Why Being Market-Driven Is Good For Business
The most dangerous thing a wine business can do is assume they know what their customers want. Unfortunately, our industry is full of assumptions—which means that many wine producers and others are not selling as much as they could.
Wine has always been what’s known as a “product oriented business”, built on the assumption that if the wine is good enough, the customers will come.
Being product oriented is only one approach to business, however. There are, in fact, four different approaches to business that can be used by any small, medium or large company. These are: Product Orientation, Sales Orientation, Advertising Orientation, and Market Orientation.
You can see the differences in the chart below.
The wine industry has been very good with the first two types of business orientations.
Wine is product focused
The industry at large pays close attention to all aspects of winemaking, including what we make, why we make it that way, whether to invest in barrels, in new plantings, new machinery. Winemakers and wine experts are the heroes of this model, and grape varieties and winemaking styles the sales focus, and we put a great emphasis on the need to educate our wine consumers.
Wine also has a robust sales-oriented side. We like to sell as much as possible to whoever will buy the product. Specialist sales tools have evolved, such as awards, competitions, and titles. Wineries love a wide range in our product mix and a focus on generating revenue.
What has been neglected, on the other hand, is profit. When a winery focuses on revenue as the main number, it can overlook the need for profit—the money left after expenses are calculated. A high revenue does not, sadly, always equal a healthy profit.
Not only that, but the majority of wine businesses don’t conduct consumer research, don’t care about satisfying consumer needs, and don’t want to adapt and change their products. They just want to sell.
The shift to advertising focus
Recently, however, a growing number of wine businesses have become more advertising oriented, thinking that “marketing” is just communications. In these wine businesses, content creation, advertising, and social media are what drive marketing activities; they focus on what the consumers see. While communications are part of the marketing mix, they aren’t effective if they’re not backed by the other fundamentals of marketing strategy: research, segmentation, targeting, and positioning. And to understand these, the winery needs to understand their end customer.
Unfortunately, with all the focus on the product and sales side of the industry, we’ve grown too detached from our consumers. The days are long gone when our customers were our neighbours, who we knew intimately. But many wineries still act as if they were, not recognizing that today’s consumers are people they will never meet, who live different lives, have different needs, and even speak different languages.
We don’t really make them our heroes or care about their needs—and we can see the effects of this in declining demand and consumption in key wine markets.
One way to turn this around is to become more market-oriented. What does it mean to be market-oriented, and does it mean selling out?
The market-oriented approach
John Narver, Professor of Marketing and the Director of the Center for Retail and Business Market Strategy at the University of Washington defines it the best:
“Market Orientation is a business culture committed to create superior value for buyers through three combined behaviors – customer orientation, competitor orientation, and inter-functional coordination.”
In short, not just the marketing department, but all departments within the company should be customer and competitor focused to deliver the best value in the market. For ease of understanding market orientation is also known as being “customer-centric,” or “market-driven,” or “customer-focused.”
Narver has demonstrated through research (1) that market-oriented companies enjoy higher profitability, superior sales growth, better customer retention, and more successful product launches.
A market-oriented wine business would prioritize identifying wine drinkers’ needs or wants above and before all. It would first research and then meet the desires and needs of its customers through its product mix. Customer service, the tasting room, and other wine experiences would be catered solely to meet the client’s needs and interests, not the other way around. And finally, a market-oriented company would study their competitors and the local and global wine markets to have a greater understanding of where they are best positioned.
It is no surprise that the world’s top wine brands are successful brands coming from companies that have long understood that being market-oriented results in success and profitability. These brands have understood their markets and consumers through research and data, and made products to fulfill consumer needs.
Usually, these are also the products that the vast majority of the industry’s product-focused professionals dismiss as insignificant wines. But sales figures of these brands prove them wrong, consumers love them and buy them repeatedly. See the disconnect?
While the most prominent wine companies are market-oriented, the significant majority of the rest of the industry remains product and sales-oriented, struggling to increase their profitability. But here is the trick, you don’t need to be big to be market-oriented. You just need to be customer focused and work around them. Here is how:
Stop making assumptions about who your consumers are and recognize that there is a specific subset of them who will be more likely to buy your wines. Find them and understanding who they are.
The way to find these customers is to spend time looking for and understanding them and their world. Before even thinking about marketing and sales activities, reallocate part of the budget for customer research. Find out who is drinking your wine, where, and why, so you can find more customers like them.
Once you know who your customer really is, build your focus and business around them. Transform all your marketing, communications, and experiences to target them specifically. Talk with them, make them feel like your heroes.
When was the last time you walked out of your office and spoke with your best customers? When was the last time you asked them what they really want? When did you have a glass of wine with them in their environment?
Go on, walk out that door, do some research, and learn more about your customers. Your bottom line will thank you.
(1) Narver, J., & Slater, S. (1990). The Effect of a Market Orientation on Business Profitability. Journal of Marketing, 54(4), 20-35. doi:10.2307/1251757