#WMTC18: Unlocking DTC Profitability with Big Data and Consumer Insights

Use real-life examples to show how Big Data and analytics can help wineries generate higher revenues and profits in both their existing customer base as well as attracting new customers like their very best. Case studies will include:

Customer Segmentation (who are 5-star customers)
Use of Big Data (demographics, financials, and psychographics)
Predictive Analyses (when club members may cancel before it happens)
Leveraged Power of Precision Marketing

Session presented by Joel Miller, Customer Vineyard

Transcript

1. Unlocking DTC Profitability October 2018 Presented by Joel A. Miller President/Co-Founder, Customer Vineyard 1 Materials Confidential Property of Customer Vineyard, Inc.
2. What’s the Deal…? • New DTC Paradigm • Leverage Existing Data • Use Insights to Sell More DTC Today: • Data Analytics/Big Data • Findings • Impact (Case Studies) Materials Confidential Property of Customer Vineyard, Inc. 2
3. The Flaw of “Averages” A B C 32°F + 140°F = 80°F Materials Confidential Property of Customer Vineyard, Inc. 3
4. “Average” Isn’t Enough Data A B C Wine Club Longevity Critical Information about Winery’s Most Profitable Channel • Average Length = 30 months • Median Length = 18 months • So…what does that tell you about customer A, B, or C? Materials Confidential Property of Customer Vineyard, Inc. 4
5. New Tools (for Wineries) to Understand Customers Big Data Mining Predictive Modeling Business Analytics Materials Confidential Property of Customer Vineyard, Inc. 5
6. Leveraging the Power of Big Data to Sell Wine More Profitably Originated as Industry Consortium • SSU / Wine Business Institute • Rob McMillan (SVB) • Vinventions Truly Know Your Customers to Better Attract, Sell, and Retain Them Profitable Marketing and Sales Campaigns 6 Materials Confidential Property of Customer Vineyard, Inc.
7. Consolidate Scrub/Append Analyze Insights Are Translated Into Sales & Marketing Actions To Drive DTC Profitability 7 Actions The Data Process Materials Confidential Property of Customer Vineyard, Inc.
8. Anonymized Database Of Wine Consumer Insights 5 wine businesses 8 Materials Confidential Property of Customer Vineyard, Inc.
9. DTC Wish List: What If We Knew… Materials Confidential Property of Customer Vineyard, Inc. 9
10. DTC Wish List: Item Area Ratings & Scores Sorry Discretionary Income Financial Big-Data Sports Interests Psychographic Big-Data Hot Spots for New Customers GeoTargeting Risk of Club Quit Predictive Analytics Value of Customer LifeTime Value (LTV) Occupations Demographic Big-Data ROI on Perks (Comped Goods) LTV Analyses Hobbies Psychographic Big-Data The List Goes On and On… Materials Confidential Property of Customer Vineyard, Inc. 10
11. 3 Not All Customers Are Created Equal… • Difficult to know who might be “whales” or 5-star potential • Hospitality: Treat everyone as a “5-star” • DTC Managers: Use data to improve your odds • Marketing: Implement precision campaigns Materials Confidential Property of Customer Vineyard, Inc. 11
12. Wine Consumers are More Affluent than the Average US Consumer… 57% of Wine Customers have a Net Worth of over $1 Million Compared to 12% for the Average U.S. Consumer 12 7x more likely that wine customer has $2M net worth Materials Confidential Property of Customer Vineyard, Inc.
13. Segment into Star Rankings to Differentiate the Highest-Value Customers 13 Materials Confidential Property of Customer Vineyard, Inc.
14. 71% of DTC Revenue Comes from 30% of Customers 14 Materials Confidential Property of Customer Vineyard, Inc.
15. Higher Spending Winery Customers are Aging Out: Younger Women Near Parity with Men $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 - 5,000 10,000 15,000 20,000 25,000 20-29 30-39 40-49 50-59 60-69 70-79 80-89 90-99 Customer Age Ranges Total Spend # of Customers DTC Spend by Age & Gender (All Wineries) female male Total Spend 35% of Customers are under 50 Yet Only Deliver 18% of Revenues Will the Millennials Ever Catch Up to the Boomers? 15 Materials Confidential Property of Customer Vineyard, Inc.
16. Wine Customers Index Very High on European Cars Make Wine % US % Index Porsche 1.9% 0.2% 1067 Audi 6.1% 1.0% 614 BMW 11.7% 2.3% 515 Mercedes 9.2% 1.9% 473 Cadillac 3.6% 2.3% 154 Ford 13.3% 19.7% 68 Chevrolet 10.4% 20.4% 51 Lexus 7.4% 2.2% 338 Honda 11.2% 10.7% 104 Toyota 12.5% 13.2% 95 0% 50% 100% 150% 200% 250% 300% 350% 400% Index (100% = US Consumers) Vehicle Origin Indices (All Wineries vs. US Consumers) Asian Domestic European 16 Materials Confidential Property of Customer Vineyard, Inc.
17. 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 Cooking - Gourmet Biking/Mountain Biking Exercise - Running/Jogging Science/Space Golf Investments - Real Estate Aerobic/Cardiovascular Financial Newsletter Subscribers Snow Skiing Arts Tennis Food - Wines Index (US Consumer = 100) Indexing of Interests (All Wineries vs. US Consumer) The Data Shows Wide Swings in Interests with Tennis and Skiing as Favorite Activities 17 Materials Confidential Property of Customer Vineyard, Inc.
18. DTC Consumers are Less Interested in Cruises and Walking 18 30 40 50 60 70 80 90 100 Smoking/Tobacco Cat/Dog Owner Religious/Inspirational Exercise - Walking Woodworking Gaming - Casino Travel - Cruise Vacations Games - Video Games Motorcycling Gaming - Lottery NASCAR Grandchildren Index (US Consumer = 100) Indexing of Interests (All Wineries vs. US Consumer) Materials Confidential Property of Customer Vineyard, Inc.
19. Definition: Lifetime Value (LTV) • Several Databases Wrong (LTV ≠ $$ Spent) • LTV = Total Value of a Customer Over their Lifetime • Predicted Value based on • Past Spend • Expected Tenure • Purchasing Behaviors Materials Confidential Property of Customer Vineyard, Inc. 19
20. High Value in Segmenting by Club Archetypes 20 Each Archetype Has Different Purchasing Behaviors 20% 33% 23% 24% Club Revenue Splits by Archetypes (all past club members) One/Done ShortTimer Veteran Loyalist Assign archetype based on club longevity: One/Done Short Timer Veteran Loyalist (Note: all are statistically validated segments) Materials Confidential Property of Customer Vineyard, Inc.
21. Wine Club Longevity (Predictive Modeling) “When will a club member cancel their membership?” Materials Confidential Property of Customer Vineyard, Inc. 21
22. A Breakthrough Way to Look at Customer Lifespan • Reapply from Medicine • Life expectancy (cancer, HIV, etc.) • Risk factors (obesity, exercise, and diet vs. heart attacks) • DTC Wine: Traditional Approach • Track club cancellations • Report “Average Club Life” • Survival Analysis • Look at data from all members (active, on hold, cancelled, new) • Use advanced modeling skills and sophisticated software • Multivariate analyses • Assign risk factors 22 Materials Confidential Property of Customer Vineyard, Inc.
23. Survival Curve: How Long Do Members Stay in Club? Early Dropouts (< 6 months) = 16% The Average Club Member Lives ~ 21 Months Loyalists (> 36 months) = 30% 23 LIFE SPAN SURVIVAL PROBABILITY (CONTINUE MEMBERSHIP) 6 84% 12 57% 18 44% 24 35% 36 30% 48 20% Materials Confidential Property of Customer Vineyard, Inc.
24. How Does Risk Vary over Time? (Hazard Analysis) Understanding Risk  Precision Marketing Opportunities 24 Actions - Special touchpoints/ offers at optimal times: • Reduce Risk • Extend Life • Maximize LTV Risk Factors: • Age • Length of Membership • Pick-up vs. Ship • Club Choice • Use of Comped Goods Materials Confidential Property of Customer Vineyard, Inc.
25. DTC Profitability Real-World Examples: Consider the fictitious winery, Platinum Estates:  50,000 customer names  5,000 club members  $1,200/yr/member sales  30% club attrition rate Note: Platinum Estates model is based on actual results at client wineries. Data Insights + Precision Campaigns Provide Exceptional ROI 25 Materials Confidential Property of Customer Vineyard, Inc.
26. 26 Attract • Find new high-value customers like Platinum Estate’s best • Example 1: Conduct geo-targeted programs to add 5% (~ 250) high value customers • Value = 250 new 5-star * $1,720/year revenue * 2.5 years retention = $1.1M new revenue Leveraging the Insights: Attract + Sell + Retain Existing Customer Base (5,000) New 5-Star (250) +$1.1M New Revenue Precise New Customer Targeting Yields High Returns Materials Confidential Property of Customer Vineyard, Inc.
27. 27 Sell More • Target low-performing customers and convert them into 5-star customers • Example 2: Convert 2% into high-value customers = 385 upgraded customers [50,000 customers * 70% current low value (1-3 star) * 55% high potential * 2% conversion rate] • Value = 385 customers * $1,313/year incremental revenue * 2.5 years = $1.3M incremental sales Convert Lower Performing Customers to 5-Star Levels 1 2 3 4 5 +2% +$1.3M New Revenue Improving Sales to Low-Performing Customers is Highly Leveraged Materials Confidential Property of Customer Vineyard, Inc.
28. It is Far Easier to Retain Customers than to Acquire New Ones 28 Retain Longer • Utilize precise marketing campaign aimed at at-risk club members • Example 3: Save 10% of at-risk customers and extend for 12 months = 150 club members (5,000 club * 30% churn rate * 10% saved) • Value = 150 club members * $1,200/year spend * 3 years = $540,000 incremental revenue Strengthen Relationships with At-Risk Customers Before They Leave Average Tenure = 30 months +10% +$540K Revenue Materials Confidential Property of Customer Vineyard, Inc.
29. Return on Total Investment = 130% Return on Marketing/Analytics = 425% 29 Estimated ROI Revenue Gains: = $3M Costs:  COGS (presume 30% of revenue): $900K  Marketing Campaign + Data Analytics: $400K  Costs = $1.3M Estimated Net Profit: $1.7M profit for Platinum Estates (YMMV) Targeted Campaigns Could Create a $3 Million Revenue Gain $540K $1.3M $1.1M + + Materials Confidential Property of Customer Vineyard, Inc.
30. DTC Profitability  EXTRACT and cleanse data  SEGMENT by customer value  APPEND with Big Data  ANALYZE with advanced algorithms Then…  ATTRACT new high value customers  SELL more to existing customers with untapped potential  RETAIN your best customers before they leave Data-Driven Marketing Processes Fuel DTC Profitability 30 Materials Confidential Property of Customer Vineyard, Inc.
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