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Increasing Revenue at Cellar Doors – the Single Most Important Thing

The most important decision a Cellar Door has to make is what you sell when someone steps through your doors.

Cellar Door

Sell Wine Club Membership First

A wine club is essentially a recurring purchase over a few years. Instead of one or two bottles being purchased at the time of tasting, scores of bottles are sold at regular intervals over a number of years. Instead of an average order value of $70, the average order value over the 2-3 years of the membership is $1000+.

I’m not saying as soon as the visitor walks through the door you grab their arm and insist they sign up to your club 😉 . Rather you go through the tasting and the brand story, and only having included them in how interesting your winery is do you say, “would you like to regularly receive some of our wine?”.

Where’s the money in a Cellar Door?

I’m going to have to go all spreadsheet on you to explain this one, let’s step through the embedded spreadsheet below Wine Club Conversion – why it matters : Regular. Note the assumptions are from the SVB Tasting Room 2014 report.

The first figures are for a regular cellar door operation. In the INPUTS section it shows the assumptions. There are 1200 Visitors per month, 65% of whom buy a tasting for $5. Of these 1200 visitors 1.7% buy wine with an AOV (average order value) of $70.

Also of the 1200 visitors, 1.7% become wine club members by signing up in the cellar door with their credit card to receive regular shipments of wine. On average the wine club members buy $500 of wine per annum and stay in the wine club for 26 months.

The CALCULATIONS section calculates annualised revenue “Total Annual Revenue” and lifetime revenue “Total Lifetime Revenue”, for customers who sign up in the particular year. In order to make my point about the importance of wine club conversions I don’t need to cover costs and profit—but I acknowledge these are also important.

In the Regular Cellar Door Operation $46,800 of tasting fee revenue, $17,136 of wine bottle purchases and $122,400 of wine club revenue is earned. Wine Club membership is your most important earner at the Cellar Door, making up 81% of all tasting room related revenue.


(NB if you can’t read the embedded spreadsheet above then try another internet browser such as Chrome).

What difference does Conversion rates make for a regular public operation?

The embedded spreadsheet below Wine Club Conversion – why it matters : HighConv compares exactly the same operation but only changes the conversion rate. It shows that focusing on converting customers to your most important revenue earner makes a huge difference. As the spreadsheet below shows, boosting wine club conversion rates from 1.7% to 10% (INPUTS section “Conversion rate wine club”) increases revenue more than 4 times (CALCULATIONS section “Total Annual Revenue”).

Remember it’s the same number of visitors, but instead of asking if people would like to buy a bottle we ask something like “would you like to regularly receive some of our best wine?”, then direct them to a tablet or PC with a sign up form that takes a credit card.

Does the higher conversion rates of Appointment-only make up for its lower volume of visitors?

In my previous blog post Should my Cellar Door be Appointment-only or Open to the Public? I suggested that “Appointment-only” may be a better financial model than “Open to Public” cellar doors because the higher wine club conversion rate makes up for the lower volume of visitors.

The next spreadsheet Wine Club Conversion – why it matters : ApptVPublic is made up of three scenarios. The first scenario Appointment Only vs Public assumes Appointment-only cellar doors have 200 visitors per month, 90% of whom buy a tasting for $15. Of these 200 visitors 2.7% buy wine with an AOV (average order value) of $180 (these figures again are loosely based on the SVB survey).

On the other hand, the Public Cellar Door has 1200 visitors, 1.7% become wine club members, with AOV and months in wine club the same (could rightly argue this would be higher). The bold figures are the important ones.

In the CALCULATIONS section it shows Appointment-only tasting fee revenue, wine bottle purchases and wine club revenue is all lower than the higher volume Public revenue.

The wine club conversion rate of 2.7% is the survey figure but I hear of up to 20% anecdotally. So I’ve redone the figures for a 10% wine club conversion rate Appointment Only (10% Conv) vs Public, and then a 20% wine club conversion rate Appointment Only (20% Conv) vs Public.

This shows that even a 10% conversion rate is not enough to make up for the lost visitor volume – Appointment-only Total Annual Revenue is $164,064 vs $186,336 for Public. At 20% the Appointment-only Total Annual Revenue has increased by 50% over Public. Note a 12% conversion rate is where both figures are the same.

So does the higher conversion rates of Appointment-only make up for the lower volume? Only if you’re really good at closing sales, remember the most important thing is to ask e.g. “would you like to regularly receive some of our best wine?”. Sales 101 really, always ask for the sale.

Summary

In summary, Wine Club membership is your most valuable cellar door product, and wine club conversion is your most important sales task and metric.

Your thoughts? Please comment below.

Photo courtesy of: Cellar on a Slope

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