The big idea: Wine consumption among Americans is strong — a stunning $33.5 billion worth in 2013 alone. A key growth area has been direct-to-consumer sales, with imbibers purchasing wine straight from U.S. wineries. Connoisseur Kevin Sidders started VinConnect in 2011 to facilitate European wineries in selling their wares directly to U.S. consumers via a Web site and e-mail offers. His company offered a potential opportunity to wine enthusiasts: European wineries had been generally shut out of the market because of complex sales and distribution laws for alcohol.
Sidders’s business initially struggled, even though more than 1,000 customers quickly signed up to this service to scrutinize wine offerings from about 20 European wineries. Why weren’t most of his subscribers buying? Sidders knew he had to focus on new marketing initiatives to reach the right audience: wine buyers, not lookers.
The scenario: Direct sales were growing at twice the rate of the overall market, making it a profitable and intoxicating niche for entrepreneurs. Sidders’s plan was simple. Customers could visit VinConnect.com and select which winery mailing lists to join. Subscribers then would receive periodic e-mail offers — some once a year, others a few times a year.
Sidders initially focused on reaching his target market by buying advertisements online linked to when people used certain words in searches. His e-mail subscriber list grew rapidly, suggesting people were excited about the opportunity to buy European wines directly. At an average of $80 a bottle, Sidders expected his gross profit margins to be about 30 to 40 percent. But the number of purchases were not as high as projected.
The resolution: Google AdWords campaigns yielded only a small number of buying customers. A small, pay-per-click Facebook campaign also showed few returns. But in February 2012, the Terroirist wine blog profiled the company, giving VinConnect exposure to the niche market it sought. The increase in subscribers led Sidders to hire a public relations specialist. Sidders was interviewed by media outlets several more times, and resulting stories boosted the company’s profile. A survey showed him exactly who his target audience was: males between the ages of 31 and 50 who had heard of VinConnect through a news publication.
These were enthusiastic buyers who liked to support wineries directly, enjoyed the privilege of buying new releases before they were generally available and were comforted knowing the wine’s provenance was genuine. Sidders also began to pursue partnerships with clubs that had a fascination with luxury wines. The first such partnership was with a leading organization of business executives, the Business Leaders Association. Its members, who appreciate the world’s best wines, became enthusiastic buyers.
The lesson: Acquiring a lot of customers is of no use if they’re not the right customers. Sidders found that customers willing to buy were those who heard of his business through news publications — both digital and print. Old-fashioned, door-to-door sales to wine lovers clubs also worked. The method used to acquire the right customers matters.
Venkatesan is Bank of American Research Professor of Administration at the University of Virginia’s Darden School of Business. He teaches the online course “Marketing Analytics” on Coursera.