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Are You Pulling the Wool Over Your Customers’ Eyes?

November 13, 2009

Here in wine country everyone has been atwitter (literally) about the recently filed lawsuit against BevMo, the liquor retailer here in the west, for fraudulent business practices in advertising its “5-cent sale” (buy one bottle, get a 2nd one for 5 cents). The suit’s plaintiff alleges that the first wine bottle’s price is jacked up above “regular” price to make up for the “loss” on selling the second bottle for only a nickel. In fact, the plaintiff says the price of the two bottles during the sale is more than the same two bottles’ price during non-sale periods. You can read more about the specifics here at Wine Business Monthly.

The thing is: does any consumer really believe it’s viable, from a business standpoint, to be able to sell a bottle of wine for a nickel? I think not. Can they really pull the wool over the consumers’ eyes? Probably not. If you’re into a gimmick, go out and buy a big supply from BevMo. If you are repulsed by this street-mountebank sales tactic, steer clear of the store. But it does beg the question: What types of sales are legit? What incentives will your client base respond to? AND Is that specific offer legal?

Are you offering a percentage off the “regular” price? Do you offer 2-for-1 deals to move more inventory? What about “buy 3, get 1 free”? Do you have to jack up your “regular” price to make up for giving away one for free? That’s generally not considered kosher. And let’s not forget that it’s advisable to consult your CPA, and perhaps other experts, before announcing a too-good-to-be-true deal for your customers.

Why is this important in marketing? Because developing a sales and marketing strategy for special incentives goes to brand integrity. Is your offering undermining it? Or complementing it? Are your special offerings desired by your client base? You don’t want to treat your customers as if they’re stupid by either a) offering them a meager bone discount that isn’t worth biting at because it’s so little, or b) offering them something they don’t really want, as if just because you made the gesture of putting something on sale, it’s should be considered reaching out to the customer base. (Just because you shove a plate of bread and water into a jail cell doesn’t mean you’re looking after the inmate’s good health and well-being. I know that’s a harsh analogy, but I was just trying to illustrate the point.) Are you truly trying to move inventory more aggressively or are you merely giving lip service to your customers? And most importantly, how will your customers perceive your action? Your sale offering? That’s the most important consideration to make.

Be sure your special sales enhance your brand and respect the customer. You can offer everything from high-demand products (with only a few units available at sale price) to inventory blowout items. By classifying the type of sale offering (i.e. “clearance”), customers will know that the original version of a product was priced much higher and that you’re only trying to empty the floor of this “discontinued” product.

What special sales strategies have worked for you?

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2 Comments leave one →
  1. Dennis Mitchell permalink
    January 13, 2010 2:18 am

    The notion of a five-cent sale would indicate to sensible consumers that the wines are being offered for, essentially, twice their “normal” price to be able to sell two-fer…

    I was bemused to see an old time Napa vintner discount its lower-tiered Cabernet for a 6 week period ($560/case “down” to $480 on 5 boxes). At the end of the sale period, the wine would be sold to Costco ($52-$53 retail there).
    The winery, Silver Oak, essentially turned its back on the close-to-40-years of brand building and relationship-building to make a quick sale.

    Now it will probably find you can’t put the toothpaste back in the tube…this bottling of Cabernet can be found on the internet for $49.95…and their $100 Napa bottling, not discounted at the wholesale level, is seen for $79.99.

    This isn’t pulling the wool over anyone’s eyes…it’s shooting one’s-self in the foot (or both feet)…

    Gregich Hills sent out a nice letter sympathizing with wholesale customers in a “down” economy. They graciously offered to discount their pricey offerings by 10%. The ‘catch’ was wholesale accounts needed to buy ten cases! For many accounts, of course, the notion of laying in three months’ supply and having to pay the bill in 30 days is simply unworkable. Once again, though, this winery also sold wine to Costco and consumers can buy a bottle of their $480/case Cabernet for $40.99 per bottle. Brilliant.

  2. January 13, 2010 4:35 am

    Dennis –

    One can only surmise that Silver Oak’s move to offer deep discounts for a limited period and then turn over the wine to CostCo (quite unusual for a venerable old premium producer) was motivated by a severe overage in inventory — decidedly not the norm for this winery (but currently the norm for the industry).

    Indeed it is very hard to put the toothpaste back in the tube, as you put it. Only time will tell what damage this action may have wrought to their brand — an issue facing many premium wine producers today. It may be shooting oneself in the foot, but I think some companies may view this type of strategy as a necessary amputation to save the body altogether. (But will they grow/replace the amputated limb that was removed during this emergency???)

    I saw the Grgich sale materials as well. Sure, it’s a gimmick and there’s a catch if you bite. But if you’re cash-poor and inventory-high, decisions must be made. These days in the wine industry it seems to be a matter of choosing the lesser of many evils: Which sales strategy will have the least negative impact to the brand and the best positive impact to the balance sheet?

    Silver Oak and Grgich have been long-established and will weather the storm in the long-run, unlike many of the newcomers to the game. I’m willing to bet their brands can withstand the temporary bashing and will come out just fine in the long-run. Of course, I don’t have a crystal ball, so it will be interesting to see how it all plays out over time….

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