Improve your profit margins. Earn more money.
Simple, right? Yet that's so much easier said than done, particularly when the highest margin opportunities in your industry are also hidden behind barriers of rigid and complex regulatory systems.
That's the reality in the wine industry at least, where the biggest profit margin typically lies in selling bottles directly to the consumer. Few wineries in the US have cracked this nut, partly because of an industry-wide reliance on traditional systems that most consider to be an outmoded heldover from the Prohibition era.
That landscape is changing slowly, but not fast enough for a healthy bottom line right now for most small and midsize wineries. The key for those who do succeed is that they innovate around their profit margins. In some cases, this means reversing strategies within a well-established business model.
For any business-- not just wineries-- faced with an oversaturated market, take note from the leading wineries that succeed in its industry. After all, they're getting ahead, even among stiff competition for consumer attention.
Here are three tips for getting ahead and growing your profit margins:
1. Mix "old school" with newer digital tools.
The business of wine, like sales itself, is a matter of relationships. The same techniques that have worked for hundreds of years still work today: Listen. Make conversation, not pitches. Seek feedback. Add value. You get the idea.
For as "old school" as those techniques sound, they are the foundation for initiating fundamental shifts in your business. Benovia Winery, in Sonoma's Russian River Valley, applied these old school tools to flip-flop their revenue stream within three years, boosting their direct to consumer sales from 43 percent in 2015 to 73 percent so far in 2018. For context, the typical margin for direct to consumer purchases hover in the 60 to 70 percent range.
So what's the right mix of old and new? Ed Thralls, Benovia's General Manager, offers some insight on what's worked for them:
- Upgrade an antiquated website for mobile responsiveness. Mobile traffic for Benovia increased from 19 percent in 2014 to 36 percent so far in 2018, and it's expected to keep growing. All of this because they simply upgraded their site.
- Add telesales outbound activities, because connecting person-to-person re-establishes the emotional connection with the brand.
- Use data mining and segmentation, to identify cohorts, like "movers," who are new customers (within the last 12 months) and have quickly become high-value customers. Then surprise and delight them. Benovia offers opportunities to visit, stay at their cottage, and sends simple thank you gifts like their Vineyard coffee table photo book.
- Pick up the phone and call dissatisfied or disgruntled customers. Any customer who rated Benovia's sales and delivery experience as six or lower (on a scale of one to ten) received a direct call from their operations team. Why? To empathize, Thralls said, and to understand any problems so that the winery not only improves their performance moving forward but also demonstrates to the customers that they care and will do whatever it takes for them to be satisfied.
2. Don't fall off the cliff.
In direct to consumer wine sales, the proverbial "cliff" happens 14 to 18 months after a customer's last purchase. Wineries lose the attention of the consumer who, given so many other options available to them, may be drawn away and never purchase again.
The time or distance to the "cliff" may be closer for you, depending on your business' sales cycle and frequency of purchases and shipments. But there is undoubtedly a consistent sweet spot worth identifying, when customers teeter between "repeat" and "gone for good."
Making contact exactly then-- with a phone call, a visit, a customized email or other outreach-- could very well tip the scale in your favor.
3. Close the deal.
You've done all the right things. You've listened. You've shared information. You've delivered a great experience. But do you and your sales people close the sale? Do they actually know how?
Close the deal. Improve profit margins. Earn more money. There are different ways to get there, regardless of your industry. Experiment with strategies that have worked elsewhere, but customize it for your own circumstances.