3 Principles of a Successful Allocation Program
Many of your are in the middle of preparation for the release of your wines this Fall. For those of you who intend to send out a release/offer letter to your mailing lists at the end of summer, you will be happy to know that we are releasing our new “Allocation Wizard” for allocating product to your mailing list at the end of this month (end of shameless plug). In order to add value to your business between now and then, I wanted to revisit the ‘3 principles of a Successful Allocation Program’ which were included in a blog I posted last year around this time. By following these simple guidelines, you will set yourself up for a successful release of your wines this coming offering season and for years to come.
In analyzing the business practices of some of the more successful “Mailing List” wineries, I have come to understand 3 basic principles that make for a successful DIRECT sales strategy. The first two principles below are commonly used across wineries of all shapes and sizes; the third, I have found, is common only to a select few in our industry. These principles rely on the assumption that wine quality is NOT the primary point of differentiation (if you intend to adopt this approach to sell your product, you better be on par with the upper tier wine brands in your varietal category, appellation, etc.) The three basic principles are:
- Exclusivity & Limited Availability
- Relationship with your Customer
- Conditioning of Purchase Behavior
The first principle above, Exclusivity & Limited Availability is obviously a combination of two important, but inter-related concepts. A ‘Mailing List’ customer is primarily interested in being part of a small sub-set of wine consumers that have ACCESS to your wine, which is in short supply and therefore limited to a “small” group of people (every winery has their own definition of a “small” mailing list).
The second principle, Customer Relationship, is key to ANY strategy for delivering your product DIRECT to consumer. The most successful wineries carry on a relationship with their mailing list customers throughout the year. Often times, rewarding your mailing list customers with private events or special gift packs/bottle formats in a supplemental offering can be the best way to cement share-of-mind for your wine brand. If you only reach out to your customers once a year to announce the release of your wine, then you better have one hell of a value proposition in the bottle, because more often than not they will become tired and move on to the next new thing. At the very least, a simply email/letter saying hello will remind your customer why they belong to your mailing list community.
The third principle applies to how you position your offering and more importantly, how you establish the “rules of engagement”. Many wineries will have the same questions when starting out: How much wine should I allocate to each person on my list? When is it appropriate to drop them off of my mailing list? These questions need to be addressed in your DIRECT strategy and specifically how you intend to condition the purchase behavior of your customers. While there are various approaches to this principle, the most important element to this strategy is to allocate accordingly so that you retain the “Limited Availability” of your wine. Specifically, a ‘Waiting List’ is as important as a ‘Mailing List’. Simply put, healthy demand is generated by creating the perception that your wine is just out of reach. Another key component to this strategy is to establish a reward (and penalty) program for customers who purchase (or don’t purchase) your wine. Again, while there are several ways to tackle this, I recommend rewarding customers who continue to purchase their FULL allocation each year, by graduating them to a higher tier/customer segment in your ‘Mailing List. The top tiers, of course, we receive access to exclusive, small production wines and a larger allocation. This process will inherently establish the rules of engagement, without having to specifically communicate this concept to them.
Most importantly, for those customers who do not stay active and continue to purchase your wine each release/year, it is VERY important to communicate the behavior that will allow them to stay off of the ‘Waiting List’. Wineries do this in many ways, but at a minimum, you should expect your active customers to purchase wine at least once a year. Of course, it is up to you to decide if customers who simply satisfy the requirements to stay on the list by purchasing one bottle per year will warrant the same allocation each year.
I personally signed up for many, many mailing lists (and waiting lists) this past year and will choose which value proposition is the most appealing (no surprise - 90% of the mailing lists are Pinot Noir producers). I personally have loyalties to certain wineries that are particularly good at maintaining good relations. After all, there is no substitute for good, old-fashioned customer service.