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Wine Clubs: what they are and why they drive your DTC revenue

In February and March I did a series of wine club marketing seminars in Renwick, Martinborough, Carterton and Hastings. I’ll be recreating this as more of a workshop and doing it again on a regular basis in more regions.


To download the slide deck, go to the presentation on SlideShare and follow SlideShare’s instructions.

Here are the key points of the seminar.

What is a Wine Club?

The phrase “wine club” has no formal definition and is used by many people in different ways. Firstly what it is not.

It’s not an email list which receives newsletters and/or offers from time to time. That’s good email marketing but not what we’re talking about here.

It’s not a discount club where, in return for registering your details on a website, you get a discount on any purchase you make. Offering a discount for so little in return is not the best strategy.

It is where a customer gives you their credit card details and agrees to buy shipments of wine on periodic basis at fixed shipping dates. The 1) credit card and 2) the agreement to regularly receive wine, is what makes a profitable DTC strategy type of wine club.

The best sort of wine club system is one that is based on a recurring eCommerce system. The credit card details are held by a third party payment processor—in NZ this would be eWay or PayPal at the time I write this post, and is often Stripe overseas (which has yet to come to NZ).

Some wineries hold the customers details in a paper filing system, which may breach their merchant agreement (a merchant needs to be “PCI compliant”), and requires manual process on every shipment. There are various software solutions that allow you do to do hold these credit cards in a secure fashion without breaching your merchant agreement.

Why have a Wine Club?

Everyone understands why direct-to-consumer (DTC) makes sense, put simply, you keep much more margin than through the trade/wholesaler channel. A wine club is the revenue turbo of your DTC wine marketing strategy. Here’s what I mean…

Most wineries have a cellar door as the core part of their DTC strategy. At the cellar door they sell a single order with an average order value of $70 (most of my figures are based on the SVB Tasting Room Survey 2014) to a customer. Wine club average order values are $480 over 26 months (as per the SVB survey), so they will sell much more wine if they sell clubs not bottles.

If you have 14,400 visitors (40 visitors a day) and 1.7% of them buy $70 of wine then those 245 people will buy $17,150 of wine pa. If you sell wine clubs then those 245 people will buy $117,600 of revenue. Moving to wine clubs increases revenue 7X. Sell Clubs not Bottles.

But I don’t have a cellar door…

Then use the other DTC marketing arrows in your quiver: email marketing, website eCommerce, events, phone sales and direct mail. Instead you of selling bottles using these promotion activities sell wine clubs. Indeed you’ll initially get more subscriptions from your email list even if you have a cellar door.

Wine Club Structures

The wine club itself is really a umbrella name for a series of subscription packages. Each subscription package has a number of dimensions: what product, how often, how many bottles, what price, commitment period (if any), and discounts (if any). Note there may be as many as 7-10 subscription packages in your wine club depending on your product range.

What product: red only, white only, mixed, reserves, one varietal, one product…loads of options. Note it can be the same bottle of wine e.g. 3X single vineyard Pinot Noir sent quarterly. The majority of wine clubs are red only.

How often: monthly, bi-monthly, quarterly, biannual. I think annual is more a release or allocation program rather than a wine club.

How many: anything from 2-12 bottles per shipment. I would be thinking more 6 bottles per quarter for your main wines rather than 12, and perhaps as low as 2-3 per quarter for your reserves. Remember you can charge shipping so no need to send out cases to cover “free” shipping costs.

Subscription price: you should probably have at least three price tiers anchored around your normal middle priced package. The middle price package has your normal wines (not the B brands, not the reserves, just your biggest selling mainstream wine/s), that go out on a regular schedule (quarterly?). Your higher priced package is then made of the reserves and the lower priced package is made up of cheaper wines. You may have additional packages with more bottles, sent more frequently. The tiers allow people to trade up or down depending on their particular circumstances.

Commitment period: if you offer discounts then you may decide to demand people commit to the club for, say, 12 months. I don’t think this is necessary and is a significant barrier to signing up. Frankly, even if you offer 20% discount you still receive sufficient margin for the sale to be worthwhile.

Discounts: research shows that people who sign up for discounts quit wine clubs much earlier. It is also counter to DTC strategy in that we are trying to increase margin not diminish it. However, if you do offer a discount then you can offer it on all/some wines, none or less on reserves, on additional purchases made over and above packages, free tastings, events and other products like T-shirts.

Here’s how to reduce or eliminate discounts as a way to have people sign up to the wine club…

Non-Discount Member Benefits

The question to ask yourself is,

what would you do when your friends and VIPs visit the cellar door?

This makes up the member benefits. They might include: special library/reserve wines, exclusive or first time access to scare wines, tours of the vineyard/winery, member only tastings, a special area for members.

You can also use events as additional benefits such as winemaker dinners, art gallery shows, estate walks, wine education events, festivals (music, film etc) and the good old vineyard Party.

Sell more to members and sell gifts

Selling additional purchases to members over and above the package subscription is good practice. This may be along the lines of being able to buy more wines from the package that you particular like, or it maybe encouraging members to give subscriptions or bottles as gifts.

Grow your wine club

You can do this via email marketing, website eCommerce, events, phone sales and direct mail. But the best way is through your cellar door.

You want your staff to be trained to respectfully and naturally include wine club information as they talk through the tasting and/or the estate tour. There will be times at which a pitch may work best, for example when they look to purchase bottles of wine or at the end of the tour.

Most of all you want your staff to be enthusiastic. They should believe in it and they should probably receive a commission (as should the team). Sales should be printed out and stuck on the office wall so people can be motivated and ask high performers what they are doing well.

The wine club should also be highly visible. There should be posters, brochures and perhaps an iPad app for wine club sign ups.

Summary

A wine club is where the consumer gives you their credit details and agrees to receive wine periodically. The wine club is made up of packages that are built around product, shipment frequency, bottle #, prices, commitment period and discounts. A wine club is central to your DTC marketing strategy. Instead of single bottles sales you get case loads of sales over an extended period of time. You grow wine clubs by selling clubs in preference to bottles especially at the cellar door.

Sources and Disclosure

Disclosure: I sell wine club software and various related consultancy solutions.

Much of the information above is care of WineBusiness.com (requires a free email registration to instantly access). A key source is Lesley Berglund, check out:
Is Your Wine Club Healthy?
Grow Your Wine Club, Now!
Industry Roundtable: Wine Clubs

Other good articles include:
Tasting Room Sales Are Up, Visitor Traffic Is Up, and Wine Clubs Are Thriving
How to Successfully Sell Your Wine Club
And of course the SVB survey (pdf) and video of the panel discussion.

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