Results from Wine Business Monthly's second annual Tasting Room Survey indicate that tasting rooms continue to be the most important profit centers for wineries. As brand competition intensifies, wineries, more than ever, are seeing the importance of attracting and holding onto loyal patrons, and are thus turning a critical eye toward maximizing every opportunity inside their tasting rooms.

 Highlights from this year's survey data reveal that 59 percent of winery tasting rooms are now charging a fee for tastings (8 percent more than last year), and that communication with customers and information collection are primarily being conducted via email newsletters (77 percent) as opposed to print newsletters and postcards (43 percent). In addition, this year's report looks at how much of wineries' total sales are coming from the tasting room; how wineries are utilizing more than one tasting room; and how visitor information is collected.

 Tasting Room Sales

 Tasting room sales continue to make up a significant portion of all winery sales. Forty-three percent of total sales for California, Oregon and Washington wineries come from the tasting room, as do 68 percent of total sales from other states' wineries (see Chart 1). According to winery size, tasting room sales from small wineries contribute the highest percentage to overall winery sales (see Chart 2). Since last year's survey, the percentage of sales occurring through tasting rooms has not increased much, which may suggest that tasting rooms are still in the midst of redefining themselves, with the fruits of this labor to be more clearly seen in the next year or so.

Craig Root, a tasting room consultant in St. Helena, California, said that winery tasting rooms still tend to under-staff and under-pay, which directly affects sales. "Tasting rooms generally staff for the valleys, not the peaks," said Root. "Without adequate staff, tasting rooms cannot extract wine club and public relations value. For example, one day I was visiting a small winery in Russian River Valley, and they had sales of $700 at 2:30, and by the end of the day sales were up to $2,200. And they had also signed up seven people for their wine clubs. There's no way one person could have handled all of this."

Root added that adding another staff person (earning between $12-15 an hour) and staggering shifts can prove to be a smart decision when the waves of visitors hit. Ideally, tasting bar staff should have a maximum amount of face time with visitors and no second row waiting their turn. "If a tasting room doesn't have adequate staff, they're losing more than they're saving," said Root. "Smart wineries have simply realized that hiring enough competent staff equals more sales."

Tasting Room Locations

 Some wineries are now operating more than one tasting room (or a tasting room not on the winery premises) in hopes of reaching out to more consumers. When asked  about the number of tasting rooms and their locations, around 70 percent of all wineries indicated that they operate only one tasting room and that it is located at their winery (68 percent of western wineries and 76 percent of other wineries) (see Chart 3).

In addition, 20 percent of western wineries said that they operate one tasting room, but that it is at a different location than their winery (compared to 6 percent of wineries in non-western states), and 11 percent of western wineries operate multiple tasting rooms, with at least one at the winery (compared to 16 percent of non-western wineries). We may see these numbers increase in the years to come as wineries realize the payoff of bringing their wines to consumers instead of waiting for consumers to find them.

To this point, Stone Hill Wine Company in Missouri operates three tasting rooms (as well as three bonded wineries, as is dictated by state law), with a combined annual case production of under 100,000. The original winery, located in Hermann, was opened in 1965. "Our second location opened in 1982 in New Florence (about 15 miles away) and is near a busy interstate that captures people traveling between St. Louis and Kansas City," said Thomas Held, director of sales and a family owner. "Our third location opened in 1986 in Branson so that we could reach even more consumers and gain greater exposure." Before expansion, the winery determined that 20 to 25 percent of its visitors were coming from Missouri and that 60 to 75 percent were coming from border states. "We tracked zip codes and opened up accordingly," said Held.

Tasting Fees

It is no surprise that more wineries are charging tasting fees this year: overall, 8 percent more this year than in 2006. Slightly more western wineries are charging for tastings this year (59 percent vs. 51 percent in 2006). However, there has been no change with non-western wineries, 52 percent of which charged a tasting fee in the last two years (see Chart 4).

Glenn Dixon, hospitality and tasting room manager for Family Wineries Tasting Room in Sonoma County's Dry Creek Valley, said that deciding to charge for tastings was the best thing they ever did. "Our sales have improved dramatically since we've started," he said. The tasting room, which was founded in 2005, represents six wineries having a combined production of around 25,000, with wines ranging from $16-$40 a bottle.

"We're unique because we're a cooperative," said Dixon. "We have 24 bottles open every day, so it's part of the cost of doing business. Since we offer so many choices, charging also provides a level of seriousness and an impetus to focus people's attention. The few that don't want to pay are small in comparison." The tasting room, which charges $5 for tasting six wines (from a selection of 18) or $10 for tasting six pre-selected exclusive wines, applies all tasting fees to purchases.

Held, of Missouri's Stone Hill Wine Company, however, said they do not charge visitors for tastings. "To get someone to believe your wine is good, you have to get it into their mouth," he said. "We always had the philosophy that once visitors get in the door, they'll taste the wine and will want to buy it. At that point they've paid us."

Maureen Lee, tasting room manager for Maryhill Winery (50,000 cases) in Goldendale, Washington, said they do not charge for their tastings of around eight wines. "I feel that people travel out of their way to visit our winery, and we would rather reward them with a free tasting," she said. "We do, however, charge for our Reserve flight of around six wines."

Most tasting fees range between $3-$5, with 77 percent of western wineries and 47 percent of non-western wineries indicating this range (see Chart 5). In addition, a significant number of non-western wineries (41 percent) said that they charge less than $3. At the other end of the scale, however, 10 percent of western wineries charge more than $10, compared to none of non-western wineries.

 When asked if their tasting fees could be applied to a wine sale, 48 percent of western wineries indicated "yes" while only 24 percent of non-western regional wineries said "yes" (see Chart 6). (Compared to 2006 survey findings, there has been little change here, overall or by region.)

Rex Hill Vineyards of Newberg, Oregon (30,000 cases) charges visitors a tasting fee of $10, half of which is refunded with a wine purchase. Retail sales manager Katie Wilson noted that, compared to other tasting rooms in the area, this rate is fair, as the majority of other fees are non-refundable. "The majority of tasting room visitors are now accustomed to tasting fees and have no problem with the process," she said. "We have found that tasters make the most of their visit and are more engaged in their tasting than they would be if the tasting was complimentary."

Larry Pilmaier, visitors center manager for Woodbridge by Robert Mondavi near Lodi, California (over 1 million cases a year) said that they offer a complimentary tier of wine tastings (Woodbridge wines that are available in stores) and a $5 reserve tier tasting, where visitors get to taste wines from very small lots made exclusively for the wine club and tasting room, which will never be found in stores. "The $5 charge is refundable with purchase, and we have almost no resistance to it since people can taste the widely available wines for free," said Pilmaier. "Most people also think the refundable $5 fee is a great bargain since the wines they taste are very exclusive."

Collecting Customer Information

Tasting rooms are the best places for wineries to collect customer information. While 91 percent of respondents indicate that they collect contact information in the tasting room, 78 percent also collect it when people visit their websites, and 66 percent collect information at winemaker dinners (see Chart 7). Across regions these percentages are fairly even, except in capturing information from websites: 82 percent of western wineries do this compared to only 69 percent of non-western states. Not so long ago, a customer's contact information would have only been collected during a sales transaction, but businesses have transitioned to more cost-effective and engaging ways of collecting information and connecting with their customers.

Eric Groves, senior vice president of sales for Constant Contact, based in Waltham, Massachusetts, helps businesses create strategies for email communication. "Through the combination of a website and email marketing, businesses are now able to engage a wider audience, generate greater sales, and communicate with more targeted messages to their customers, as more customer information is collected at various stages of a customer's lifecycle," said Groves. "Businesses are also able to communicate more frequently and at a lower cost with email, leading to greater overall results."

Of the types of information wineries are most often collecting, email address es are clearly most valuable. Ninety-eight percent of wineries collect email addresses, compared with 79 percent mailing addresses, 67 percent phone numbers and 19 percent birthdates (see Chart 8).

According to Groves, wineries should be collecting three levels of customer information, including: basic information, comprehensive contact information and targeted information. "Basic information includes a customer's email address and name: this information is required to send a personalized email campaign," said Groves. "Comprehensive contact information includes basic information as well as a mailing address if the winery is interested in sending di­rect mail pieces in addition to email. And targeted information includes all of the above as well as the interests of the contact, which helps the winery proactively communicate things to customers based on their interests (i.e., wine tastings, new releases, specials, etc.)."

Some wineries have discovered that offering visitors an incentive to join their mailing list can be good motivation: 24 percent of all wineries surveyed said that they do offer an incentive (see Chart 9), a finding that is consistent across both categories of winery regions. Although a seemingly modest percentage, this relatively new tactic may suggest that wineries are more aggressively pursuing loyal customers and club members. This, a contrast to the traditional mailing list, relegated to a side counter, passively existing and certainly without reward (unless you happen to accidentally walk out with the pen).

Mailing list incentives that were mentioned by respondents include: discounts on wine purchased that day, a giveaway item, pre-release notification, discounts on future purchases and entry into a contest. An incentive such as a discount on future purchases, noted Groves, will help ensure that you are getting good email addresses from customers, and it will encourage repeat business. He also added that if you run a contest, be sure to tie it into the products that you sell, such as having a half a case of wine as a prize rather than, say, a trip to Disney World.

However, Groves makes the point that while using an incentive to get customers to join your mailing list can be a great way to build your list, it isn't always necessary. "One of the best ways to get someone to join your mailing list is to show them examples of the types of information they will receive; this could be a printout of a recent email campaign that you laminate or frame and display near your sign-up list," he said. "If you show customers content they find interesting, they will be more compelled to sign up when they are engaged at your winery."

Wilson of Rex Hill said her winery offers mailing list sign-ups notices of new releases, special events and wine specials, "but we also offer 'insider' and winery information that helps customers feel connected with the winery and brand," she said. "Most folks like having the opportunity to hear about winery news, and that in itself is reason enough to sign up." In addition to collecting mailing addresses, Wilson said that they also collect email addresses from interested guests to cut back on the extra work and costs of printed materials. "The goal is to send monthly email newsletters to keep subscribers current and engaged," she said.

Maryhill Winery has a unique mailing list incentive: their summer concert series, which is held in their huge outdoor amphitheater. "We really don't need an additional incentive," said Maureen Lee, "as most people want to hear from us because they want to keep abreast of our concert schedule." Lee said that they primarily collect emails and that no immediate follow up is done. "We just add it to our recipient list for the next email we send out."

Customer Communication

Winery owners are understanding more the importance of consistently keeping their brand in front of wine club members and mailing list sign-ups. Along these lines, this year's survey asked wineries what type of immediate follow up they do with recent tasting room visitors. Forty-six percent of wineries indicated that they don't do anything, 44 percent give a brochure or more information about the wines/winery, 10 percent send a thank you email, 7 percent send a thank you letter or postcard, and 1 percent make a thank you phone call (see Chart 10).

When interacting with their customers on a more regular basis, email clearly appears to be the preferred mode of communication. Just over three-quarters of wineries report using email newsletters to stay in regular communication with their customers (see Chart 11). This is followed by invitations to winery events (55 percent), and print newsletters or postcards (43 percent). Ten percent of wineries indicated that they don't regularly communicate with customers. Email's ease and cost-effectiveness will undoubtedly make it an even more prominent player in the coming years as marketing departments learn to maximize its usefulness.

Eric Groves noted that email stands out as the preferred medium to communicate with customers for three reasons: economics, understanding your customers and the ability to forward your message. "As for economics, the average cost for a printed direct mail communications piece ranges from $0.30 to $1.00, while the cost of sending an email communication is only a fraction of a penny per communication," he said.

As for understanding your customers, Groves said, "With email you can get additional information about what your customers most want to see. If you use a reputable email marketing service, you will have the ability to see open and click-through rates, and also know which of your contacts unsubscribed," which helps you know what items in your newsletters are of most interest to your readers, according to Groves.

And lastly, with the ability to easily forward messages, he noted, "If you send compelling emails with valuable information, people are more likely to share them with family or friends. This can help grow sales from word of mouth."

As for the frequency of communication, 42 percent of western wineries and 32 percent of non-western wineries responded that they make contact at least once a month; and 40 percent of western wineries and 37 percent of non-western wineries make contact once a quarter (see Chart 12).

Groves noted that it is important to communicate with customers at least once a quarter, and that creating a realistic schedule and sticking to it sets an expectation as to how often your customers can expect to hear from you. "The key is to deliver small amounts of valuable information on a regular basis," he said. "If you are successful with this approach, you will likely strengthen your 'open' and 'click-through' rates and hopefully increase sales, as you'll be keeping your winery's brand in the minds of your customers."

Maryhill Winery communicates with its customers via email only and at a rate of about every three months. "We don't send hard copy mail anymore; we don't feel it's necessary, and it is not worth the cost," said Maureen Lee. "Most people prefer, or are at least satisfied with, emails, which seem to reach the majority of people."

Katie Wilson of Rex Hill Vineyards said they try to communicate via email every month but send out print materials only twice a year. "The print mailers are usually sent out just before the Oregon wine industry's two main holiday weekends: Memorial Day and Thanksgiving."

Woodbridge's Larry Pilmaier said that they send out hard copy information primarily to wine club members. "I think it makes them feel special, which they are," said Pilmaier, who noted that they also send out emails about six to eight times a year to generally remind people about events, harvest, etc.

Club Benefits and Membership Cards

The benefits of joining a wine club are many. When asked what benefits wineries offer to their members, 74 percent indicated that discounts on wine are their most offered benefit, followed by member dinners and exclusive events (63 percent), pre-release notifications and order opportunities (63 percent) (see Chart 13).

Rex Hill Winery offers its club members a 20 percent discount on all wine purchases. "I think the discount is the most powerful motivator," said Wilson. "If someone already likes our wines, then why not sign up to receive them quarterly and get a discount?"

Theresa Dorr, a consultant with Active Club Management, a company that helps maximize wine club efficiency, noted that while discounts, events, etc. are all important parts of the picture, the largest and most successful clubs have been built by providing good customer service. "These wineries welcome and return every phone call, and their team is on-site, meeting their club members during events," said Dorr. "The wineries may provide knowledge to their members with behind-the-scenes updates via newsletters, but they are always working to provide a great experience when the customers come into their tasting rooms."

Membership cards are steadily gaining popularity for their ability to easily identify club members and thus quickly ring up their purchases while visiting the tasting room. About 17 percent of all respondents indicated that they use membership cards (15 percent in western wineries and 22 percent of non-western wineries) (see Chart 14).

"Membership cards are definitely on the rise," said Sue Lyon, a systems consultant with CI Solutions in Walnut Creek, California, which provides personalized ID cards and systems for a variety of industries. "The first time I got a call from a winery about membership cards was three years ago. After that, I started calling on wineries; and while some were interested, they hadn't really thought about it," said Lyons. "Now they have become much more popular." Lyons noted that there has been a large increase in wineries contacting her about the cards. "Seventeen percent of wineries using membership cards sounds pretty accurate, but next year I predict this number will be much higher as wineries become more sophisticated," she said.

Winery membership cards are often a graphic extension of a winery's label, which is great for marketing their wine clubs. Another primary purpose of membership cards--beyond staff recognition and convenience in accessing information and ringing up a sale--is to make members feel that they are an important part of the winery. Membership cards help the winery develop a personal relationship with each member. "Wineries who understand this relationship understand why they need cards," said Lyons.

"I receive more calls each month from wineries inquiring as to the benefits of membership cards," added Dorr. "Customers are competitive, and when they see that someone else has a special card, many times that is enough to get them to ask, 'How do I get a card?' This is also a great lead into inviting them to join your wine club. You can even do multi-level cards, such as bronze, gold and platinum."

Held, of Missouri's Stone Hill Wine Company, provides special cards to those who buy a case of wine. "When visitors buy their first case of wine, we make them a VIP right off the bat and give them a special VIP card, which they like when you tell them they'll get an even bigger discount next time." Stone Hill's multi-tiered discount program for first timers is 10 percent off one case or 15 percent off two cases. Returning VIPs get a slightly higher discount (15 percent off one case or 20 percent off two).

Held also noted that this is the best way for their busy tourist winery to capture the visitor contact information they really need. "Between all three of our winery locations we get over 500,000 visitors each year, and about 50 percent won't be coming back again. So a traditional mailing list could become very big," said Held. "We wanted to qualify a certain, more serious type of wine drinker."

Wilson of Rex Hill Winery said that they do not issue any kind of card with wine club membership because too many cards to keep track of can become more of a nuisance than help. "None of us want to carry another card in our wallets, so we wouldn't expect that of our guests," she said. "These folks are the bread and butter of the winery's direct sales, and we hope to make their membership as convenient at possible." Wilson also said that with their current POS system, the ability to look up member information, buying history and club membership status is made easy.

The only constant appears to be change when it comes to winery tasting rooms. Wineries and their tasting room staff are constantly experimenting with new, more sophisticated ways to attract visitors, stay "in front" of loyal patrons and boost sales. Since each tasting room is unique--due to case production, location, personal philosophies, and whether or not they have other sales channels, for example--it would not be fair to expect them to operate in similar fashions. But developing deeper relationships with customers and aiming for greater sales are universal goals that have been clearly enhanced by email marketing, regular communication, tasting fees, and a wide variety of incentives and benefits. wbm

Cathy Fisher is a freelance writer living in Sonoma.