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December 3, 2008 at 4:34 am · Filed under Uncategorized and tagged: assumption, blends, business success, Food, garyvaynerchuk, global, government policies, Industry Analysis, influencers, Marketing, Robert Parker, small businesses, social media, Social network, Social network service, tobacco tax, value chain, varietals, vintages, wine, wine brands, wine business, wine companies, wine industry, Wine Spectator, wineries
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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