Sunday, September 28, 2014

Should You Enforce Your Wine Club Contract?

 
On occasion I get suggestions about something on which to blog. I really appreciate the ideas and use them when I can. This past week I got an email from a follower who suggested I post on their experience with a disgruntled wine club member. The review they got in YELP is a good place to start:
"The wine club is a total scam! I only wanted the wines that weren't in stores so I was told I had to join their club. I didn't want to but I got a discount on the wine. Once I got my first shipment which had all the wines I wanted, I just cancelled the club. Then the as*****s charged my credit card without even telling me! I was like, WTF? and was told by some bitchy tasting room person that I signed a contract that said I had to give back the discounts if I didn't take both shipments! Like who reads contracts? And just because I quit their winery, they didn't send me concert tickets they said they would."

ACME Winery


For the second week in a row I'm asked to anonymize the winery. So we officially have a trend keeping the semi-innocent anonymous to protect the wicked. But in this case, there are some things I can tell you about this winery to give you a flavor of their business model and their side of the situation:
  • They are 100% direct to consumer - nothing is sold wholesale
  • They sell less than 7,000 cases
  • Their average wine sells for $60 per bottle up to almost $400 per bottle
  • Half of their wines are completely allocated and in very high demand - selling for double the retail room price on the secondary market.
  • Their wine club contract requires a one-year commitment and if cancelled in the first year, the discounts have to be repaid to the winery. That part reminds me a little but like the old CD clubs.
  • They include concert tickets for new wine club sign ups but in this case the shipment was made and the customer quit before tickets could be sent.
 

Business Would Be Fine Except for the Employees and Customers

 
So how do you handle a consumer like this who games your wine club agreement? My response is to change your system.

Over the years I've talked to numerous wineries who tried to sell a wine in lower demand in exchange for a consumer getting their hands on an allocated or high scoring wine that was in high demand.

To my thinking in brand building, you really want to make wines that are in demand, and build demand for all your SKUs. Getting a consumer to take a wine they don't really want doesn't build demand for that wine. It may even have a negative impact on how your overall brand is perceived.

Think of this analogy: You find a really awesome pair of custom made Italian shoes in your size, but to get them from the manufacturer, you have to buy a second pair of shoes that are ugly and don't fit.

If you are the buyer, you give zero value to the ugly shoes that don't fit. That means for you to feel like you received fair value for the purchase, you had to feel the price you paid for the package of shoes would be fair either with or without the second pair of shoes.

To go a step further, you may feel that the second pair of shoes has negative value because you now have to go find someone who likes the style of the second pair and has the right size foot. That's going to cost time and effort. If you are making those shoes, what you really want to do is identify a consumer who values ugly shoes in that size. ( .... hope that didn't take analogy too far ... )
 

Is the Contract Legal?

 
I can totally relate to this frustrated winery owner. I didn't mention it, but they did in fact send the concert tickets to the consumer too. So they totally lived up to their side of the deal and got hammered in a review for their trouble. Was their contract legal? Could they charge back the customers credit card for the discounts?

A wine club contract can be a legally binding agreement but that's really a red herring. The practical reality is if you are talking about contract rights to a wine consumer, you are well past building your brand and off topic.

I'll probably get kicked out of the Bankers Union for saying this, but I don't think contracts matter that much. You can have a legal right to something, but in the end what really matters is how you do business, no matter what a contract says.
 
If a social media review is unfair, shake it off. You wont please everyone. Some people are just unhappy and carry a chip on their shoulder. But negative truthful reviews are an opportunity to check on how your business is done and improve. Is compensation motivating the right things? In this case, is the tasting room staff messaging the club program effectively so their are no surprises.
 

Responding To YELP Reviews

 
I feel as though the question of what to do with a negative YELP review has been discussed sufficiently in the blogosphere, but the short treatment is: 1) You can respond as a business owner to a negative review. 2) You can't have a review removed unless the post was a violation of YELP's user agreement but good luck with that. 3) You have no right to have your brand removed from YELP. 4) Don't pay a company who says they can remove negative reviews. They can't.
 
If the reviewer seems crazy, ignore it but if the reviewer sounds reasonable respond to it and show you really do care about providing good service. Interestingly though, for some unknown reason most wineries I checked this week don't respond to reviews at all. You can also encourage people to write reviews which will push the negative review from the front page at least.
 
Finally - thanks to the anonymous winery for suggesting the topic. Hopefully they will get some good thoughts from the community.
 
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What are your thoughts about wine club contracts? What advice can you offer this winery regarding their approach? Do you have any similar customer service stories to share and if so, how did you handle it"
 
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25 comments:

  1. That's rough, but we get people who cancel their card and report a fraudulent transaction (when we charge their first shipment), after loading up on allocated wine club only wines. Sometimes they even try to keep the wine, after reversing the charges....AMEX is particularly onerous to deal with in these (thankfully rare) cases...

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    1. Eric - Thanks for logging in and the story. You are right that the credit card company policies are stacked against merchants. All you have to do is complain and the charges get reversed pending an investigation. In the meantime, you add up time and effort to collect a debt - when you were never granting a consumer credit in the first place!

      Have heard that story many times. Thanks Again!

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  2. I don't work the tasting room so I really don't know what I'm talking about (in this and many, many other instances) but being in sales, I feel the need to chime in. I think trying to force someone to be a customer is crazy. Your wine club can be a great way to make small lots worth doing. If you have 1000 members you can bottle an experimental vineyard lot and know you already have 4 barrels already sold. And your club members will be thrilled to get a one off, insider only, item. But this is only going to work if you make fun wines that club members get value from. If a customer only wants highly allocated wines, then a club is not the way to reach them. Maybe have a wait list, and just like a hot ticket restaurant will hold tables back for good customers, your long time or high dollar customers move up the wait list faster than the cherry pickers. And just like the restaurant, you don't have to put a sign out explaining this. Someone who is genuinely vested in your winery will figure it out for themselves.

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    1. Kent - Thanks for the note and comments. We encourage people who don't know what they are talking about to comment here. You are in good company!

      Delete
    2. I do work in a tasting room and have managed several wine clubs. Wine club benefits are not only about the wine. They get complimentary tasting for themselves and their guests, member only lounges or tasting areas, invitations to free or discounted parties. The list goes on. Nobody is forcing anyone to be a customer. They signed up for a wine club and agreed to the terms. There are customers who don't update their credit card and don't want to fulfill their commitment, but yet still want all the perks. I do not feel sorry for this customer. It sounds like they have buyers remorse, but still want the free concert tickets.

      Delete
    3. Anon 4:43 - No reason to feel bad for the consumer on this one. Totally agree there. Just one of those unhappy people in life.

      Delete
  3. Joining in the elbow/third base commenters here, this is an personal growth opportunity for the winery staff and management. (BTW, the numbers suggest that the gross income here is on the order of $6,5 million--nice work if you ca get it.) I agree with the notion that unless you are a brand so highly allocated that you can afford to p*ss off customers cuz there are more where they came from (see PT Barnum), this is a model that seems likely to fail over the long term. Why? Because your reputation has a half-life and unless you are reinforcing a positive relationship with existing customers, you are only one iffy vintage away from begging for forgiveness. The old Golden Rule thing comes into play--and Grouch Marx about club membership.

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    1. Thanks for the comments PG.

      I really can relate to the winery owner. It seems so unfair to have someone not live up to their side of a deal, you try and make things better for them, and you still end up getting a shot in the chops.

      Its important to look through issues that any of us may put into a deal/sale that can be misunderstood and then a decision should be made about the efficacy of that provision. Over the years I've tried to encourage the folks I've trained to remain on the consumers side of the table. Put yourself in their shoes and if the shoes are ugly and the wrong size - find a better path.

      Delete
  4. Rob, et al,

    More questions here than answers here. There seems to be brand messaging confusion in the above winery's marketing strategy. Do 'wine clubs' in fact support the highly allocated, small production focus of a luxury wine brand? Or is this biz model better supported by a mailing/waiting list? Also, the idea of discounts vs net pricing, as mentioned in the consumer's review. Why are discounts on wine needed to build consumer loyalty (and sales)? There seems to be contradictory brand messaging between highly allocated, small production and discounting.

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    1. Excellent observations and questions.

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    2. John - Excellent thoughts. I think that is the other side of selling wine people don't want: Selling wines people do want at a discount muddies the brand too.

      Delete
  5. Rob, I can see both sides; in my opinion (which granted, is not listened to, especially if you ask my wife!), the Yelp commenter was not very fair, so, on that side, I get the winery. On the winery side, I also understand. I have been on each side - the seemingly ripped off consumer and the aggrieved winery.

    I actually had a friend tweet on my wine - he had purchased a case and tweeted about it, liked it - and granted, he was a friend - but then someone else tweeted that "that wine sucks, you must be an idiot for drinking it..." The tweets exchanged and it was revealed that the guy who commented on my wine had it confused with another wine - but, that tweet was out there for the world to see... think that's the nature of our "anti-social media" today...

    But, to answer your question, no, I don't think any such contract is worth the paper it's printed on - and I would never hold a customer to such a contract. I want folks to be pleased with my wine, not locked into a contract!

    Rich (btw: I'm anonymous because I don't sign up for anything! no social media for me - seems too dangerous and insidious to me! and I say that only partly tongue in cheek!)

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    1. Thanks for the comments Anon 10:06.

      Totally agree on the anti-social media comment. In my day their was resignation to being "unable to fight city hall." Today, consumers don't have to fight city hall. They just throw social molotov cocktails to try and get even.

      (BTW .... did you know the molotov cocktail came from the Finns in 1939? ..... another important tidbit from SVBonWine you can use at your next molotov cocktail party.)

      Delete
  6. As a winery owner, this is something we run across from time to time. Our wines sell for up to $75.00 and we sell mostly, but not exclusively, direct to consumer. Our club sign up card does clearly say that the new club member will commit to two shipments. Club members join almost exclusively while they are in our tasting room. If they join in our tasting room, we will waive up to four tasting fees (at $20 per person) and give the club member a 20% discount on their purchases (and smaller discounts to their friends). These are the benefits of club membership. It can run well over $100 in discounts on just this one day. We do this because the new club member has committed to purchase approximately $550 in wine from us in the coming year (and, we hope, for years to come). This is the agreement we have with the consumer. They agree in advance to buy a set amount of wine and we agree to waive tasting fees, give them a 20% discount for purchases, invite them to two free club member events with food and wine, send them exclusive offers, and give them the first opportunity on any other offer we make. It doesn't seem unfair to me that if they consumer rethinks their membership (buyers remorse) that the winery would recover the club benefits they gave to the consumer. We've never tried to enforce the agreement to accept two shipments, but, if we feel we have been taken advantage of, we will recover our discounts.

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    1. Anon 10:37 - Thank you for posting.

      Clearly there is a legal right that can be enforced, but building a brand requires that you separate the potential impact and cost from that one disatisfied curtomer with a social media bullhorn. Sometimes - there is a principle at stake and I get that too. Its not a black and white issue.

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  7. A lot of different topics covered here – all good for conversation. It’s good to see that this is more the exception than the rule (or at least it seems to be from the comments above) and for us, these are taken on a case-by-case basis. Customer knows when they are trying to pull a fast one. Calling them out (politely and professionally, of course) is really key, and it usually works pretty well. The person coming in and signing up to get free tasting(s) and discounts is not one you build a brand on, therefore minimizing the amount of time and effort spent on “policing” them should be minimal. Afterall, those are precious minutes you are taking away from your loyal DTC customers! That said, if you are selling your wine wholesale, who knows how much of your wine they are truly buying? That needs to be considered as well in your conversation.

    As long as wineries attach benefits to wine clubs, this will happen. I’ve seen some places try to build their programs so that benefits don’t kick in until the customer has met the minimum requirements (i.e. two shipments, one year, etc.) which might work for some, but from the consumer side of things, that’s kind of silly.

    To answer the main question – yes, wineries need to enforce the contract (rules) of the wine club, whatever they may be. Not only does the “contract” between the winery and the consumer need to be enforced, but also the “contract” between the winery and the employee (incentives) who signed them up. Having solid, consistent messaging and strong training with the front line staff is key so they act as a filter for the winery and IMO, it’s important to have those folks involved in the SM conversation as well (positive and negative) to make it personal. It’s a social contract, if not a “legal” one. Right is right, and anyone spending hundreds of dollars on wine usually doesn’t like to be the person (like the one in the Yelp review above) who just looks petty.

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    1. Dave C - thanks for logging in and for the very thoughtful post. Love the following comments:
      "The person coming in and signing up to get free tasting(s) and discounts is not one you build a brand on, therefore minimizing the amount of time and effort spent on “policing” them should be minimal."

      ....need to enforce "the contract between the winery and the employee (incentives)"

      "anyone spending hundreds of dollars on wine usually doesn’t like to be the person (like the one in the Yelp review above) who just looks petty."

      Great comments. No doubt we all read these YELP reviews and gloss over the ones that seem out of character either way ... too negative (a person with life issues) or too positive (an employee of friend of the winery)

      Delete
  8. I agree that club "contracts" rarely work. One thing we used to have in our "contract" was the right to ship club selections that weren't picked up for 6 months and charge the customer's card for freight. They got their shipments, and we lost about 100% of those customers, who were upset that we didn't give them a third warning. (Nice email, then a nice postcard.) So we dropped that policy, and now substitute newer vintages if they haven't picked up allocated wine in perhaps 14 months.

    From the consumer side, one of my all-time worst experiences with a winery concerned a club membership. When the recession hit, I had to cancel all my memberships. One winery took my email as a "temporary hold" request. So 6 months after I canceled, I received a 9-bottle shipment. I asked why I got the shipment, and they said I had to take it because I had been getting club benefits the entire time. I told them I don't live in the region and had actually never visited the winery, and therefore had received no benefits, other than the discounts on the three shipments I did take. There ensued some ridiculous bickering back and forth. They wanted me to pay the freight to send the wine back. I said I'd be very happy to, but they needed to send me a call tag. They finally agreed when I threatened to do a chargeback if they didn't credit me and send me the call tag. We got it all sorted out after way too much time on my part. I suggested in the future that they NEVER automatically restart shipments without first getting an obvious approval from the customer. Needless to say, I still have a very negative feeling about that winery.

    - Jon Bjork
    (And I hope this didn't post like 50 times, because I was having lots of trouble posting from Chrome. Internet Explorer seemed to do the job, though.)

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    1. That's a horrible experience, Jon. Being a member of clubs should have an element of convenience to it....and your experience was far from that. Sometimes it's good to check back in, though (especially if you love their wine) to see if things have improved.

      Delete
    2. Thanks, David. The wine was good, but overpriced, then significantly "reduced" to special prices just for the club. The winery has one of the largest clubs I had heard of, so I'll admit I joined just to see why they were so successful. I still like/use the gifts they included with each shipment, packaged ingeneously with custom corrugate. There were a LOT of things they were doing right, but I think I fell into the cracks in such a huge club, and they were probably pretty tired dealing with people's complaints that day.

      Delete
    3. Jon - great story. No question client care has two sides to it in many cases. That too is a training issue. Dispute resolution takes a person with confidence and with that - can enhance your brand while still insisting on fairness.

      Since we're on stories - a quick sidebar - Occasionally in banking, a deal will go bad and we are forced to go into a collection mode. Fortunately it doesn't happen often, but my belief is even in a collection mode, as long as a positive collaborative working relationship is maintained and lawyers can remain on the sidelines, you work with a client and still give and take to get to the best joint outcome. Calmer heads need to prevail. Sometimes that means giving up some of your own contract rights for the bigger picture.

      It's is a rare event when you find yourself calling a debt that someone thanks you for it - but I tell everyone who I've ever trained, that is the sign of an expert lender. No ... it doesn't happen often but my point is that is what we shoot for as professionals. We don't need to be right. We need to be as fair as possible to all parties even in difficult circumstances to build a positive brand.

      Delete
  9. Excerpt from The Wall Street Journal “Marketplace” Section
    (November 26, 2008, Page B6):

    “Marketers Reach Out to Loyal Customers”

    Link: http://online.wsj.com/article/SB122766322705958805.html

    By Emily Steel
    Staff Reporter

    It’s an adage of the business: Persuading a satisfied customer to return is cheaper than attracting a new one. Now, in the struggle to do more with less, that concept is becoming even more important.

    Acquiring a new customer costs about five to seven times as much as maintaining a profitable relationship with an existing customer, says Marc Fleishhacker, managing director at WPP’s Ogilvy Consulting . . .


    From BusinessWeek “Upfront” Section
    (April 17, 2006, Page 14):

    “Gripe Alert: Revenge Of The Irate Shopper”

    Link: http://www.businessweek.com/stories/2006-04-16/talk-show

    By Robert Berner

    Caveat vendor: That disgruntled shopper snarling at the manager isn't the problem. It's the customer who complains about the store to friends. A new study shows that people told about a friend's or relative's bad shopping experience are up to five times as likely to avoid the store in question as the original unhappy customer.

    One reason is that the tales of annoyance tend to be embellished with each telling. By the fifth rendition or so, "the sales clerk who was just unresponsive has become abusive," says Paula Courtney, president of Verde Group, a Toronto retail consultant that conducted the study with the Jay H. Baker Retailing Initiative at the Wharton School.

    The survey of roughly 1,200 U.S. shoppers in the weeks before and after Christmas, 2005, delivers some particularly bad news to the big-box stores. It seems that customers of mass merchandisers like Wal-Mart, Target, and Sears Holding's Kmart share their negative experiences with an average of six people, double to triple the audience sought by customers who've had negative experiences at other retailers. The biggest gripe about the big boxes: difficulty locating merchandise. Store managers at all types of outlets, meanwhile, are left out of the loop because irritated customers are five times more likely to vent to a friend than to a store rep. Says Stephen Hoch, who heads Wharton's retailing initiative: "What retailers don't know can really come back to bite them."

    ReplyDelete
  10. From C F O Magazine
    (January 2009, Page 50ff):

    “Playing Favorites;
    It’s Tempting to Feel Grateful for Every Customer You Have.
    You Should Fight That Feeling.”

    Link: http://www.cfo.com/article.cfm/12835154/c_12838677

    By Josh Hyatt
    Contributing Editor



    From The Wall Street Journal “Business Insights” Special Report
    (June 22, 2009, Page R4):

    “Why a Loyal Customer Isn’t Always a Profitable One”

    Link: http://online.wsj.com/article/SB10001424052970203353904574149041326829628.html

    [See accompanying sidebar exhibit]

    By Tim Keiningham, Lerzan Aksoy, Alexander Buoye and Luke Williams



    From The Wall Street Journal “Marketplace” Section
    (October 16, 2006, Page B3):

    “A Reality Check for the Sales Staff:
    Firms Crack Down on Deals That Generate Revenue
    While Racking Up Losses”

    Link: http://online.wsj.com/news/articles/SB116095765790493401

    [See accompanying exhibit.]

    By Jaclyne Badal
    “[Management] Theory & Practice” Column

    ReplyDelete
  11. I'm a member of the Wall Street Journal Wine Club and have actually been told that my contract with them is legally binding! It's still a great club - good enough that I've blogged about it at http://www.wineclubs.net/reviews/wall-street-journal-wine-club/ but I still thought it was weird that they'd try to keep consumers locked in by telling them they can't break their contract.

    ReplyDelete

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