Web 2.0: Turning Browsers into Buyers
To plan the dinners, Stormhoek employees did absolutely nothing except blog about the parties and ship one case each to 100 hosts across the U.S. and Great Britain. Jason Korman, CEO of Stormhoek's parent company, London-based Orbital Wines, wrote dozens of blog entries about the events, one of which proffered the idea of a Stormhoek dinner for non-drinkers without the wine:
"To those people, why can we not ask the question: How can Stormhoek fit into your life? For them, where Stormhoek fits in may be an interest in Web 2.0, marketing, packaging, open source, the technical aspects of growing grapes or South Africa ... from our perspective, it's all good."
Volunteer hosts, including well-known bloggers, wine enthusiasts and those who just wanted to throw a party, organized the dinners by contributing contact and location information to a wiki, a form of open-source collaboration software. They (and guests) posted more than 150 photos of the events on Flickr.com, a photo-sharing Web site. In all, about 4,500 people attended the dinners, including popular bloggers like former Microsoft employee and outspoken technology critic Robert Scoble; John Edwards' presidential campaign manager, Joe Trippi; and high-profile Internet marketing consultant B.L. Ochman.
While Stormhoek (pronounced STORM-hook) is small it expects to sell $10 million in wine this year its innovative and integrated use of blogs, wikis, Web video and digital photos offers companies of all sizes lessons in how they can use social networking technologies and some of the Internet's more popular sites to turn browsers into buyers.
Stormhoek's sales have tripled since 2005, a gain Korman attributes entirely to a marketing push that exploits so-called Web 2.0 technologies. Web 2.0 is a catch-all phrase for a constellation of Web applications and links between and within applications that allow users to generate and interact with content, rather than just consume it. People tend to think of Web 2.0 in terms of open collaboration software, like wikis, or social networking software that lets users communicate with each other and tap into others' personal or professional contacts.
But the Web 2.0 lexicon also includes Web content feeds (enabled by RSS and eXtensible Markup Language formats) used to push updated content, such as blog posts, news feeds and podcasts, to subscribers' in-boxes. Content tagging, which also falls under the Web 2.0 rubric, is the assigning of detailed labels to information on a Web site or blog. For example, a recent post about Sun Microsystems' strategy on James Governer's Monkchips blog, which offers analysis of the software industry, includes hyperlinks to other posts on "Sun," "2.0," "Java" and "dynamic languages." Search engines scan for tags, which means that the results of a search on one of these topics are more likely to include a link to the blog post than if the topics were listed as static text.
Even though CIOs know they need to embrace this next techno-wave for both internal and external use, many executives regard Web 2.0 technologies as a nuisance, says Young, who likens their emergence to instant messaging several years ago. "CIOs didn't want to deal with IM, but it was squeaking in anyway," he says. Employees in some companies are starting their own Web 2.0 efforts, he says, which means that CIOs are being forced to investigate and purchase platforms for the technology.
Even by starting small with a wiki or RSS feed, Young points out, the adoption represents a major change for most organizations. Take customer management: Many large organizations use highly structured and pre-defined customer relationship management applications to keep track of clients. Using wiki technology for CRM, where the software structure is emergent and based on the ongoing needs of users, often requires flexibility and a shift in organizational thinking.
But implementing a technology and using it to enhance the bottom line are two different things. Companies like General Motors, Burpee Seeds and Stonyfield Farms have been communicating with customers via blogs for at least two years. Burpee, which sells flower and vegetable seeds and provides gardening advice and customer testimonials on its blog, has drawn a correlation between sales and the blog effort; in this case, it was a small incremental boost, according to Don Zeidler, Burpee's director of direct marketing.2.0">
Gearing Up For Web 2.0
CIOs have Web 2.0 platforms on their radar, according to a March research report from Forrester, which found that 90% of CIOs surveyed at firms with more than 500 employees say their company uses at least one Web 2.0 technology.
Stormhoek, which produces 10 types of red and white wine ranging in price from $10 to $15 a bottle, has chosen to use a blog as its corporate Web site. When visitors go to Stormhoek.com, they are presented with the latest posting from a Stormhoek employee. Korman chose Movable Type, Weblog publishing software from San Francisco-based Six Apart, based on a consultant's recommendation. Jonathan Alstead, I.T. director at Launch Site of Edinburgh, Scotland, configured and customized the template-based application in about a week. The blog supports video links (Stormhoek bloggers can cut and paste embedded links to YouTube videos directly into an entry), an XML feed that sends new posts to subscribers, and an e-commerce component that allows visitors to purchase promotional "swag," like Stormhoek-branded posters and underwear.
One challenge in the implementation, according to Alstead, was ensuring that the standard identifiers for each file type being transmitted from the blog over the Internet be it an image, text or video were all correct. That meant encoding placeholders in the software that would support multiple media file types.
Since the Stormhoek.com launch in May 2005, the only consistent problem has been a profusion of blog spam random comments automatically posted by marketers promoting commercial services. The Stormhoek site sometimes gets spammed hundreds of times a day. Korman and other Stormhoek staffers purge the unwanted posts daily.
The blog setup and a five-user license cost about $500, according to Korman, who says Movable Type is fairly easy to use; he can type up his posts into a text field and a script in the software's scripting language, Perl, pulls the information into the blog template.
For its wiki, Stormhoek chose MediaWiki, a free Web-based software package originally created for Wikipedia, a publicly edited online encyclopedia. Hugh MacLeod, a marketing consultant and illustrator who's been working with Stormhoek for two years, configured the wiki in a matter of hours and hosts it on his Web site, Gapingvoid.com. He programmed fields for information, such as the location of each geek dinner and a link to each host-blogger's home page. MacLeod also creates clever wine-related cartoons for the Stormhoek site and marketing paraphernalia.
Integrated into the wiki is an interactive map of the U.S., created with an application called Frappr Maps. The "mashup" a hybrid of information pulled from two or more content sources allowed dinner hosts to display their geographic location graphically. When visitors clicked on an event on the map (represented by a colored dot), they could sign up to attend the dinner, send a message to the host and view photos of him or her.
From a financial perspective, companies can get started with commercial Web 2.0 technologies by investing in the $10,000 to $20,000 range for commercial software, Forrester's Young says. For that amount, a company could purchase a blog, social networking or wiki platform. Adding features and functionality could increase the annual costs to $100,000 to $200,000.
But Web 2.0 doesn't have to be a major investment. Young says there are plenty of open-source applications, like MediaWiki, that can accomplish many of the same tasks as commercial software. In those cases, the only investment is time and I.T. resources. "For a very limited investment, firms can get up and running with Web 2.0 technologies," Young says. "The barrier to entry is very low."
There's an adage that it takes a large fortune to make a small fortune in wine, and Stormhoek is trying to buck that trend. Korman and his Stormhoek staff of about 20, including farm workers, have built a brand from scratch with a marketing budget of $50,000 in 2006 and $100,000 in 2007.
Stormhoek, which means "stormy corner" in Afrikaans, measures success according to a few metrics some hard, like revenue growth, and some squishy, such as mentions in the trade press and winning tasting awards. In the first half of 2006, Korman estimates that Stormhoek had about 100 mentions in the wine press, and about 200 in the second half of the year. Stormhoek's pinotage, a signature South African red wine with hints of fruit, was named the best pinotage of 2006 by the International Wine and Spirit competition.
Sell rates, the number of bottles actually sold, is another key metric. In 2005, for example, Stormhoek sold a weekly average of 4.3 bottles of wine per store in the U.K., its primary market. That number leaped to 7.8 in the first quarter of this year, an 80% jump.
Korman uses Stormhoek's limited budget as a license to leap into the unknown. "Our attitude is, we might as well try stuff if it doesn't cost much to give it a try," he says.
Stormhoek's culture of experimentation provides a context for success with Web 2.0 technologies, according to Forrester, which found that the only common thread among a handful of large businesses that have adopted Web 2.0 is an adventurous corporate culture and the freedom to fail.
Sometimes, the experiments work. In April, MacLeod, Stormhoek's marketing consultant, asked readers of his blog to weigh in on the tagline for a new wine, a rosé designed to be drunk with ice (a no-no for wine purists). MacLeod posted 10 prospective taglines for Couture Rosé including, "Happiest over ice" and "Best over ice, Darling." Three days later, visitors had posted more than 160 comments, many of them suggesting their own witty catchphrases, such as "BYO Ice" and "Rocks on the Rocks." Stormhoek does not particularly encourage visitor comments on the Stormhoek site, Korman says. Rather, the strategy is to use MacLeod's and other blogs to have digital "conversations" online. Indeed, Stormhoek reviews in the blogosphere have been, by and large, positive, and include comments from "eminently quaffable" and "good ... but not enough fruit," to "The palate is zippy with nice balance between the ripe fruit and the grassy freshness."
Not every undertaking is a slam dunk. Following one of the Stormhoek-sponsored geek dinners in the U.K., a mini-battle ensued between MacLeod and British blogger Ben Metcalfe, who referred to Stormhoek in one post as "crappy," and to MacLeod as a wine "pimp." Korman says the experience was upsetting. "We had a very little brand and were trying to grow," he says. "It's the risk you take in being online." MacLeod fired back on his own blog with some choice words for Metcalfe. It was a brief but pointed cyber-spat.
Seth Godin, who blogs and writes about marketing, cites this risk and lack of control as the primary reason that large companies hesitate to try new kinds of Web marketing; audience cooperation isn't always there.
For example, Godin points to Microsoft's offer to ship free laptops loaded with Windows Vista to bloggers. The hope was that they would write about the new operating system. Critics suggested that Microsoft's offer amounted to a bribe, while defenders said the laptops let them try out Vista.
"You can't bribe these people into giving their opinion," says Godin, among the critics. "What you can do is to create a story that encourages them to choose to write about you."
Young, on the other hand, believes that Stormhoek's efforts were successful in appealing to potential customers' palates. That's because the winery is engaging users in a culture around the wine. As Young explains: "It's far more about lifestyle than about the product."
Stormhoek Base Case
Klein Doolhof Estate, Wellington, South Africa. Parent company is Orbital Wines, 13 Chapter St., London SW1P 4NY, U.K.
(27) 836 252 865
Wine production and marketing.
Orbital Wines CEO:
Stormhoek financials in 2006:: Revenue of $6 million, up by 100% from prior year.
Create a market for new wine.
- Establish retail presence in seven major grocery chains in the United Kingdom.
- Increase number of Stormhoek wine units in U.K. grocers from four in 2005 to 24 in 2007.
- Boost revenue from $3 million 2005 to $10 million in 2007.