Joel Vincent

Technology. Wine. Family. (maybe not in that order)

The DaVino Code: Link Between Social Media and the Wine Industry

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There is endless analysis out there and supposition/assumption that social media is important to the wine industry.  Some people claim the vision is over-blown and that traditional sales methods will dominate for a very long time to come.  Those people would be very wrong and taking their business, in the short term, in an OK position but long term dangerous position.  The decisions about online strategies for wine companies today will have long range impact on winery, retail, etc… business success and ultimately determine if the business will survive.  Here’s why.

I’ve written a bit about how wine is bought a couple years ago in what I called the Wine Life Value chain where I describe a bit on how wine is bought when people trust the source.  Stronger the trust bond is, the more likely the sale.  This is a little more elaboration on that idea and how Social Media is critically important to understanding that trust and scaling it to global proportions.

First a bit about the wine industry.  According to Wine Business Monthly and US Alcohol and Tobacco Tax Bureau there were 5960 bonded wineries in the US representing 12,000 US wine brands in 2006.  Lets just assume that number is still valid (even though its grown, those are just the latest I have on hand for this post).  Add to that the approximately 20,000 import brands (a number I’ve been told by several industry contacts) and we’re talking somewhere on the order of 32,000 brands available in the US, with new vintages every year, multiple varietals and blends and you’re looking at an incredible amount of selection for just the US consumer (only gated by protectionist government policies).

Add to this that many of the wineries (like most of the US economy) are small businesses with few employees and even fewer resources dedicated to creating a recognizable brand by the average person and what you are left with is an industry that is driven primarily by “Buying Pattern Influencers” (BPIs).  Every industry has them – people who are knowledgeable and can guide your decision – but no industry has such a confluence of factors (selection, unique characteristics, variety of flavors, degrees of desireability influenced by individual body chemistry) such that word-of-mouth and BPIs become the primary driver (Yes, there are lots of HDTVs out there, but if you took every factor – size, brands, prices, etc… – you still don’t come anywhere near the selections of wines that change every year of production).

Hence wine is bought and sold by BPIs more than anything else.  If you look at the Wine Life Value chain I discussed in my other post, BPIs vary in influence depending on the strength of the bond between the consumer and the BPI.  Basic laws of business still apply in the wine industry, don’t get me wrong.  If your product has no distribution of any kind, either direct to consumer or through three-tier distribution, then the consumer can’t buy it.  But the BPIs matter the most.  What are some examples?  Well:

  • Wine Spectator is an entire magazine that used the concept of BPIs, aggregates them and publishes a magazine that is very widely distributed.  The experts, by virtue of their qualifications, are BPIs though their bonds to the consumer are weaker than say your wine geek friend.  But in the end, its better than nothing and therefore influences a large number of people.
  • Robert Parker and his newsletter are another example of a BPI using traditional media to distribute his opinions to a large number of people.
  • I’ll get a little more personal – I know for a fact that the buyers of the Whole Foods and other grocery stores near me go to my wine guy (Bert over at Joseph George in San Jose), check out what he’s getting, and use that to select brands.  Bert and his crew are BPIs not only to his customers but to other local liquor operations interestingly enough.
  • Another one – my brother buys anything I tell him I think is good.  He’ll do it blindly because I’m basically his BPI (or one of) and we have a strong bond (i.e. we’re close) so he’ll buy it site unseen.

OK, now Social Media and what does all this have to do with anything.  The connection between the wine industry and social media is the basic understanding that Buying Pattern Influencers decide what gets bought and sold in the wine industry and the strength of the bond between the BPI and consumer is the factor that tips the decision from “maybe someday I’ll get that” to “gimme that right now” (i.e. it’s the factor that increases the conversion rate of touches – in marketing terms).  If you understand that then you need to look at Social Media in this way – you can try to become the BPI or you can find a way to work with BPIs that are mutually beneficial to your business and/or the community of BPIs (i.e. the social network between BPIs).

Prior to online social media, it was nearly impossible to understand who were BPIs.  You didn’t know an individual’s network, how big it was, or how influential that person is over his/her network.  How could you?  The only measure was this magazine/newsletter has this many readers therefore at a minimum you’ll get lots of exposure and at a maximum the publication will influence many many people.  And it does just that through wide distribution.  The weakness of such publications is that, save for a select few fanatics, they create a weak bond between the consumer and the BPI.  Hundreds of thousands of weak bonds, but relatively weak none the less.  Given no alternative, again, it’s the best bond there is for a newbie.

Along comes Social Media.  Here’s a couple of videos with a simplified explanation of Social Networks and social media.  But basically, it allows for communities to evolve, BPIs to develop to much wider audiences, and exposes the social graph of a person and scales it in ways never possible before.  A single person can connect to thousands of other people and maintain communication with those people – two way communication, unlike magazines – and not only create a bond but maintain it and make it very strong.  And that bond is not necessarily local either – that person can be equally connected to someone next door as they could with someone in another continent.  Social Media allows individuals to become BPIs (see the most famous example in Gary Vaynerchuk and the like) or to get to know communities of BPIs and create strong bonds with the members.

This fact is reinforced by a recently release study of consumer behavior online conducted by Razorfish called “FEED:  The Consumer Experience Report”.  In it they surmise that:

And not too surprisingly, most consumers are using social networking services to connect with others—either actively or passively. Few are venturing there for less-social goals, such as finding out about new products or services. And despite the proliferation of games and applications available on social media sites, user activity is still dominated by communicating with friends and updating status messages to keep others abreast of personal news and developments.

They are also concluding that the “one-stop” destination for information and updates is in a state of disintegration because of the ability of the individual to make these connections, filter information, and federate tools to create highly personalized portals to their digital life – but that’s a topic for another discussion on Social Media and the wine world.

Its been speculated that wine enthusiasts that leverage one of the earliest social media tools – Blogs – are important and a catalyst of change.  Wine Bloggers are in effect early adopters of this new technology and they, as a community, represent a group of BPIs.  They are people who, through their passion for wine – either by trade or just because they love it – write about wine just to share that passion and potentially educate other people.  They generally have small audiences but the important thing to remember is that there is genuine two-way conversation happening on blogs and each blog creates a micro-community with very strong bonds.  Now there are by some estimates 1000 wine blogs out there.  The industry is saying “yeah, but their audiences are small and they’re all spread out”.  True…today.

Social Media is in its infancy and there are spectacular tools that have yet to be written.  This first stage of social technologies are allowing for information to be liberated and democratized.  Over time, technologies for how these disparate bits of information – 1000 wine blogs, hundreds of thousands of wine reviews on sites like Cork’d or WineLog, etc… are correlated and tailored to a single persons tastes and how this person influences the buying patterns of their social graph are all coming.  (FYI – therein lies the danger behind the door for publications attempting to create the “one-stop” destination for their readers.  Its the technology that changes the playing field that ends companies’ dominance and changes markets.)

For the wine industry this is a fantastic new frontier.  The technology world is working feverishly to simplify the creation and identification of BPIs, something the naturally social world of wine has done offline for centuries as good wine would be recommended from one friend to the next.  Technology and the Internet are just now catching up to where the wine world needs it to be – all about social interaction.

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12 Comments»

  Anonymous wrote @

Great post, Joel. Exciting new frontiers, as you say!

  Anonymous wrote @

Thanks for the link back to my site – I know Zemanta did it automatically – but I’m finding a lot of good sites just by seeing where the trackback comes from – in this case, your site and this post.

I’ll subscribe to your feed as well.

Thanks,
Marshall

  Anonymous wrote @

[…] Vote The Link Between Social Media and the Wine Industry […]

  Anonymous wrote @

So what is a winery supposed to do, chase every BPI so that they get some product placement that goes viral? Viral branding has its limitations. It forces a company to constantly chase BPI, which draws company resources away from the company authoring and creating its own brand messages. Does a company really want to place its success in the hands of BPI like Paris Hilton?

Holt’s book “How Brands Become Icons” compares cultural branding to mind share, emotional, and viral branding. I think Vaynerchuk is a BPI because he performed great cultural branding–he provided a story (changing the wine world, trust your palate not critics, etc.) through an aesthetic (video blog, football chat, cartoon characters, fast talking/ADD New Yoker), to Internet people (twitter, ustream, facebook).

I’m not saying catering to BPI isn’t important, it’s just that a winery should not overlook practicing cultural branding–providing stories/aesthetics/authenticity–that resonates with its customers.

  Anonymous wrote @

@Dr Horowitz – I think you’re absolutely right and cultural branding is part of influencing BPIs and/or becoming a BPI. Part of cultural branding is creating that tribe that follows and buys into that culture (and thus becoming a BPI – which GV did).

I actually don’t think wineries can become GV’s because knowing Gary he spends way too much time doing that stuff to run a winery (and as I mentioned, the winery itself typically doesn’t have the resources). But there are ways to create strategies for leveraging the tools to maximize or compliment the cultural branding you are trying to achieve and even creating a “cult” brand online might be possible.

Bottom line is today the tools are still evolving and there are communities to work with to help build a cultural brand. Looking down the line, its a bit of an early adopter world today but things are definitely trending the right way for wineries if they employ some forethought in their online strategies.

  Anonymous wrote @

Joel, amazing post and spot on as usual.
Are they listening?

  Anonymous wrote @

Hi Joel, Great article Joel
as an export director for a winery (with a winery blog!) I joined most of the new web 2.0 tools a few months ago, when I started our blog. I signed up to some web 2.0 tools to see if I like them enough as a individual, now I already have seen that for business purposes some networks and tools are extremely powerful!

  Anonymous wrote @

@mydailywine I don’t know if they are but I’ll be happy to say “I told you so!” (and, FYI, its on the record 🙂

  Anonymous wrote @

Thanks for a very thought provoking posting. I’ve been in the wine business since March 1993, coming from FM rock n’roll radio, where innovation reigned supreme… I segueing into wine-country-casual at the exact time rock n’roll seemed to hit market maturity, with other genre’s taking over …

I was quick to learn that putting out great ideas was a big yawn. This industry is so far from Madison Avenue, that it’s separated by more than the physical 3,000 miles, truth be told. That’s the one point that no one seems to get – both in and out of this business.

Technology is moving a whole lot faster than the wine business.

The wine industry is owned and operated by a group that studied the sciences to get here (enology and viticulture), and mostly skipped all the marketing classes (the same way the marketing students skipped Vit 101).

The psychology of early adopters is such a small margin of the population (documented at 3 to 5 percent); and, we’re in such early stages of social media (on the grand scale of time), that I know – based on my history with this industry – that as much as we want everyone to just hurry and catch up, wine country casual’s a bit stuck in the muck.

Your final sentences says it all: “Technology and the Internet are just now catching up to where the wine world needs it to be – all about social interaction.”

How long that’s going to take – I believe – is going to floor innovators…

  Anonymous wrote @

@Jo Diaz – The wine industry is very interesting. The atmosphere of community and cooperation that makes it a perfect fit for the future of the Internet is in place because the industry is so old fashion in the way it does business. Its quite the paradox.

I’ve been in this type of situation before being in the Tech industry and looking at many “vertical” industries where I could target the technology. Some are super aggressive at adopting technology (believe it or not, Healthcare, when a technology can improve care and meeting HIPAA guidelines is super aggressive and the Oil industry will buy anything that even has a wiff of legitimate benefit – since they have the money to try anything) and some are super slow like the wine industry.

There was a time when so-called “analysts and experts” told me and the company I worked for that multi-protocol routers could not be sold through retail to everyday consumers – too complicated and only the super aggressive consumer cared and that crowd knew how to get them. This presented an opportunity to innovate not technology, but the approach to putting technology in the market. That company was Netgear and we began selling a “Home Internet Gateway” that “Connect multiple computers to the Internet at the same time” – and thats all we marketed. It was the first of its kind to be marketed that way in Fry’s, Best Buy, Circuit City, etc. and it FLEW off the shelves ultimately propelling Netgear to spin-off and go public (NTGR).

Point being that what it takes to move a late-adopting crowd is clear-cut benefit, even quantifiable benefit, that they can understand immediately. And they need it articulated very clearly. Not because they aren’t smart, but because they have better things to do (like run a successful winery).

I think you’re right – technologists might be in for a surprise when they start to see how slowly their technology gets adopted in the wine industry. But there are remedies for that problem.

BTW – there are a bunch of folks from other industries moving into Wine (or have moved into) and this really forms in interesting group of early adopters. It makes this particular industry interesting in that companies may find early success with these early adopters and then a long dry spell as the next wave of business doesn’t come until somehow you get the laggards in the mix. It just a very large “chasm”, as the text books describe it.

  Anonymous wrote @

Joel, Great analysis of the relationship of technology, the new social media and how it interacts and is used by those of us in the business. I happen to be an importer, distributor and wino, who is also a total tech geek. I am personally very excited for the future because our business, especially given the opportunities presented by the massive consolidation in the business lately. That is nothing but good news for a small boutique house like us, that is ahead of the pack in selecting great wines based solely on quality and being technologically ahead as well. Kudos for the in depth analysis. You hit the nail on the head. The wine industry is so broad, with so many brands that most wine drinkers do need and usually have BPI’s to look to for advice on what’s new and good. That is to be explored, but…Consumers need to learn to trust their own palates. “Your palate will never lie to you”, is what I always tell consumers. Cheers.

  Anonymous wrote @

Hi

Interesting discussion on Wine and Social Media and BPI. It is also worth asking who the users are or the demography of the social media participants. Depending on the actual wine site or blog, it is morel likely that the social media sites are frequented by the younger tech-savvy generation of users.

While we want to attract more wine drinkers, buyers and commentators, one wonders what the value of their influence is, with respect to their influences on rating, tasting notes, purchases, conversions etc. Would one prefer to value the peer ratings of senior/experieced wine connoisseurs and collectors or the feedback from novice, young and general wine drinkers or enthusiasts?

So the quality of BPI is likely to be of more value than just volume of participants and their comments on a social media wine site.

This begs the question as to whether plain vanilla wine sites are of lesser value than social media sites?


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