn’t to actually sell you a bottle of Chardonnay, at least not right now, it’s to get you to watch a video of Heidi talking about the Chardonnay and then sign-up for their allocated mailing list.  So, it’s not a call for a transaction, it’s a call to sign-up so you opt-in to communication, which presumably leads to a relationship with the winery over a period of time that will eventually consummate in a purchase—like trying to get to that elusive third date in a relationship, ahem. 

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Of course, in that allocated and shrouded in mystery kind of way, there is no pricing on the site for the Chardonnay.  So, a consumer is left to wonder and await an email for their presumed allocation offering of said wine, more on this in a second …

However, in regards to price, checking out wine-searcher.com, it looks like the ’07 (pre-Heidi Barrett total control) Chardonnay’s (two bottlings - one from Napa and one from Sonoma) go for somewhere in the $40 neighborhood, while the 2008 available at Wally’s in L.A. goes for $75 a bottle.

Hello superstar winemaker price increase!

Now, of course, you have to be a reasonably savvy marketer to figure this Adwords stuff out, but this really gets to the heart of a couple of things in the direct-to-consumer portion of the wine business:

How do you move pricing up and down the price ladder (having the cred. of Barrett helps you move up)

How do you grow an allocated list of members when your previous bottling is widely available at retail (i.e. how do you find them, if they’re not finding you – Google Adwords and contextual based advertising is one way)

What do you do to facilitate an opt-in to a mailing list that will turn into a relationship (what are they going to do with me now that I’ve signed up)

How do you measure customer acquisition costs and the lifetime value of a customer (do you measure your cost of acquisition versus purchasing habits to see if I’m a profitable customer?)

Now, while I’m guessing, I know I’m in the ballpark when I say the Google Adword cost for the word “wine” is somewhere around $4-$7 per click, maybe it’s a little higher, maybe it’s a little lower, but the point is I signed up for the allocated mailing list, as I’m sure a number of other people have, and the cost to Fantesca is slight, at least slight relative to the costs of having Heidi Barrett making your Chardonnay and slight compared to buying a list and doing traditional mailings and that sort of thing. 

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If a 1000 people sign-up at a cost of $6 per person and 10% of those people buy a bottle of wine at $75 per bottle, that math makes a lot of sense to me, especially if amortized over a couple of purchases and a bigger topline revenue number.  A customer acquisition cost of $6 if you can get me to buy two bottles of wine for $150 is ridiculously inexpensive.

There are a couple of flaws, however.  First, I’m in the camp that no Chardonnay is worth more than $30 to me, making a purchase unlikely.  Secondarily, while I know who Heidi Barrett is, the majority of other people who click on the link can’t be assumed to have similar awareness.  Finally, the process itself has gaps.  For example, after I signed up and opted in, the web site tells me that there is no offering in this allocation season.  However, I did get a follow-up email from Angela Duerr, who is their National Sales Manager, sent from her iPhone, asking me to let her know if she can help with an allocation.  Huh?

Despite these peccadilloes and a process map that hasn’t likely been thoroughly vetted for water tightness, this all strikes me as very smart marketing from a guy who isn’t a stranger to smart marketing.

For all of the hot air about social this and social that, at the end of the day, what every marketing tactic boils down to is execution and service.  Solid, point-to-point execution and satisfying service, which I believe Fantesca offers.

Fantesca owner Duane Hoff, also the originator of the cutting edge “Adopt a Grape” program a couple of years ago, wasn’t available for comment, but he did reply to my inquiry while on his vacation, another nice service touch.  I expect to catch up with him in a couple of weeks.

I’ll be curious to see if I can dig into the mechanics of the campaign and share some results.  The funny thing about online marketing is getting details on what works is difficult, and, well, if Hoff has figured out a way to increase the retail price of his wine by 90%, while finding customers in this climate, selling direct-to-consumer and not via distribution, then he has a future not as a winery owner, but as marketing consultant.



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Posted in, Wine: A Business Doing Pleasure. Permalink | Comments (13) |


Comments

On 05/21, Bobby Cintolo wrote:

Another great article Jeff. While I am sure other wineries are marketing online I am willing to bet there is significant room for improvement and expansion; especially for any winery allocating wines. Low production and high demand equals larger profits. If a good amount of these profits are not reinvested into marketing campaigns then it’s being wasted.

On 05/21, Ian Griffith wrote:

It will be interesting to hear what you learn from Mr. Hoff and I hope you’ll keep us posted. From the information above it sounds to me like an expensive experiment for a few reasons. 

As you point out the name recognition for Heidi Barrett is unlikely to be high, especially for people who use the search term “wine”; who knows what they were searching for? A successful Adwords campaign usually attempts to focus on a targetted keywords that places your ad in front of qualified prospects, and usually these keywords are more affordable even if it takes a lot of them to generate the traffic you want. Maybe Hoff is using more targetted keywords, you didn’t explain how you came to the conclusion that his keyword is “wine”.

Then there is the issue of conversion: in your example above you seem to be suggesting that everybody who clicks on the ad from Google will result in a mailing list subscription. In practice you will find a low percentage actually “convert” even if the risk of joining a mailing list is low.  This is where your targetting really matters.  You correctly point out that since the winery isn’t asking for a sale there is a second conversion point. Indeed the winery still needs to demonstrate value to their new mailing list, especially if the potential sale is some time in the future.

Ideally the winery should know the expected value of a mailing list subscriber from this campaign. That is, if 10% of 1000 people buy a bottle for $75, then a subscriber is worth $7.50 in sales. If each click from Google costs $6 and 10% covert to become subscribers, then each subscriber costs $60. That math isn’t going to work for very long.

On 05/21, Ranndy Kellogg wrote:

Great blog.  The math does not make sense. I hope Duane clears it up for all of us.

I have been on Fantesca’s mailing list for a couple of years.  While I enjoy Duane’s wines (his Cabernet has been very nice), I also have heartburn over a $75.00 Chardonnay.

Heidi has a great reputation.  Unfortunately, I have never been able to taste her wines.  I hope her Fantesca Cabernet does not break the $100 mark.  Perhaps I am dreaming.

On 05/23, Kristi Davis wrote:

Had to comment in regards to the math. The top header and GMail ads are significantly lower. Probably in the less than $1.00 range. Gmail is in the Content Network for AdWords and not the Search network. Therefore the pricing is different. On the other hand, research has shown that conversions for Gmail are crazy high so hopefully it’s proving to be a good one for her.

The draw to watch the video is an interesting one though.

On 05/23, Kristi Davis wrote:

I forgot to mention that I have your site in my RSS Reader and when I clicked on the heading, the proxy feed did not come through. It said Invalid Get Data and the link was:
http://goodgrape.com/index.php/site/google_and_allocation_wine_make_interesting_bedfellows/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+GoodGrapeAWineManifesto+(Good+Grape:+A+Wine+Manifesto)&utm_content=Google+Reader

So you may want to check your Feedburner link?

On 06/29, square peg web wrote:

Then there is the issue of conversion: in your example above you seem to be suggesting that everybody who clicks on the ad from Google will result in a mailing list subscription. In practice you will find a low percentage actually “convert” even if the risk of joining a mailing list is low.  This is where your targetting really matters.  You correctly point out that since the winery isn’t asking for a sale there is a second conversion point.

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On 04/26, .(JavaScript must be enabled to view this email address) wrote:

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On 07/23, San Mateo Real Estate wrote:

There are not so many blogs or other platforms dedicated to wine or sommelier. Thank you for the post and for the blog in general. The article is cool.


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