02/24/2010

The Customer Perspective: Does your Tasting Room Staff Have the Wow Factor?

Posted by Kelly Richards under Customer Service, Human Resources | Tags: , , , , , , , , , , |
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Kelly Richards holding tasting room customer service checklist

What is your staff doing to WOW! customers in the tasting room?

Last week I attended Viticulture 2010 in Rochester, New York.  The event takes place every three years and is geared toward vineyard managers and winery owners.  This year there was a lot of talk about the state of the economy and how wine and grape-related businesses can best position themselves during our current tough times.  A theme that came up during one of the presentations that generated a lot of discussion amongst participants was the level of impact that tasting room staff customer service has on customers’ purchase intentions and the amount they spend in the tasting room.  The speakers,  Dr. Miguel Gomez, Assistant Professor of Applied Economics and Management at Cornell University, and Annemarie Morse, graduate student within Cornell’s Food Science & Technology, Enology Program, talked about the importance of customer satisfaction in the tasting room and how taking a customer from satisfied to highly satisfied can increase that person’s chance of buying by 20% as well as spend $10.00 more on purchases.  The speakers claimed that customer satisfaction in the tasting room should be a priority for winery owners and tasting room managers because of the high price retailers pay for losing existing customers:

  • The cost of attracting a new customer is five times the cost of retaining one
  • The average company loses 10% of customers a year
  • A reduction in customer defection increases profits
  • Customer profitability tends to increase over time

The speakers went further to say that through their preliminary findings they discovered that when winery owners think about making customer satisfaction improvements in the tasting room, focusing efforts in making sure tasting room staff is present, helpful, knowledgeable, and friendly has a bigger impact on increasing sales than anything else.  Wow, I thought that this was a pretty big statement to make considering some of the other areas the speaker talked about were such significant things as signage, lighting, displays, cleanliness, price, quality, ambience, discounts, cost of the tasting, and number of wines.  From my customer perspective, I think all of the above areas are important to my overall experience in a tasting room, and winery owners should pay attention to each of them.  As I sat through the talk though, I couldn’t help but think about a few recent experiences I had where it was clear that management was focusing its efforts on moving its staff from good customer service to exceptional customer service and how this move ultimately affected my perception about each of these companies.

  1. Employees at a local hotel were warm and welcoming when I checked in.  Upon checkout, when I went out to the parking lot I discovered the staff had brushed off all the cars in its parking lot after a big snowstorm.
  2. The company that designed my printer now offers online chatting technical support.  Not only did the company understand and fix my problem right away, its staff is trained to be prompt, greet its customers in a friendly manner, and use words such as how else can I be of service,  I appreciate your patience, and it was a pleasure assisting you today—all while communicating on line!
  3. After giving me great service by bringing me items to try on, an employee at a local clothing store made sure I was comfortable with the high price of an item I was planning on purchasing before she rang me up. 

In all of the above examples, the staff started out with high-quality customer service. As a consumer though, I expect good customer service from all businesses.  What’s great about the hotel, computer company, and clothing store above though was that each company’s staff went above and beyond good customer service and gave me a memorable experience.  They all had a wow factor that made a lasting impression on me. 

When I think about winery tasting rooms, customer service and the interaction between tasting room staff and customers is such an integral part of the selling process from the moment that people walk in the door to the moment tasting staff close the deal and sell wine that it makes sense that level of service is such a big driver in purchase intentions and dollars spent.  As a customer, I then ask what can you do to wow me?  What can you do to take me from a level of being satisfied to the level of highly satisfied?  What fun and creative customer service ideas can you and your staff come up with that will be unique and memorable enough to set you and your winery apart from the other wineries on your wine trail?  I hope you enjoy the fun challenge!

Join the dialogue!  What do you think?  Do you think improving the level of customer service in your tasting room has a bigger impact on customer buying intentions and actual purchases than other changes?  What feedback do you get from your customers?  Please include your thoughts in the Comments section above.  Want to contact me directly?  You can email me, Kelly Richards, at info@wineryprofitability.com.

 

01/20/2010

Key Financial Ratios for Wineries

Posted by Steve Richards under Business and Finance | Tags: , , , , , , , , , , , |
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cubes with percent signs symbolizing winery business analysis

The use of relevant financial ratios helps winery owners accurately evaluate their business performance.

Business analysis helps winery owners and managers evaluate their winery’s financial performance throughout the year. While there is no universal agreement among experts on which ratios to use in a financial analysis, this posting represents the key financial ratios that I think are most useful to winery operations.  I have divided these ratios into categories of retail sales, wholesale sales, cost control, inventory, capacity, financial leverage, and profitability.

Retail Sales

I have already profiled these ratios in my previous blog posting, Tasting Room Profitability:  Sales Data Analysis.  Please check out that previous post to see why number of visitors, number of purchases, average transaction size, and conversion rate are very important retail sales data.

Wholesale Sales

Most wineries use a distributor to fulfill their wholesale sales.  Other than top-line measurements (growth in wholesale sales or growth in case sales), one really has to pay attention to cost of goods sold, the cost of sales, and the gross margin received through the wholesale channel.  Key measures to consider are the following:

  • Wholesale marketing—are you tracking depletions, buybacks, and promotions? 
  • Wholesale cost of sales—if you are not using a distributor, are you tracking delivery costs? 
  • Wholesale gross margin {Wholesale sales – cost of goods sold – cost of sales} 

Cost Control

Almost every vintner worries about the cost of goods (grape costs, packaging costs, barrels, chemicals, yeast, etc.).  The real culprit in cost overruns, however, is labor cost.  Labor costs for a winery operation can run higher than 30% of sales.  The vineyard is even worse since the cost of grapes produced in the vineyard can run as high as 80% of the value of the entire crop!  So when I look at cost control measures, I typically focus on the following points: 

  • Labor as % of sales {total labor/gross sales x 100} 
  • Vineyard labor as % of grape value {vineyard labor/total grape market value x 100} 
  • Winemaking staff costs per case produced {winemaking staff costs/total cases produced}
  • Cost of Grapes from Vineyard (per ton) {total vineyard costs/total tons harvested}
  • Retail staff cost per case sold {total retail staff cost/retail cases sold}
  • Wholesale staff cost per case sold {wholesale staff cost/wholesale cases sold}

Inventory

One of the hardest parts of running a winery is that inventory is a black hole, sucking up almost all the available cash.  The trick is to move the inventory quickly enough to sustain the cash flow of the business.  These measures give us a clue about inventory management:

  • Inventory turnover ratio {Cost of goods sold/average inventory}
  • Average age of inventory {365 days/inventory turnover ratio}
  • Years of sales in inventory {Sales value of inventory/annual sales}

Capacity

Capacity refers to the volume of wine sold and how that relates to overhead costs and capitalization of the winery.  Overhead costs are those costs not directly tied to cost of goods sold (e.g. interest, depreciation, taxes, insurance, repairs, etc.).  These ‘hidden’ costs are what get a small winery in trouble, since these costs are no different at a 1000-case winery as they are at a 7000-case winery.   To make sure a winery’s capacity is in balance with its overhead costs, I keep my eye on these measures:

  • Overhead costs per case sold {overhead costs/total cases sold}
  • Overhead expense ratio {overhead costs/gross sales}
  • Asset turnover ratio {gross sales/total winery assets}

Financial Leverage

Winery businesses are very capital intensive—meaning you have to spend a lot of money in order to get started and established.  No matter what business you are in, I always say that the least money you need to get started, the better.  Financial leverage ratios let managers know how debt commitments impact their operations.

  • Working capital including inventory {current assets – current debt}
  • Working capital excluding inventory {current assets – inventory – current debt}
  • Term debt and capital lease coverage {(net cash income + interest)/loan & lease pmts)}
  • Market value debt to asset ratio {Total Assets (market value)/Total Debt}

Profitability

Honestly, if the above measures are in line, then profitability is the result of good performance in all the other areas.  That being said, the profitability measures that mean the most are simply net profit (in dollars and percent) and net profit per case sold.  The only other tweak is that you should look at the profitability of each enterprise (winery, vineyard, events, etc.) and each distribution channel (retail, wholesale, off site sales, internet sales, etc.).

Financial analysis provides valuable insight into a winery business, but it does have a drawback—the analysis must ultimately be compared to similar businesses in the wine industry.  In this manner, financial performance can be ‘benchmarked’ against a standard of performance.  If you would like to take your financial analysis a step further and participate in the Winery Benchmark™, please visit the Winery Benchmark page for more details.  You may also call me, Steve Richards, anytime at 1-800-929-7102 or email me at info@wineryprofitability.com if you have any questions.

 

01/07/2010

The Customer Perspective: Does your Winery Staff “Own the Problem?”

Posted by Kelly Richards under Customer Service, Human Resources | Tags: , , , , , , , , , , , , |
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Crossing out problems and writing solutions on a blackboard.

A winery staff that "owns the problem" increases customer loyalty and retention.

What is the customer service culture at your winery?  How do you winery staff members feel about solving customer problems?  Do your employees own the problem and seek out solutions from beginning to end?  Or if the problem did not start with them, do they tend to pass the buck?  In this article I’ll relay a recent positive experience I had with an employee of a local business and share what I think from my customer perspective were the positive steps he took to ensure I felt good about his company and would therefore keep coming back.

This past November my sister flew in for a holiday visit.  Knowing she likes arts and crafts, I decided to take her to a museum close by where for a small fee the staff lets visitors make art projects.  Christmas was coming up and she thought her project might make a great gift for my parents.

Our day at the museum was great.  We had a lot of fun using our creative side.  We even took pictures of the experience.  My sister thought, “Wow!  Mom is going to love this.  How unique!”  When we were finished with our projects, a staff member came to retrieve them from us.  The projects first had to be fired in a kiln and then either shipped to customers or customers could pick them up at a later date.  To ensure there were no mix ups, the woman also took our ticket stubs with our names on them and lined them up with the projects.

A few days later I returned to pick up the items.  I told my sister I would ship her project directly to my parents.  Excited to see how they both turned out, I immediately un-wrapped them.  “Hmmm,” I thought.  The gift labeled with my sister’s name didn’t seem like the one she made.  When I went back inside, the woman at the front desk explained that it must be the right gift since it lined up with the right name tag.  “Hmmm, I thought again.  Well, I guess Mom is going to get the gift.  It’s just don’t think it’s going to be the one my sister made.”

After speaking with my sister and confirming the project I had was indeed not hers, I decided to give the museum a call.  I relayed my situation with the person on the phone, and she said someone would get back to me.  At this point I honestly didn’t think I had a chance at all in getting the project back.

But this is where the story changes.  Not too much later an employee from the museum’s shipping department called me back.  He apologized profusely for the situation.  He listened to me give my details of what happened.  He said he wanted to do everything he could to see if he could track down the item.  Again he apologized.  He then said he would look at all of other projects that had not been picked up from that day.  He even said if he had to, he would call the other customers from that day that picked up their items to see if they had the wrong gift.  Next he said he would call me back by the end of the day to give me a status update.

Well, the museum employee did in fact call me back that day.  Luckily, another woman left a voicemail to say she had just received her project in the mail, and it was not hers.  The employee called me and excitedly relayed the voicemail and told me that he would call me again when he had reached her to get a better description of the project.  He then explained that once he got a positive description, he would have a box shipped to me.  I was to wrap up the project I had, and he would call UPS to have the box shipped back to him. 

A day later the man called me to say that the project the woman had was indeed my sister’s.  He then took my parents’ address and shipped the project directly to them.  Amazingly my parents got my sister’s gift in time for Christmas!

So what did the employee from the museum do that made me feel so good about him and his company?  Below is a list I put together:

1 – The employee owned the problem

What I found refreshing about this employee was that it didn’t matter who was responsible for the mix up.  He didn’t go into how it happened or name other staff people’s names.  He was just going to own the problem himself and come up with a solution.

2 – The employee sincerely apologized for the mistake

Again, it didn’t matter whose fault it was.  The employee apologized on behalf of the museum.

3 – The employee actively listened to me

The man let me explain my situation without interrupting me.

4 – The employee did what he said he was going to do

He said he was going to call me back by the end of the day, and he in fact did just that.

5 – The employee saw the problem through from start to finish

The man didn’t just discover what was wrong and then pass parts of the solution off to others.  He stuck with the problem himself to ensure I would end the experience with a positive feeling about his company.

6 – The employee had a good plan in place for fixing my problem

He really took charge and explained step by step what he and I should do to get the project to my parents.  His confidence really showed which made me feel like he and the museum were very professional.

What about your winery employees?  Would the members of your staff have acted the same in a similar situation?  Do you have clear policies and procedures set up to handle common problems?  Please share your thoughts in the Comments section above.  Want to contact me directly?  Please email me, Kelly Richards, at info@wineryprofitability.com.

 

12/09/2009

How Tier Pricing Helps Wine Sales

Posted by Steve Richards under Business and Finance, Sales and Marketing | Tags: , , , , , , , , , , , , |
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Tiered Wine Pricing

Tiered wine pricing increases sales by helping winery customers decide what to purchase

Back in my 2009 Wine Economic Outlook: 3rd Quarter Update, I argued that the buying-down phenomenon was due in part to the way we typically market wine—in tiers.  And, although this has caused some havoc with high-end wine sales in the last year, pricing wine in tiers is a good thing.  Pricing tiers establish a product class and enhance consumer expectations.  And, while the recession shuffled the price points for wine purchases (according to the most recent Nielsen Company statistics), it did not change basic consumer buying behavior.  In this post, I’ll illustrate how tier pricing is a necessary ingredient for a successful wine marketing strategy.      

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12/01/2009

The Customer Perspective: Are your Wine Product Displays Reaching your Customers?

Posted by Kelly Richards under Sales and Marketing | Tags: , , , , , , , , , , |
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Free-standing display tables help bring products to customers

Are your wine and wine gift displays reaching your customers?  I’ve written about merchandise displays in past posts, but this time I mean it in the literal sense.  Are your displays near where your customers stand?  Or do your customers have to walk to your displays?  In this article I’ll talk about how the placement of free-standing display tables positioned throughout a winery can help encourage customer spending.

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11/12/2009

Take a Management Time Out

Posted by Steve Richards under Business and Finance, General, Human Resources | Tags: , , , , , , , |
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Taking a Time OutI have to say that winery owners and managers are some of the hardest workers I know.  Working hard is important, but it can be overwhelming–leaving winery owners and managers little time to ponder how effective they are working.  As hard as it is, managers need to take a daily time out to ask themselves how they can work more effectively and delegate more tasks.  In this post, I’ll show how successful winery owners and managers use their time outs to break some vicious cycles.

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11/12/2009

The Customer Perspective: Is your Winery a Place for Holiday Shopping?

Posted by Kelly Richards under Sales and Marketing
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Holiday Decorations

Are your display decorations helping your customers get in the holiday spirit?

It’s that time of year again—the winter holiday season.  Once again my favorite stores have jump started me into thinking about what to buy my friends and family.  It’s amazing how as a consumer my brain shifts gears once I see the sparkles and shimmers of wintery merchandise displays.  As I navigate through aisles of red and green, I can’t help but wonder what wineries can do to take advantage of the holiday season and what for many retailers is the biggest shopping time of the year.  In this article, I’ll talk about what some of the big market research companies are saying about this year’s  holiday season.  I’ll also include a list I pulled together from my customer perspective of what I think are some simple ways winery owners and managers can use this information in their tasting rooms.

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10/09/2009

2009 Wine Economic Outlook: 3rd Quarter Update

Posted by Steve Richards under Business and Finance | Tags: , , , , , , , , , , |
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Isolated Road Sign: Changes

I recently attended an excellent conference held by a number of combined Farm Credit Associations.  At the conference, I listened to some great economists who tried their best to prognosticate the future.  I took home three messages:  1. the recession is over; 2. the government stimulus package is helping to mitigate the effects of the recession; 3. growth in the future is going to be positive, but slower than it was prior to the recession.  I thought I’d pass on some of the details of these findings and then give my best shot at predicting future wine sales trends.

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09/24/2009

The Customer Perspective: Can Halloween Brew Up Wine Sales?

Posted by Kelly Richards under Sales and Marketing | Tags: , , , , , , , , , , , , |
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iStock_000007281800XSmall[1]Halloween.  It’s not just for kids anymore.  Lately more and more adults are getting in on the fun.  Maybe it’s because Halloween offers adults a sense of escape and excitement.  But what does Halloween have to do with wineries and selling wine?  Just like other top-selling holidays, Halloween offers winery owners and tasting room managers the chance to increase customer spending.  In this post I’ll talk about how from my customer perspective, I think  incorporating Halloween into wine displays could increase wine sales.iStock_000010598174XSmall[1] (more…)

 

09/02/2009

Tasting Room Profitability: Sales Data Analysis

Posted by Steve Richards under Business and Finance, Customer Service, Sales and Marketing | Tags: , , , , , , , , , , , , , , , , |
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iStock_000000481727XSmall[1]The first step in enhancing your tasting room sales is to identify the areas that you can improve.  Winery tasting rooms are different than traditional retail stores in the respect that the customer gets to sample the product before purchasing.  Not only does this step add complexity to the transaction, but it also gives additional insight into the customer’s buying behavior.  In this post, I’ll review the data that your retail staff should be collecting on a daily basis, how to interpret that data, and give some tips on how to diagnose possible problems. (more…)

 

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