Sunday, March 16, 2014

What Percent of Tasting Room Visitors Buy Nothing?

Ridding the World of Melon Squeezers
One dark and stormy night (yes I used that one) ...early in my banking career in Mendocino County, I attended an internal banking event where Jim Miscol; one of our senior executives would speak. He told us what a great a job we were all doing then asked us to help change the culture of the Bank. He said we needed to "get rid of melon squeezers." What in the heck was he talking about? I had no idea where he was going but my mind started racing to possibilities.

He went on to explain his comment by talking about a grocery store he banked in a retirement community. The store was carrying too large a waste/spoilage factor in the produce section. As it turned out, the store had evolved into a social gathering place for seniors who would walk the isles with an RC Cola, freely sampling grapes and nuts like it was a smorgasbord, and squeezing melons and peaches while talking to friends. It was the analog prequel to The store owner was at a loss how to address the problem without chasing away his customers. How would you handle that situation?

At Silicon Valley Bank, we have been doing research and writing reports on the wine business for years now. We released the Annual State of the Industry Report in January, and just this past week closed off the Tasting Room Survey which we run in conjunction with Wine Business Monthly. WBM will release the findings in their annual Tasting Room edition coming out in May and if you are one of the lucky 860 wineries who completed the survey, expect the complete results of the SVB-WBM survey in your in-box within the next two weeks.

We are still sorting through the analysis of the survey as I'm writing this, but the Melon Squeezer Slide was one I noticed right away. The slide is sorted by region and describes the percentage of tasting room visitors who visit your tasting room and don't ever buy anything. When you look at the slide you will see that on average, 35% of people who enter your tasting room are just eating nuts, squeezing melons and enjoying the great experience you've created along with their friends, but they are not purchasing anything. Melon squeezers are a drag on earnings but like that grocery store owner, what are you going to do about it? You can take a negative approach and put up signs that discourage melon squeezers. Some retailers out there have a minimum purchase sign posted. You could do that. 

Many wineries mentally process a tasting fee as an incentive when its applied back to a purchase. That makes a little sense because you can at least say you got a tasting fee, but I can assure you without even doing the math that the true cost of building a public tasting room, complying with county regulations, building codes (bathrooms, ADA, etc.), TTB regulations, and staffing, in no way are those costs covered by the tasting fee. And if that fee is satisfying, you haven't heard me preach about "the second sale."

Some wineries think about tasting fees as a disincentive. By charging a large tasting fee, they think that will discourage Uncle Ned from bringing his VW van filled with revelers. It probably does work to some extent. As side bar, while I don't have the stats to prove it I suspect if you charge the least for a tasting in your wine neighborhood, your melon squeezer quotient is probably higher than your neighbor. But while a higher tasting fee might make some sense, does it make sense to discourage potential customers? That's the conundrum the grocery store owner had. My answer would be yes it does make sense, because what you really want to do is have the right people enter your tasting room in the first place, but how do you do that?

I believe this is where many in the wine business need their own change in culture. Many think of a tasting room just as the Native American's in Alaska think of fishing weirs. They build a fish trap on a river with a good population of migrating salmon swimming by, then try and funnel the fish into the trap. It works pretty well but they don't just get salmon. They pick up carp and other junk fish. If you put the "Library Tasting Today" sign out on the road with balloons on  it to attract some of the migrating wine tourists, you are going to snare more carp than if you had no sandwich board at all. Why is that? Because a higher component of people will be coming to your tasting room already looking for your brand. They either had your wine or read something somewhere and don't need a "reserve tasting today" sign to get them to turn up the driveway.

Rather than taking the passive approach of waiting for the fish to drive by and stop at your winery, you should be defining the profile of your ideal client then developing a marketing approach to attract that profiled customer to your tasting room, long before they are in their car.

In many respects, those with a by-appointment approach are already ahead of the game because they have to target shoot and pre-qualify potential customers. They have to work harder at getting people attracted to their place of business or they fail. That's not to suggest that an open-to-the-public tasting room is any less desirable an approach, but today, as you will see in the soon released SVB-WBM Tasting Room Survey - its the by-appointment wineries who are demonstrating superior metrics.

Rather than the type of location or style of tasting room experience, I believe it's the strategy employed to attract people to the winery before hand that makes the difference. The strategy can include a "drive by" component but only if you have a process in place in which you direct melon squeezers to one area and the high potential customers to another. You can't allow melon squeezers to distract your tasting room staff from the experience of a high-potential client, even if Uncle Ned is an engaging and entertaining fellow.

What do you think? How do you lower the melon squeezer quotient in your tasting room? What strategies do you employ to get the right potential customers to your place of business before they get in the car?

Please log in and offer your thoughts

If you think this is valuable information, please pass it along through your favorite social media app.