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Churn may make great ice cream and butter, but churn in winery club membership can sour a significant source of sales for many North Coast wineries.

Yet, modern tools for digesting the increasing flow of sales and consumer data can yield greater long-term revenue, according to marketing experts.

The wine business has a number of platforms for managing direct-to-consumer sales and marketing efforts, but the industry needs to devote more attention to statistical modeling to predict which customers are likely to cut a club out of their spending.

That’s what Sonoma State University economist Sam Riewe and industry DTC data-cruncher Joel Miller of CustomerVineyard said at the institution’s Wine Business Institute research summit on July 10.

“So in the wine club, you have new members constantly joining your club, you have an active pool of subscribers that are constantly getting shipments, and then the thing that I worry about, and you probably care about it too, is the term ‘active losing customers,’” said Riewe, also co-founder of Data Nation Analytics Group.

Recurring sales are predictable income, and here’s how big of a deal the loss of club members is to vintners.

Direct to consumer sales make up 61% of revenue for the average family winery, according to the 2019 Silicon Valley Bank industry report. And over three-quarters of those DTC dollars come through the tasting room (42%) and wine club (36%).

A common metric for wine club health is average tenure — how long consumers continue to opt for regular shipments. In a sample of 2,550 members from CustomerVineyard client clubs, the average from 2006 through last year was 31.3 months, Miller noted. A challenge with tracking average time of retention is that those who stay in the club for several years blur out information about members who come and go more frequently, so he recommends looking at median tenure.

That metric is sobering. The median tenure in Miller’s sample is 11-15 months, so half of new club members are leaving in that amount of time after they join.

“Those are people who walked in your door, paid good money, joined up to your club,” Miller said. “They know your brand. They know your product, and out the door they go. That’s a ripe population to go after.”

Some vintners call lapsed members to see if they will re-up or contract that out to an outside sales company. Miller said there’s a lot of value in monitoring the membership situation throughout the relationship.

CustomerVineyard used analytics and predictive modeling to segment club members into four “buckets,” or archetypes.

“One and done” subscribes for less than six months, and the “short timer” for six to eight months. Together, they accounted for over 60% of Miller’s sample but roughly 20% of revenue, when compared with the lifetime value — projected sales during the subscription via survival analysis — of the categories of “extended” (18-36 months) and “loyalist” (over three years).

And survival analysis, something also employed in medical research, can help zero in on periods in a club membership when there’s high risk of churn, Riewe said. Two peak periods identified by such hazard analysis are at four months and nearly 16 months, he said.

While a one-and-done member’s lifetime value in Miller’s sample was a few hundred dollars, and just over $1,000 for the short-timer, extended member value was $2,500 and loyalist at least $7,500.

Miller recommended use of modeling to keep members on board. Special offers may help retain younger one-and-done members, and promotions could be timed to certain seasons with statistically more drop-offs for short-timers.

For those on board for extended periods, offering case-sized orders may be a way to deepen the relationship. For loyalists who often make regular trips to Wine Country to visit the winery, the vintner could have special deals and activities when those members typically arrive to pick up wine.

And being ready to reach out to younger consumers will be important for Generation Z, said Liz Thach, distinguished professor of wine, at the research summit. It’s a group born after 1995 and currently the nation’s largest cohort, at 27% of the population, compared with 23% for boomers, 22% for millennials and 20% for Gen X, per Statistica. Gen Z first reached legal drinking age in 2016.

Thach polled Gen Zers in 2016, 2018 and this year to compare their wine preferences and other characteristics to millennials. In 2019, she surveyed 158 SSU students (27% men and 73% women). She found 70% enjoy white wine, 68% red, 52% rose, 49% sparkling and 23% dessert wine.

Unlike millennial tendency to rank wine more highly as “confusing” and “snooty” on a five-point scale, Gen Z this year described wine as “pleasurable” (90%), “delicious” (83%) and fun (81%), with those negative connotations ranking below 20% each.

Her survey pool recommended wineries reach Gen Z mainly via advertising (62%) and packaging and design (40%). But they didn’t want advertising in the traditional way, rather through YouTube, Instagram and their other go-to social networks.

“Another piece of research on them is unlike millennials who seek experiences, Gen Z seeks exciting products with strong visuals,” Thach said, pointing to the need to think of Instagram for marketing and package design.

Jeff Quackenbush covers wine, construction and real estate. Contact him at jquackenbush@busjrnl.com or 707-521-4256.