I’ve become a real fan of identifying and pursuing marketing solutions for clients where value creation opportunities have the best chance to blossom and thrive. My first read on the topic some two years ago came from Author Sangeet Paul Choudary. He is the Author of Platform Scale and it’s follow up book Platform Revolution and continual thought leader on the subject of platform businesses. You can learn much about value creation in digital business models from a visit and study of his tremendously useful website, http://platformed.info/.
As a builder of a budding, soon to be released platform in the alcohol marketing space, I’ve read these books along with Lean Analytics with great interest. These are not just casual business reads to me but extremely important works that serve to provide frameworks around design, iterations, marketing, customer support, and much more.
So how is value creation defined in the context of a platform or digital exchange of some kind? A classic example is when Uber launched, it provided a platform for drivers who owned extra time and were willing to spend it picking up strangers in their car to do so. It also simultaneously provided users needing a ride to press a button hailing one of those random drivers to come pick them up. In the exchange of time and space in the car and the need for a ride somewhere, value was created. This exchange’s value was estimated and a piece of software was designed to facilitate the rider’s payment of that estimated value to the driver. Value Creation Defined!
In similar ways, a horizontal old school model of car rental, calls for a company to buy or lease fleets of cars, place them on a lot for daily and weekly rental, and as a result, cover all the cost associated with infrastructure, employees, and more. The person who needs a car has to reserve the car, go to the lot, do the paperwork and hope there are vehicles matching the approximate description of what he/she attempted to reserve. In exchange, the car rental company collects a fee paid by the renter. Hence, value creation. There are disruptive models on the horizon poised to decimate the car rental business. They involve a company providing car owners a platform to place their cars on the open market for rent by vetted drivers needing rental cars. One such site is https://turo.com/.
So platforms are disrupting most everything. You likely know this to be true? Why? Simply said, it’s their ability to create value where none existed previously. Generally a problem is solved via the value creation. In AirBnB’s case. one needs a room. Hotels are too high or not available. A person provides a space and a person rents it. It’s a problem solved and a value created. I would argue, that limiting platforms is akin to stopping the printing press or stifling freedom. You want to take the world back to the dark ages? Stifle the creation of value brought about by platforms.
Let’s discuss the spirits, wine and beer space. First, one in the business understands that value creation in the alcohol industry is NOT the first consideration. Thanks to the government, tax structures, and compliance issues driven by tax collection, innovation is not central to the business. Let’s discuss a couple of places where value creation does take place in the spirits, wine and beer industry. One such value creation point in the supply chain occurs when a spirits, wine or beer brand provides a thoughtful fun tour of the facilities. Consumers, distributors and their clients and the public in general find these experiential outings as informative and entertaining. Value is created and proven increases in loyalty and awareness are the result. The exchange is beneficial to both and value creation is the result.
Another such example is when a restaurant decides through its Beverage Program to feature a specific brand on the beautiful shelf behind the bar and also place it on the cocktail, wine or beer menu. This featured spot provides the waitstaff to speak to the brand’s qualities, enhances the experience for the diner and provides significant value to the brand being featured. These front line exposures in the on-premise environment lead to results in retail buying as well. Many people are known to begin the consumption of brands for at home use after experiencing the brand at a bar or restaurant.
You’re beginning to see value creation is all around us. When a distributor wraps the delivery truck with a brand’s colors and messaging, it becomes a traveling billboard and certain value is associated with that exposure.
So where are the breakdowns in value creation in the spirits, wine and beer businesses? There are a few that come easily to mind.
Let’s name a few. How bout waste in kegs? That’s right, keg waste. The folks at Steadyserv.com (not an endorsement) suggest that 20% of the beer in a keg goes back with the keg when it goes back to the distributor. Wow! Their solution may create value to the tune of a 5% to 20% revenue increase on a keg. Value Creation Defined.
Another terrible leak in value? Poorly made cocktails, inaccurate pours, wasted alcohol and all things associated with waste behind the bar. These problems are being solved in major ways but the makers of http://tendedbar.com. The automated bartender brings tech solutions to a real problem. As a result, one of the way Tended Bar creates value is by eliminating poor experiences by the consumer while adding immense stability to the cost and planning of a certain important aspect of running a bar. Jay Perkins was able to convince Mark Cuban that this problem was significant enough to solve and as a result, Tended Bar is now a Mark Cuban company.
One area where there is currently NO value created is in the individual relationship between the consumer and the brand. Brands are sometimes convinced they know their consumer. They actually don’t. Car companies actually know far more about the buyers of their products than spirits, wine and beer brands. Why? They know what they bought. Alcohol companies know what their agencies tell them. They know very little else. How does this happen? How can multi-billion dollar budgets lead to NOT knowing your customers? This is how. All that is measured is case counts. The measure of success for any spirits, wine or beer brand is the sale of cases. This means the venue and retailer sold to by the distributor is the most important buyer outside of the distributor. You and I going into the restaurant or retailer renders only anecdotal information about us to the brand. Imagine just about any other industry spending billions in marketing dollars and not knowing actually who bought what they were selling? Heads would roll!
So how can this lack of value creation be solved? There are a number of ways. Some companies, like Kroger, via their Kroger Card system are beginning to exploit the data derived from every purchase. I now experience very valuable coupon offers and information that speaks to me specifically thanks to my use of the Kroger Card and their moving forward with initiatives to exploit the info from my purchases. This creates value for me, the brands I buy, and Kroger due to my enhanced loyalty.
Another way value may be created for spirits, wine and beer brands is for mobile apps and experiences to be promoted. Mobile is now ubiquitous with almost all age groups deriving nearly total search, e-commerce, and discovery on mobile. One such example is the Shared Spirits mobile app due out in November 2017.The app allows for the brand to build individual relationships with influencers and ambassadors of their brand. The key accounts on the On-Premise side as well as the retailer side are tremendously enhanced while at the same time, the distributors and restaurants end up with considerably more benefit as well. As brands utilize the platform created by Shared Spirits, the creation of value takes place through the entire supply chain. Supplier/Brand relationship with the Distributor is enhanced. The Distributor ends up with a tool to provide on-premise and retail accounts. The restaurant or bar as well as the retail establishments are afforded new tools that enhance social sharing and literal sharing of cocktails, wine and beer amongst avid fans, influencers and ambassadors.
When the Shared Spirits app is used to share a drink with a friend, colleague, prospective business lead, or prospective date, value creation begins. It starts with the fact that the buyer of the drink shared it with the recipient. Hence Value Creation.
When the recipient takes his/her phone into the participating establishment and redeems the drink, another important value creation occurs. The establishment gets paid for the drink. The data on the entirety of the transaction is stored, assessed and used to provide the users an even more customized experience in the future. Hence Value Creation!
If you’d like to discuss in more detail about how your brand could start putting value creation at the heart of everything it does, shoot me a message. I’d love to chat about how Shared Spirits could identify points where value creation is possible or currently being undermined. Our explainer video below. You can also get out our list at http://sharedspirits.com.
Sherman Mohr serves as CEO and Co-Founder of Shared Spirits. Shared Spirits is a marketing tech and data firm in the spirits, wine and beer space.
Contact him at sherman @ sharedspirits dot com