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Industry Watch: Value’s New Toolbox

Posted on  | April 24, 2013   Bookmark and Share
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Retailers go beyond pricing to appeal to tight-fisted consumers in tricky times

Much has changed since the re-cession ended, but one thing hasn’t: Consumers are still looking at prices and gauging value in wine.

“If there is a reason to buy wine, they’ll still do it,” says Melissa Surdyk, whose family has owned the same-named Minneapolis retailer since 1934. “So you have to give them a reason to buy it—a really good deal.”

So what’s a retailer to do—especially since no one wants to go back to the bad old days, when the only prices consumers cared about were on the shelf, and they waited to buy until those prices were marked down? The answer, increasingly, is to approach value and price with flex-ibility, leaving shelf prices more or less where they are but using tools like case and six-pack discounts, one-day specials, five-cent sales, loyalty clubs, wines of the week, and even producer initatives.

“This is a huge dilemma for the indus-try, and especially for wineries and pro-ducers that had to cut prices,” says Paul Tincknell of wine marketing consultancy Tincknell & Tincknell in Healdsburg, CA. “To be able to restore the profitabil-ity that they need is a big challenge.”

That price still matters was evident in a recent national survey of the fastest-growing wine brands in the country. Al-most all of the 27 wines on the list had suggested retail prices of $10-$12 is the sweet spot that consumers discovered during the recession and now seem re-luctant to abandon.

In addition, say retailers, they’re more savvy about pricing and reluctant to pay pre-recession prices, especially for pricier wine. Says Scott Spencer of the upscale Houston Wine Merchant: “My customers have discovered wine-search-er.com, and that means I have to use it, too. I’m more price conscious than ever before. In some ways, my competition is just not local, but national.”

Many of those tools have proven surprisingly effective, say retailers and consultants, and especially if they’re used in conjunction with traditional sales and discounting.

“In addition to traditional POS and print advertising, Banfi Vintners makes significant investments to support our brands with social media initiatives, seasonal programs, and wine education tools—all geared toward turning pur-chasers into loyalists, and loyalists into zealots,” says Cristina Mariani-May, co-CEO of Banfi. “We’d love to see more re-tailers take advantage of these resources in creative ways to develop tailored pro-motions that engage their customers.”

Among those new value tools that have and are being used:

Six is the New 12

It what’s all that long ago, says Sean Oliver, the operations manager at Hazel’s Beverage World in Boulder, CO, that case discounts were few and far between. Now, he says, they’re almost old hat, and Hazel’s has moved on to 10% discounts on mixed six-packs for wines that aren’t on sale. “They get to buy a variety of wines and get a discount even though they aren’t on sale,” he says. And they don’t have to spring for a full 12-bottle case to feel like a winner when they walk out the door.

Loyalty Has Its Rewards

Loyalty clubs can take many forms, but their common thrust is rewarding customers who shop regularly over time. Some require customers to accumulate “points” based on the value of their purchases; others are based on number of bottles. Some loyalty clubs involve physical cards that get punched; others enter people and their purchase history into a database.

Hazel’s loyalty program is based on a “Z Card,” which patrons can sign up for without a minimum purchase. Card holders receive email alerts about special events; can instantly qualify for special in-store discounts; and earn “frequent flyer miles” on qualifying purchases, which can be redeemed for dis-counts or merchandise.

At Suburban Wines & Spirits in Yorktown Heights, NY, the loyalty parameters are fairly hardcore: to join their “50’s Club,” shoppers need to purchase 50 different wines. But then the rewards are hardcore, too: 20% off even single bottles (excluding weekly specials).

Whatever loyalty conditions a store sets, the criteria and rewards should be clearly spelled out, via signage at the checkout counter and on the store’s web-site. It doesn’t hurt to play up the loyalty program via social media as well. Loyalty programs are designed to reward the faithful, but they can also be a means of attracting new frequent shoppers.

Once and For All

One-time-only deals are making a big splash, whether they’re one-day blow-outs at 20-25% off or less spectacular special offers. Surdyk’s brings in specific wines, especially direct imports, for their one-time sales. The wines, says Melissa Surdyk, are priced effectively, and the store adds a 20% case discount to that. “We’ve been real heavy on those over the past couple of years, and they always sell out,” she says.

Kick the Tires

In-store tastings, with and without discounts, are proven winners. Pouring from their own inventory can be expensive; still, retail-ers love them. Sur-dyk says the appeal is natural: tastings give consumers a chance to try before they buy, which is always welcome given all the labels to choose from. Hazel’s holds tastings twice a week, the most allowed by Colorado law. Typically, discounts on the wines in the tasting run 10%, but that’s not always necessary, says Oliver, since “it’s no longer a guess for the consumer.”

Another sign that in-store tastings are more vibrant than ever: in New York City, a dedicated calendar web-site, The Local Sip, that details what’s being poured at dozens of shops around town, encouraging merchants to uncork the good stuff and giving savvy shoppers a chance to strategize their try-and-buy activity.

Promotions Put in Motion

Banfi Vintners’ Mariani-May alluded to some of what’s being done, but also expect to see more high visibility efforts. Earlier this year, Treasury Wine Estates offered a money-back guarantee for several of its Rosemount wines. The offer was included on a neck hanger. All the consumer had to do was buy the wine, save the receipt, fill out the form on the other side of the neck hanger, for a re-fund if they didn’t like the wine.

Revamped Packaging

Does it seem like more producers are changing their labels and look? “That’s because they see an opportunity to up-grade their wine’s value with better packaging,” says Tincknell. “If it looks more polished and more elegant, that’s going to help with the consumer perception of the wine. And that change in perception helps throughout the chan-nel—it makes the job easier for the distributor, restaurant and retailer.”


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