Projecting revenue for your wine club
Posted by Michael Coffey on March 11th, 2008This is something that can both positively and negatively affect your business. There are 4 things that you must think about when projecting your clubs revenue or better yet, truly understanding the value of your club. Most wineries fall into a trap of thinking their wine club revenue is simply the number of members times the cost of the shipment. If that is all you are looking at, then you are simply letting money fall through your hands. Here are the keys to focus on:
1. View your club shipment as a sample program and focus on getting your club members to repurchase what you just gave them an opportunity to taste.
2. Know your average decline rate for your club runs and keep it under 10%. Well run wine clubs have a decline rate of under 10 percent. If you find that you are running a higher percentage than that, then you have some cleaning to do. Implement a de-activation plan for those club members that are simply sitting on your list and never purchased, let alone received your last club shipments. If you don’t do this, we guarantee you will have a difficult time planning for your year’s financials.
3. Have a repurchase plan and execute on it 2 weeks after your shipment has been sent. This will remind your members to purchase the wonderful wine they just consumed. More often than not wineries condition their clients to simply wait for the wine their shipped and every once in a while consume it. Successful wine clubs condition their club members to consume the shipment they receive so that they know how many bottles/cases they should repurchase.
4. Know the % of club members that are repurchasing and continue to find ways to increase their order. By watching this percentage you will see what your club members like and don’t like. (Very valuable information)
When you put all of this together you get:
((# of club members – 10% decline rate) x package price) + (# of club members x 20%) x Ave purchase price)) = Total Club Value
CLUB ACTIVE NUMBER x CLUB REPURCHASE = Total Club Value
March 13th, 2008 at 8:15 pm
Interia, is a good concept, but lets get down to fundamentals. I did not hear any reference to wine quality. If you are not selling wine this is the first place to look. Rich Frank has no club but sells 90% out of his tasting room because it is good wine he does not charge for tasting. This is fundamental quality fruit makes quality wine and this wine sells itself. Reorders occur because the people that taste it cannot avoid buying more. Yes it is good marketing to follow up and say order more but if the first thing is in place it removes the necessity
March 14th, 2008 at 12:37 pm
Mark - I couldn’t agree with you more. In this industry, if you don’t have a product to sell, that speaks for itself, you are fighting an uphill battle. When it comes to Rich Frank, that is the perfect position to be in but when it comes to a majority of the wineries out there, we find that they either have more inventory in their Library or are selling a larger percentage through distribution than they should. As we both know, there are multiple ways to approach these situations. One way is to have the best product out there, one that is so good that it sells itself. But even in those situations, you typically need to ask for the sale to make the sale happen. With that said, good wine does sell itself, but great wine will sell even more with an “opportunity reminder” to repurchase. The aim for the winery with 90% of sales through the tasting room is now 100%. - Cheers
March 15th, 2008 at 4:03 pm
Hey Michael:
Can you walk me through your equations? Email me privately or respond online.
thanks
March 17th, 2008 at 2:57 pm
Hey Michele,
I would love to walk you through the equation. The basic explanation for the equation is this:
Take the number of your active club members and expect to have a percentage of them decline. We have seen an average of 10% but I would suggest that with the right plans in place you will be able to drop that percentage. Next, take the estimation of clubs members that will actually be processed times the cost of the shipment. At this point you will have a pretty good grasp on what that club will bring in for revenue. Now this is where most wineries stop when looking at the revenue for the club. My thought is that if you start to measure the amount of club members that “repurchased” your wines that were included in your club shipment, you will be able to see two things -
1. What wine was enjoyed the most by your club memebers
2. How many of your club members really repurchase what you send them
I truly believe that once a winery starts recognizing their club as a sample program they will really be able to not just grow the number of those in their club, but grow the over all value of their club. With that said, the last part of the equation is the idea of a repurchase program. I would love to talk more about this so feel free to call me at 707.603.2810. - Cheers