After reading an article that mentioned “Club W“, a (so far) successful startup that sells wine “personalized” to the customer’s taste with great! price, I decided to give them a shot!
There is something great with the idea of personalized wine! With so many variety of wines and the sheer amount of wine being sold everyday which produces valuable data, this idea makes total sense. I would love to get affordable high quality wine, personalized to my taste!
However, there is a problem with my “Club W” experience. A simple one; their wine is neither personalized, nor high quality or good price! Basically they look more like a scam than a real business. They have built a website that asks you some basic questions, which at best can help them segment customers as red/white dry/sweet drinkers – not a real personalization, and get you to accept a monthly subscription by giving up a one-time discount on first purchase. A monthly subscription that you can only cancel if you call their customer service in business hours. Instead of coming up with great products with good prices, they focus on physiological tricks to get customers money. An approach that is “guaranteed” to fail on low-margin highly competitive retail market.
I think “Scam the customers, scam the investors” is a business model commonly seen in U.S. due to the large pool of potential first (and only) customers. I personally see this over, and over with companies that have terrible products and terrible service, but big marketing budget. Another example is “ADT Home Secutiry” with a two star ranking on Yelp – to get you thinking.
I developed a recipe for a successful “Scam the customer, scam the investor” business model. Don’t hold me accountable on this, but it has worked for many companies.
1 – Come up with a great idea that everybody likes, but you can not deliver on (such as affordable home security or cheap quality wine tuned to customers taste)
2 – Somehow! raise a bunch of money and build a very good marketing team.
3 – While others are trying hard to win the customers with great products, focus on getting new customers, forget about customer retention and referral, just rely on traditional / online marketing channels. You will have a good go until your marketing budget finishes.
4 – Use the sales figure growth to convince the venture capitalist that you have a great growing business.
5 – Hope that you will figure out a real sustainable business model, once you raised several hundred million dollars.