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.