Direct, Online Marketing Builds Wineries' Databases

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The wine and spirits business faces almost the same level of regulation as the prescription drug sector, yet this fact has not sobered San Francisco agency Crush Direct.


Instead, the 18-month-old shop has helped more than 30 winery clients -- nearly half its business -- build their databases through direct and online marketing. The opportunity: a $20-billion-plus wine and spirits category that typically is driven by retailers and distributors.


"Most of the winery sales historically have not been through the direct channel, so there's a huge opportunity for wineries to connect with consumers to better differentiate themselves to drive higher-margin sales," said John Hingley, partner at Crush Direct. "Anytime you go direct to the consumer, your margins are higher than if you go through the retail channel."


Crush Direct [www.crushdirect.com] is using search engine marketing and optimization, targeted banners on portals and affinity sites and interactive promotions and quizzes to build relationships and databases. Even e-mails work, Hingley said, with open rates of 40 percent to 65 percent, click-throughs of 10 percent to 20 percent and orders off click-throughs at 5 percent to 15 percent. The average order is estimated at $125.


The agency's yearlong work for Southcorp.'s Little Penguin value line of Australian wines is a case in point. The wine producer sought to target a 25- to 40-year-old hip audience interested in travel, gourmet and eating out. Branding and building a database of handraisers is essential.


A key component of the U.S. online push is "The Little Penguin Wine Personality Test." Participants answer 10 questions to determine "If you were a wine, what would you be?" Questions include:


· "Which of these hobbies do you most enjoy?"


· "If you were a dog instead of a penguin, you would be a ..."


· "Which penguin best represents you?"


· "How wise are you in the world of wine?"


· "Name your favorite guilty pleasure."


· "How would your friends describe your personality?"


Participants can gauge whether they are a Merlot, Cabernet Sauvignon, Chardonnay or Shiraz. They can compare the results from other consumers who took the test.


The quiz is taken at www.thelittlepenguin.com. Required fields include first name, e-mail address and ZIP code for delivering the quiz's results. Participants must opt out of signing up for the Little Penguin newsletter for local events, special offers and free downloads.


Working in tandem with that promotion were nearly 60 keyword buys like "Australian wine" and "wine personality test," along with search engine optimization, e-mails to opted-in lists and targeted ads on sites like Yahoo and MSN.


"It's been a great success," Hingley said. "We went from zero to 40,000 in less than one year."


Franciscan Estates, a St. Helena, CA, label owned by Constellation Brands, is another Crush Direct client. United Airlines' MileagePlus frequent-flier members get bonus miles for buying wines off the Franciscan Estates' site at www.hartwickandgrove.com. E-mails and banners drive traffic.


"We've seen tens of thousands of people going to the site," said Hingley, who declined to disclose actual numbers.


Other clients include Martin Ray Winery and Peju in wines and spirits. Non-winery clients are VerticalResponse, Workz.com, PetCareRX, Niman Ranch and the Philadelphia Eagles Youth Partnership.


Most U.S. wineries can ship to just 26 states because of Prohibition-era laws that place regulation of the distribution of alcohol at the state level. The Supreme Court soon may rule on the constitutionality of such restrictions, affecting the future of winery direct and e-commerce sales.


Most of the estimated 3,000 wineries nationwide are unwilling to roll over and play dead. They say that New York and Michigan laws go beyond regulating trade by restricting interstate commerce in a protectionist and discriminatory manner. Wineries claim the laws violate the commerce clause of the Constitution, which was enacted to engender free trade among the states.


Twenty-four states have partial or complete bans on direct shipping while 26 allow such interstate commerce in varying degrees.


"If the Supreme Court's ruling caused the remaining 24 states to allow direct shipping, wineries in California would be ecstatic," Hingley said. "The big rub: Distributors are threatened and are putting millions and millions of dollars into the fight to keep the laws as they are."


Such restrictions have hampered wineries in developing one-on-one relationships with consumers. Wineries in major wine-producing states like California, New York, Oregon and Washington are among those most affected.


But demand, even if not ignited by relevant marketing, is driving commerce beyond the traditional store and restaurant channels. A recent VinQuest survey from VintnerActive, Windsor, CA, projects that U.S. wineries' direct sales will double from the current estimate of $2 billion annually to $4 billion by 2010. This includes sales from tasting rooms, events, direct mail programs and e-commerce.


E-commerce and the use of more sophisticated wine clubs, both said to be growing at twice the rate of tasting room sales, are propelling direct sales.


VinQuest claims its survey is the first national study of consumer direct sales. Responses were garnered from 200 wineries in 20 states.


Database marketing in the winery business is in the early stages. Small lists make it necessary to segment at the most reasonable level, Hingley said. Wineries typically have 2,000 to 3,000 names in their databases, according to market researcher MKF, St. Helena, CA.


Also, small lists make it tough to test, forcing Crush to rely on knowledge accumulated over time. However, qualified mail and e-mail addresses are vital in whatever quantity they are available.


"Because of the consumer's passion and interest in the wine category, even at levels of a couple thousand names, it does make sense to do e-mail marketing and direct marketing as long as you're targeting your message," said Daniel LeFrancois, partner at Crush Direct.


Wine marketers potentially can lift response by targeting based on buying behavior, channel captured and product-type interest. Crush Direct specializes in building lists for clients mainly through online tests and promotions as well as profiling. There is also huge potential for a co-op database in the wine, luxury and gourmet crossover, Hingley said.


"In the wine and spirits industry, it is largely regulatory, but also behavioral in the fact that the majority of wine and spirits consumed zoom after purchase," he said. "So, apart from shipping restrictions, we continually address the fact that although direct-to-consumer wine sales are growing, we need to increase overall brand awareness, loyalty and increase sales at restaurants."


Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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