Blog

Wine Country Proves the Value of Customer Segmentation

By Daniel Kozarich
May 3, 2016

Recently I had the privilege of visiting California’s wine country and spent some time at the wineries tasting and taking in the beauty of the scenery. While visiting several of the local wineries, I started thinking about the go to market (GTM), pricing, and segmentation strategies they employ, knowingly or not.

At first I was thinking they had a captive marketing strategy developed since I was on their property and many of the wines I tasted were for purchase only at their winery or a few select local stores. However, after trying to get the names of the local stores that sold the wine I was interested in, I started to realize they serve three distinct customer segments and have a different GTM for each.

The three segments I derived are:

 Segment  Description
 Local  People that live in and around wine country
 Commuter  People that have a 2 or more hour commute by  car to wine country
 Vacationer  Those that are visiting on vacation and most likely  have to travel by plane

Each of these segments has different needs and allows the winery to price and serve each segment differently.

Let’s look at the Local segment first. This segment is comprised of those that live in or around wine country. They have the common characteristic that wine and tourism are their livelihood and they are — most likely — wine drinkers themselves. Why drive to a winery to purchase their wine when there are local stores that can meet their needs? I derived this segment based on the sales channel and the refusal of those wineries visited to provide actual store names (which leads to the next two segments).

Commuter and Vacationer are similar segments except for the delivery method of the wine. The winery wants each to purchase directly from the winery instead of a local store. This increases the wineries’ sales and margins with the direct purchase from these segments. Wineries will have the wine for sale onsite and also provide a stable packaging method to ensure the wine makes it home. By packaging and having the wine available for sale, the winery meets the Commuter’s needs, as well as increasing the odds of repeat business.

The Vacationer has the disadvantage of most likely having to fly home — and wine does not do well at 30 thousand feet. To serve this customer segment, the winery treats the Vacationer similar to a Commuter, but there are two distinct sales goals; the first is to have the Vacationer purchase wine for delivery back to their home and the second is to have the direct sale so the Vacationer takes a bottle back to their accommodations. They will use the same packaging as the Commuter as well as offer specialized packaging and shipping to the Vacationer’s home. Once purchased, all the Vacationer has to do is provide an address and everything is taken care of and the winery also makes incremental revenue on the shipping and handling.

By segmenting their customers, the winery is able to serve their needs, price accordingly and offer different services to each, thus satisfying their customers’ needs. As a Vacationer, for full disclosure, I had wine delivered home and bought a bottle for my hotel.

Hear more from Daniel at the 27th Annual Professional Pricing Society Spring Pricing Workshops and Conference in Chicago this week. See more here.

  • california , napa valley , pricing , segmentation , wine , wine country

    Daniel Kozarich

    Danny Kozarich has over 10 years experience in management consulting focusing on pricing and customer strategy. Danny’s consulting experience has consisted of working at major corporations, such as HR Block, Defence Logistics Agency, Sysco, and Alstom. Each engagement led to an improvement in their bottom line via enabling some of the following: Brand Pricing Discipline, Cost/Price Curves, Channel Analysis, Customer Value Analysis, and Process Improvement.