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Case Study: How an Online Retailer Grew Revenue 161% Year over Year

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Company: Sideways Wine Club
Contact: Dave Chambers, Founder and wine merchant
Location: San Francisco, California
Industry: Internet, B2C
Annual revenue: Confidential
Number of employees: 7

Quick Read:

The Sideways Wine Club, launched in April 2005, improved sales 161% year over year through July 2006, despite the fact that most online wine marketers experience an average visitor-to-buyer conversion rate of about 0.0085, or 0.85%, much lower than most other online retailers' conversion rates. The company's founder, Dave Chambers, knew he could improve sales even more dramatically, if he could improve those miserable conversion rates.

First he tried banner ads and keyword buys, to dismal results. Then, he launched...

  • A personality-filled blog
  • Shorter, "punchier" emails
  • A corporate gift-giving campaign

Now, little more than six months later, conversion rates on the site are at 0.011, or 1.1%.


Challenge:

Thanks to the huge success of the movie Sideways, the Sideways brand had excellent name recognition. But Chambers faced several tough challenges:

  1. The cost of the Sideways license was high, and new subscribers weren't coming in fast enough to offset it.

  2. Wine drinkers like to purchase from a variety of producers. They might purchase a dozen bottles of wine online each year but from a single club only once or twice.

  3. Wine is a "sensual" purchase—people typically want to taste and experience a wine before buying it.

Campaign:

Chambers determined that it all came down to trust. People wouldn't purchase a wine they couldn't taste unless they trusted the merchant. Chambers knew that if consumers could come to "know" him, they would trust him and buy his wine. So he set about creating an engaging, trustworthy voice and a personality suitable to the brand.

Email

Step #1: Produce shorter, tighter content

Chambers's original emails were promotional in tone and rather lengthy. Surmising these factors were behind the falling response rates, he shortened the content and reduced the graphics to a simple template.

Step #2: Generate a sense of fun and community

Chambers wanted to invite people to participate in something, rather than simply to purchase a wine. So he used email to promote contests and wine "toasts," and invited recipients to contribute fun commentary to the site.

Step #3: Focus on practicality and usefulness

When Chambers's emails contain information that is particularly practical and useful, he sees increased open rates and substantial forwarding rates. For example, when liquid was restricted on flights, he explained how to travel with wine.

Blog

Chambers wanted the blog to recreate the sensual experience of tasting wine. Toward that end, his blog emphasizes the following:

  1. The personal side of being a "wine merchant"

    "There are way too many opinions about wine," Chambers explains. Instead, he writes about why he loves wine and what it's like to be a wine merchant.

  2. Current wine and wine-related news

    In one post about a study concerning overweight mice and the red wine extract Resveratrol, Chambers points out that someone is working on a Resveratrol pill. "A pill?" he writes. "What fun is that?"

  3. Cross-links to other blogs the Sideways audience might like

    When Chambers likes a blog and thinks his readers might, too, he adds its links to his site. Then he emails the blogger in question, tells the blogger he's linked to his or her blog, and says, "If you like what I'm saying, you can link to mine."

  4. Longer, less frequent posts

    Unlike most bloggers, who tend to post shorter articles (100-200 words) several times a week, Chambers writes longer, more substantial posts (500-600 words) just once per week.

Corporate gifts

Although it is difficult to get a company to offer wine as a gift, Chambers knew that if he could pull it off, it would be a great way to initiate word of mouth. So he put together different options at different price points that allowed companies to offer some gifts with wine and some gifts without.

For instance, a company participating in the Sideways corporate program might receive a branded landing page displaying three gift packages, two including wine and the third not. Gift recipients could then click through to choose the gift that suited their preferences.

Results:

As a result of these marketing efforts, Chambers has seen year-over-year revenues climb 161%, and conversion rates have increased to 1.1%.

Chambers attributes the growth to the fact that the brand is more clearly expressed through current Web content and emails.

Interestingly, membership to the wine club has remained steady despite his not engaging in customer-acquisition marketing. This suggests that grassroots efforts have been successful in bringing in new members to offset membership decay. Better yet, it shows that Chambers has been successful in building loyalty about current members and encouraging them to purchase more.

Details:
 
Email

Chambers's email campaign open rates are no longer declining; in fact, often they are as high as 30%.

Clickthrough rates tend to be in the mid-twenties (percentage of opens).

The percentage of people who read an email as a result of its being forwarded is amazingly high, as much as 60% and occasionally as much as 80%!

The focus on community building is paying off, says Chambers. Readers are "much more engaged with me and my business," he says. An email from him is "not just another offer from Wine.com."

Blog

While it is difficult to track whether blog readers are buyers, Chambers points out that sales have gone up while membership has stayed steady (without acquisition marketing).

Google page rank has increased from a 3/10 to a 6/10, and his Google rankings on organic search have steadily increased since he began blogging.

When he writes about an intriguing bit of recent news, such as the study concerning fat mice and a red wine extract, he sees a tenfold increase in blog visits.

Lessons learned:

One unsuccessful tactic that Chambers tried was banner advertising on sites such as Evite. The Evite ad was served to site visitors who identified themselves as planning a dinner. He tested offers and incentives. "The cost per acquisition was $225," says Chambers. "It was a great idea, but it did not work."

Then he tried "hundreds and hundreds if not thousands" of Google AdWords keyphrases, with 30-50 different creative treatments and custom landing pages that included special offers. Conversions were in the hundredths of a percentile.

He even brought an agency onboard to try making cost-per-click acquisitions a success, to no avail.

The bottom line is that Chambers knows that nothing can ever completely take the place of tasting and experiencing wine. So in addition to creating a "personality" and building a community online, he is opening a real-world wine bar, which he expects will continue to drive the success of the Sideways Wine Club.

Related links:

Note: The number of Sideways Wine Club employees consists of 2 full-time and 4-6 hourly workers; the business also counts on 5-6 "valuable service partners."


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