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Tag Archives: wine marketing

How to manipulate on-line reviews with a clear conscience — get a federal court ruling

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manipulate on-line reviews yelpAlways wondered how legitimate the scores and reviews were on sites like Yelp, Angie’s List, and the Wine Spectator? Now, thanks to a federal appeals court ruling, you don’t have to wonder: Legitimacy may not matter. The sites may be able to manipulate the ratings, and they don’t necessarily have to tell you what they’ve done.

Or, as Lou Bright, the blog’s unofficial attorney, says: “This does have the ethical aroma of dead rat, doesn’t it? Yet neither Yelp nor the Wine Spectator are legally bound to be morally upright. The First Amendment allows for an awful lot of disreputable speech.”

The court decision, made earlier this month in San Francisco, didn’t break new legal ground when it found that the possible “engineering” of review postings on Yelp, based on whether businesses bought an ad on the site, were legal. The ruling came after several businesses sued Yelp, claiming the site moved unfavorable reviews higher and moved favorable reviews lower on the site – or removed favorable reviews altogether – if the businesses didn’t buy ads.

Said the ruling: “It is not unlawful for Yelp to post and sequence the reviews. As Yelp has the right to charge for legitimate advertising services, the threat of economic harm that Yelp leveraged is, at most, hard bargaining.”

A legal thing here, so I don’t get sued. Yelp’s senior director of litigation said the company didn’t make review decisions based on whether anyone bought ads, and there is a disclaimer on the Yelp site. And I’m not saying Yelp does that. Or that Angie’s List, the Spectator or anyone else does it. Or that it goes on at all anywhere.

Rather, as W. Blake Gray wrote when he broke the story last week, the ruling reaffirms that sites or magazines that do reviews can charge for upgraded placement, higher scores, or better reviews with a clear conscience. After all, it’s just hard bargaining.

I talked to three other attorneys for this post, and each said the same thing as Bright: It’s not a consumer-friendly practice,and there may be risk in the long run, but it’s not necessarily illegal. As long as the site or magazine doesn’t commit libel (which is often difficult to prove, says Dallas attorney Trey Crawford), and doesn’t run afoul of the Federal Trade Commission, it’s on safe legal ground. Some court decisions have even gone as far as to equate engineering with “editorial discretion.”

What can you do to make sure ratings and reviews aren’t engineered? Look for a disclaimer on the site, like the one I use, and will continue to use. No one pays me for favorable reviews or to review their product, and it will always be that way. Because, if there isn’t a disclaimer, anything is possible.

Winebits 350: Three-tier, wine prices, wine marketing

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three-tier systemNo love for three-tier: The Wine Curmudgeon has much respect for the Wine Folly website, which does great work educating wine drinkers. Its recent post on the dreaded three-tier system was no exception, detailing what it was and how it worked with quality graphics and clear writing. I don’t know that it gave enough credit to Prohibition in three-tier’s formation, but it did discuss its beginnings in the late 19th century, which I didn’t know. And it did impressive work tying the cost of wine to the inefficiencies of the system. My only complaint: That it forecast the coming demise of three-tier, based on direct shipping, the Internet, and flash sites. It’s not that I don’t want three-tier to go away, but it overlooks three things — three-tier’s constitutional protections, which the Wine Curmudgeon has lamented many times, the system’s immense clout through campaign cash, and that direct to consumer sales account for less than five percent of wine sales in the U.S. That’s hardly eroding the system.

“A giant sinkhole”: W. Blake Gray writes about the media’s immense joy in forecasting rising wine prices, which seems to happen every six months or so whether it’s true or not. The most recent example came after the Napa earthquake, even though the region produces just a tiny fraction of the world’s wine. Gray writes: “People just don’t have a sense of how enormous and international the wine business is — that if Napa Valley or Mendoza, Argentina or Barossa Valley, Australia fell into a giant sinkhole tomorrow, we would all be the poorer for it, but overall world wine prices would still not be much affected.” He also notes that many media types figure only rich people drink wine, and so deserve higher prices. I’m not so sure about the second; many of the media types who still get paychecks in this post-print world aren’t exactly paupers. My hunch is that it’s mostly crummy reporting. When a Washington Post writer proclaims that wine prices are skyrocketing when they’re not, and the Post is supposed to be one of the world’s best newspapers, it’s no surprise that everyone else misses the point, too.

It’s not about the marketing: Producers in the French wine region of Bordeaux are running around in a panic because sales are down, and this report discusses how it will try to solve the problem through better marketing — some €3m worth (about US$3.8). The Wine Curmudgeon, out of his great respect and admiration for Bordeaux wine, has a cheaper and simpler solution: Stop overcharging for your wine. It’s one thing to sell the best wines for hundreds and thousands of dollars a bottle, but when the everyday stuff costs $15 or $20 — and isn’t any better than $10 wine from California, Spain, or Italy — you’re not going to sell it, no matter how much you spend on marketing. One retailer, when I asked him why this was happening, attributed it to Bordelais greed. “If they can get it from the Chinese, they figure they can get it from the rest of us,” he said. Obviously, that isn’t the case any more.

Treasury Wine Estate’s plan to avoid a hostile takeover

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Treasury hostile takeoverThe Wine Curmudgeon mentions Treasury’s scheme for two reasons. First, and most importantly, it doesn’t seem very sustainable. The troubled Australian multi-national wine company, whose holdings include California’s Beringer, has been losing more millions than most of us have socks.

Yet, despite its problems, Treasury wants to boost business to fend off a hostile takeover from private equity firm Kohlberg Kravis Roberts, which tried to buy Treasury earlier this year and made another offer this week. The second offer was a little higher, but probably won’t scare anyone.

Treasury’s anti-takeover plan features selling heavily discounted wine refrigerators to customers in Australia. The Brisbane Times newspaper reports that the company’s new boss “labelled the wine cabinet promotion the biggest consumer-facing promotion ever undertaken by the company.” Which should tell us all we need to know about Treasury’s lack of marketing ability.

How does it work? Buy six bottles of a Penfolds Bin wine, which cost from AU$30 to AU$80 a bottle, and you can buy a AU$650 wine fridge for AU$200. In other words, buy six bottles of AU$30 Penfolds Bin 51 Eden Valley riesling and the refrigerator and pay AU$380 — just 58 percent of what the refrigerator would cost by itself. Given retail discounting, in fact, you could probably get the fridge for at least 50 percent off. Is it any wonder that Treasury wrote down AU$260 million earlier this year and fired its CEO?

The second reason I mention this? The Wine Curmudgeon, financial genius that he is, bought 100 shares of Treasury stock in hopes KKR (as we high-flying investment types call Kohlberg Kravis Roberts) would make another, much higher offer for Treasury. My retirement to Burgundy never seemed so close.

I paid about what KKR offered the first time, so news that Treasury seems to be throwing away money on the refrigerator promotion is not welcome. The company is reducing inventory and margins to increase cash flow, which will not boost its value or make me rich. KKR’s second, not much higher, offer confirmed this.

In the wine business, the old joke always seems to apply. Or, as one actual real-life financial type told me: “With a little luck, you might get a nice bottle of wine out of this.”

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