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Business Rx: He's got Wisdom, but is in search of more marketing savvy

By Special to Capital Business
Monday, July 12, 2010; 28

The Entrepreneur

Erik Holzherr is winning awards for the drinks he serves up at his lounge, Wisdom, in D.C. He saved money for seven years, began bartending and mastered the art of mixology on his own. During that time, he researched D.C. neighborhoods and learned about commercial property, business licensing and liquor laws. Holzherr purchased a vacant building in an up-and-coming area near Capitol Hill. With the help of his father and an uncle, he renovated the building into his dream cocktail lounge on the first floor and an apartment for his home above. Holzherr even did his own decorating -- including a vintage wooden bar from a California naval base, antique furniture and a chandelier he carried home in his backpack from a trip to Turkey.

The resulting vibe has been more speak-easy than club since Wisdom opened in October 2008. There are no TVs and the music is set at levels that promote conversation. Plus, the drinks are unique. Along with offering the city's most extensive absinthe menu, Holzherr pours cocktails that have earned him accolades.

The Pitch

Holzherr

"Wisdom is an upscale cocktail lounge, specializing in masterfully crafted and one-of-a kind cocktails. We try to appeal to educated consumers from all ethnic backgrounds -- our decor and music is extremely eclectic.

"Wisdom is very unique; there are no other true lounges in the Capitol Hill area and very few in the D.C. metro area. The ambiance appeals to people looking to avoid chain establishments."

The Problem

Holzherr

"The biggest challenge is the neighborhood is up-and-coming, and although we are on Pennsylvania Avenue, 1.4 miles from the Capitol and a half block from the Potomac Avenue Metro station, there is not much foot traffic. There are few other open businesses in the immediate area, so we are more of a destination spot. Also, many people have a negative perception of Southeast. I cannot single-handedly change a negative perception of Southeast, but I have done my part starting up a neighborhood watch, meeting many neighbors and police officers, and trying to build a community."

"The one thing I can control is marketing, and it is definitely my weakness. I am also very limited in funds for marketing. Most people are extremely impressed and surprised by Wisdom when we get them in the door, but the challenge is getting potential consumers in my immediate area and Metro-accessible D.C. areas to 1. know we exist and 2. make an effort to check us out.

"The other thing I'm struggling with -- I'm using really expensive ingredients and doing some different stuff with cocktails. Some people really appreciate this, but others aren't comfortable with it. Do I change my brand and go for cheaper ingredients and better prices in order to make it thrive, or do I keep chugging along and keep looking for new people who would be excited by what we offer?

The Advice

Asher Epstein, managing director, Dingman Center for Entrepreneurship at the University of Maryland's Robert H. Smith School of Business

"I think your strategy sounds like a good one. Cheap drinks can work, but it's difficult to differentiate yourself from others. You're always racing to the bottom because someone can always offer a better, cheaper deal. You've got what sounds like a really nice hip vibe -- it's just a question of brand-building.

"You should focus on the happy hour crowd as opposed to the neighborhood residents for now. Ultimately, you'll also want to focus on developing an audience of locals for your late-night and weekend crowd, but there is only so much you can do to move the market along. You can't get into the business of trying to improve the entire neighborhood and changing people's perceptions. The things you're doing in the neighborhood now are good, but you have to focus on attracting customers who will be comfortable with what you have now.

"Don't go after a group that's not already regularly going to happy hour. Find out where they are going and lure them to your place instead. Think about hosting cocktail tastings or other events to introduce new crowds to your lounge and draw in the type of people who appreciate what you offer. Try several events that get a lot of new people in the door at one time, and then keep them coming back.

"Figure out how you can tap into the market of young professionals that work on the Hill. In most office settings, there are a couple of people who are the "influencers" who organize group happy hours. Figure out how to get these people to bring their friends in and incentivize them with free drinks. You've got to get the regulars -- the "Cheers" model -- but you also have to constantly be reaching out to new people. In your business and your location, if your customers stick with you for 18 months, that's pretty good.

"Give people a reason to try your bar tonight -- tie your marketing to events or seasons with a strong call to action. Or offer different high-quality cocktail specials each night or on a rotating basis. Leverage social networking tools like FourSquare, Facebook, Twitter and strategies around those tools. Only Tweet things that are actionable "tonight," such as drink specials for that night only.

The Reaction

Holzherr

"Happy hour is something I know I need push more. The Metro is right on the corner -- I just don't think people realize we're here.

"I just did a Groupon promotion and I try to set up a tasting every single Tuesday of the month. I change the menu up seasonally, and we're about to enter an exclusive partnership with a new high-end gin brand that will lead to marketing opportunities. I recently started using Twitter, but so far it's having minimal impact. Where do you draw the line with social networking and e-mail marketing -- when does it become too much?"

Epstein

"You overdo marketing when you spend more time working on the message than you do generating revenue from the end result. If you're out there Tweeting 10 times a day and you know that traffic is coming in because of that, Tweet 20 times a day. But if you're Tweeting and you can't trace any extra drink sales because of it, you're wasting your time. It's a balance because you need to give those methods time to work, but try a strategy for a few weeks or a month and see if it works."

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