Not Seeing Bottom Line Impact From Wine Social Media Efforts? Then You’re Using It Incorrectly!

20 thoughts on “Not Seeing Bottom Line Impact From Wine Social Media Efforts? Then You’re Using It Incorrectly!”

1. I had a friend who lost his ear in a tractor accident as a kid. But after two weeks of social media – just two weeks – it grew back.

   Hey, this fundamentalism stuff is fun.

   Here's the deal.. according to this study, nearly 9 out of 10 wineries believe that social media increases wine sales. Therefore you can stop your railings against the anti-SM forces. You've won. 87% of wineries understand the importance of SM to drive revenue. That's it we're done here.

   1. Fair enough. This is pretty much the end of that phase of the discussion for me.

2. Joe,

   Not to be an argumentative jerk…but according to the report, 61% of the wineries responding saw between no increase and 10% increase in sales. But an increase in sales isn't the same as an increase in profitability. If, as the report states, the key winery personnel have to be actively involved in the process, there is a substantial cost to social media. Do you think that a 0-10% increase in sales (but necessarily in profit) outweighs the costs?

   Adam Lee
   Siduri Wines

   1. Hi Adam. The short answer is Yes, I do, particularly when the aspect of interfacing with customers is factored in (that needs to be done anyway).

3. Yeah, social media is no brainer. I tell wineries not having a Twitter or Facebook page is like not having a phone number. It is a communication tool. But as far as a marketing tool, you got to be smart with your strategy. And Adam – you have a FB page right? Have you seen the low engagement numbers lately? You got to pay to play now. I think there is a a hierarchy of wineries marketing needs – first get a get message behind your brand, #2 communicate that visually and non visually #3 Do this consistantly across all mediums.

   1. Thanks, TS. We think it’s a no brainer, but there’s still a contingent in wine that’s being too skeptical at this point. I wish then luck. I mean, most of this stuff is pretty sound evidence in favor of social/digital bringing potential business benefits, and it’s not even confirmation bias type of results. I guess in some ways what I’m saying here is that I give up, I’m done trying to convince that group, which no doubt will eventually constitute a bit of a minority position via attrition.

4. . . . if you don't have #1 & #2, social media isn't going to be a good investment of your time.

5. Talking Sheep — personally I love social media. I combine both my own Facebook page and the winery's Facebook page. I also am involved on Twitter and Instagram. And Jelly and LinkedIn. And I believe it is essential for wineries to be active on numerous social media platforms from a public relations point of view.

   But that wasn't, I don't believe, the point of Joe's blog and of the Sonoma State study. The point, I believe, is in the title, "bottom line impact." I guess I just question whether this study shows that the bottom line impact is worth it. Let me give you an example….from the time I worked for another winery and had to justify expenses to a bookkeeper.

   Here's what the bookkeeper would have said to me, "The study shows that 61% of the wineries (most of which are below 10,000 cases) showed a 0-10% increase in sales. So, taking some middle numbers let's say that means an increase of 500 cases in sales. That's something…no doubt. How much money is made off of that 500 cases? Well, Silicon Valley Bank shows that the average winery right now is making 3.9% profit pre-tax on each case. But, lets be generous and say it is 5% and the average case sold is $300. So, 500 cases sold at $300 a case with a 5% profit bring in $7500 in profit. — How much time, Adam, do you think the owner of this winery will need to spend actively involved in social media to bring in this $7500? Currently the owner takes home about $200,000 a year which is about $100/hour assuming 40 hours a week and 52 hours in a week. So to break even he can spend 75 hours a year on social media. Will that be enough, Adam? Because more than that, and we will be losing money."

   That's the kind of thing you are up against in justifying social media. And all I am saying is that this article and report doesn't seem to provide enough ammunition, IMO, to win that argument with an account.

   Again, I support social media and am active on it. But just think you need to see what people at wineries deal with.

   Adam Lee
   Siduri Wines

   1. The marginal contribution on that incremental revenue is mostly profit. If you assume that most of the impact is on DTC with limited discounting, then maybe 50% of that sale is profit. So now you're looking at $75K in profit just for this year 1. Apply your favorite LTV calcs for the new direct relationships and the value of the initiative grows to, say, $200K.

      So, @TalkingSheep, how much does one need to spend to drive 500 cases of incremental revenue?

      1. Michael,

         You may well be correct….though I think you are being rather optimistic on margins (again see the SVB studies on margins). I've requested a copy of the entire study…simply because I think it is well worth checking out the details (never a fan of summaries of studies).

         I will say that one thing I hope to see is some quantifiable numbers on social media and returns. I am not sure that believing that there is a return on investment and actually having a return on investment is the same thing — especially when the survey is likely completed by the person doing the social media in the first place.

         That being said, PR is high on the list of what wineries say they want to accomplish and I think social media is very good at that.

         Adam Lee
         Siduri Wines

      2. Michael,

         On the margins….just thinking (and drinking)…..50% profit and yet SVB shows a 3.9% profit margin pre taxes (here: http://svbwine.blogspot.com/2012/08/how-much-do-w…. Wouldn't the wineries have to be truly losing a lot of money or selling virtually everything via wholesale to have 50% direct and only 3.9% total?

         Adam Lee
         Siduri Wines

         1. Gotta thinking incrementally. SVB avg winery gross margin is over 50%. Let's say this is dominated by indirect sales. Let's also say that your average channel discount is 40% and direct is just 15%. That means you generate 25% more revenue/bottle @ 50% gross margin = 12% greater profit. Also, let's say that your fixed costs are 10% of your total production costs. So that means 5% more profit. So now your gross margin on that incremental 500 cases is 67%.

            Now I come to you and say "Hey, pay me $100K and I'll use Orkut and Friendster and generate 500 cases of new direct sales." You have a trivial amount of incremental admin expense, but otherwise this doesn't cost you anything more. Let's say the retail bottle price is $35. So $35*12*500*67% = $140,700 marginal contribution minus the $100K you paid me and you're left with $40,700 profit of of $210,000 of incremental revenue.

            You can quibble with percentages, but I think this is directionally correct.

            1. Michael,

               SVB report is not dominated by indirect sales. As Rob writes in his comments, "it is probably skewed to higher performing wineries." And SVB doesn't bank many very large wineries.

               You are, of course, ignoring the part of the report that says, "Those wineries reporting higher wine sales indicated the owner was managing most of the social media efforts." —

               But I can promise you this….assuming it is as simple as you make it seem. If you or anyone believes it is as simple as you write, then please come to me with a plan, I will front the $10k of admin expenses and if you can generate what you say, I will pay you the $100k at the end of the 12 months….and praise you to the high heavens on every site in the land. But if you can't generate those results, I don't pay expect for the $10k admin. Done deal.

               BTW, I've read the whole report now. Some incredibly positive things in there, and some other things that are substantiated and some other things that lead to more questions.

               Adam Lee
               Siduri Wines

            2. Michael,

               BTW, you do know that Orkut is shutting down, right?

               Adam Lee
               Siduri Wines

               1. <sigh> Yes, Orkut and Friendster references were tongue-in-cheek.

                  The math of incremental revenue is as simple as I'm making it out to be. That's the easy part… the hard problem is how you generate those 500 cases of incremental sales. Can you do that with SM Marketing economically? I seriously, seriously doubt it although clearly there are folks here who would believe it's feasible. But intuitively it doesn't make any sense that it works – it's too noisy and expensive to pay to play.

                  But if you stop thinking of it as marketing tool and instead think of it simply as a way to engage your customers like you'd want to be, then that's a winning proposition. Provide them great experiences and they'll find you more customers. As a small winery, you are a potential escape for many millions of people. If Adam Lee pinged me to swing by the winery when I checked in a couple miles away, he has a customer for life and a new evangelist. Adam Lee sends me some 2014 vineyard pics of a single vineyard bottling I bought in 2012, I'm definitely buying the 2014. If Adam Lee has his social media marketing person post a new recipe to his Facebook page, send out a tweet storm for #winewednesday and shoot an unfunny viral video, then I'm moving on.

                  1. Michael,

                     That's what I wrote….many times. From a Public Relations POV I know it works. And there are good examples in the whole report about times it worked as a marketing tool….but also lots of questions about it working that way. — Which is why I don't think you could convince a bookkeeper yet to give it a go, even with your pie in the sky revenues. — So we largely agree.

                     And, btw, I do some of the things you mention….try different things….some work far better than others….but I have fun doing it.

                     Adam Lee
                     Siduri Wines

6. I'd like to see stats/numbers on the small scale wineries in the 1k-5k category. There appears to be a quicker, more nimble engagement in social media with these folks on a more intimate level and story that resonates more with folks. Economy of scale is more of an issue with 1500 case production wineries (me), a huge benefit and much needed for our success, is DTC sales. My cost of goods/production is higher but maybe my cost to interact in SM is less? Surely not in the FB realm of pay to play, where we all pay roughly the same to buy engagement but maybe because I don't have the employee cost of monitoring and contributing to SM???

   1. Ryan, the entry level costs are effectively zero. The issue is always time, which does of course have a cost. There’s no right mix for everyone. I’ve not seen hard data for what you’re describing but I can certainly think of a few anecdotal examples in support of it.

7. In summary you're saying based on the results of this one study, you should act on the results or you're a luddite and deserve to lose your business? Can't tell if you're trolling or trying to be helpful.

   1. Rama, read, oh, I dunno, the last four years of commentary on the subject on this blog and you’ll get a definitive answer to that. This study is simply one of many such tidbits I’ve cited (albeit one of the more timely). At this point, I’m considering the body of evidence substantial enough that the debate, such as it is, is effectively over. You can make up your own mind, but I’ve obviously based on this post run out of patience discussing it, and from here on I’ll just watch brands that don’t accept it eventually fail, I suspect.

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