Monday, June 10, 2019

The retention time of people on winery mailing lists

Each year the Silicon Valley Bank and Wine Business Monthly collaborate to produce some wine-industry metrics about Direct to Consumer sales in the USA. They do this by sending out a questionnaire to wineries across the land (see Insights for Successful Consumer Wine Sales Survey Questions). The results are compiled into the annual Insights for Successful Consumer Wine Sales publication.

One of the winery questions relates to the retention rate of mailing-list membership:
On average, how many months do wine club / allocated mailing list members stay in your most popular wine club release / mailing list program?
Last week, Wine Industry Insight highlighted the results for the surveys from 2015-2019, arranged by grape-growing region. These data are shown in the graph reproduced here, originally sourced from 2019 Insights for Successful Consumer Wine Sales.

Winery mailing list retention in the USA

There are several things worth noting about these results.

First, the average time for people to stay on a winery mailing list is 29 months, across the 5 regions and 5 surveys. Is 2.5 years a good retention time for mailing-list membership?

The marketing industry has always treated current customers as the “low-hanging fruit”, even suggesting that it costs 5–7 times as much to acquire a new customer as it does to maintain an existing customer relationship (The Wall Street Journal, Nov. 26 2008). The marketers therefore refer to the loss (and replacement) of customers as the “churn rate”.

It is therefore a maxim of successful company growth that retaining the existing customer base is more important than trying to acquire new customers. That is, if the retention rate falls below average then the company cannot be growing. There is the usual 80:20 rule — 80% of your business comes from 20% of your customers — which means that doing something to keep those 20% is more effective than trying to market to new customers.

It is not entirely clear to me that wineries understand these ideas particularly well. If mailing-list people (who are almost always current customers) are being retained for only 2–3 vintages, then this cannot be a Good Thing. How proactive are wineries at increasing their retention rates (or decreasing their churn rates)? It always seems to me that they expend a lot of their efforts on attending wine-tastings of various sorts, which are directed principally at getting new customers (or giving the wine trade free drinks). What are they doing for their current customers, beyond sending an email every now and then?

This is not to say that wineries do nothing, of course. Most wineries offer purchase discounts to their direct customers, for example, and also wines that are not available outside the mailing list. There are even wineries where almost all of their sales come from the mailing list, and there is actually a waiting list for the mailing list; and good luck to them. However, this begs the question of a 2.5-year average retention time. Discounted wine is apparently not enough for most customers to remain interested, at least on its own.

Some wineries also put on special events for existing customers, for example; but this is only effective for those customers who live close enough to attend conveniently. For example, I have always been on mailing-lists where these activities were of no practical relevance to me at all.

This highlights the important point about most of the business coming from the top 20% of the customers. Indeed, it has been suggested that the bottom 20% of the customers can actually be a drain on profit, because it costs more to service them than they bring in as income — the remaining 60% are break-even customers (CFO magazine, January 2009; The Wall Street Journal, June 22 2009). Strategies that target the top 20% (the core customers) are thus the key to financial success — trying to please too many different types of customers can be counter-productive.

This implies spending the effort to identify the top 20%. I am not suggesting that all wineries should conduct what is called a “customer-profitability analysis”, which would result in a “portfolio of needs-based customers”, who will be the profitable ones. However, it would probably pay dividends if the wineries did do it. Their limited resources could then be directed towards servicing and expanding the profitable customer relationships, rather than trying to keep everyone on the mailing list.

This is effectively a Loyalty Program of sorts, which will work only when it somehow enhances the overall value of being associated with the winery, and thereby motivates the loyal buyers to make their next purchase. Sadly, most of my experience with these things (such as frequent-flyer miles) is based on a workplace paying for the service but me getting the loyalty benefits. [Although I did once get free return plane tickets for my daughter and myself, based on the frequency with which we had traveled from Australia to Sweden.]

Other points

The second thing to note about the graph data is that the wineries in Washington state do best at retaining members, while the wineries in British Columbia generally do worst.1 It would be interesting to find out whether the winemakers of Washington are doing something different from their compatriots elsewhere. Or perhaps their wine is, in some way, simply more attractive for Direct to Consumer sales?

The third thing to notice is that there is an apparent increase in retention rates through time.2 In particular, the retention rates for the 2018 and 2019 surveys were 2 months longer than they were for 2015 and 2016. Is this cause for optimism? It would be nice to think so.

Later note: these issues are addressed by Rob McMillan in his comment below.


For me, the bottom line here is that a bit more attention to the current customers (mainly Baby Boomers, I guess) might be more effective than trying to woo new customers (eg. Millenials, etc). This will require careful attention to the causes of mailing-list churn, both throughout the wine industry as well as for individual businesses. The marketing people seem to be missing this simple point — the key to successful marketing is less publicity and more targeted selling. Customer relationships are not one-off events — we need to turn it into a long-term relationship (called the “customer lifetime value”).

1 The data are statistically significant: One-way ANOVA F = 10.59, p = 0.0001.
2 The data for the yearly averages are statistically significant: Correlation = 0.90, p = 0.039. The individual data for both Napa and Sonoma counties are also statistically significant.

Thanks to Bob Henry for directing me to this topic and its discussion.


  1. "The second thing to note about the graph data is that the wineries in Washington state do best at retaining members . . ."

    One explanation may be that Washington state residents find fewer of California's coveted wine brands in their neighborhood stores than they wish, so that relative scarcity compels residents to drink more home state wines and adjacent state Oregon wines.

    California wineries might view selling into Washington state as the equivalent of "selling coal to Newcastle."

    California vintners face less competition for wine store shelf space by selling into other non-wine producing states.

    A different example of the "low-hanging fruit."

  2. Let me throw some publicity Rob McMillan's way at Silicon Valley Bank, by citing his wine blog.

    "The Most Important Factor In Wine Club Success | SVB on Wine (April 5, 2014)"


    "How Family Wineries Will Get Your Attention In 2019 | Forbes magazine (Jan. 16, 2019)"



    "The 2019 Silicon Valley Bank (SVB) State of the Wine Industry Report, released this week, offers some insight. Among respondents, the direct sales mix for the average winery is built on 42% tasting room purchases with another 36% leaning on wine club enrollments. ..."

    1. Thanks for providing the data. I presume that this applies to smaller and mid-sized wineries, rather than the behemoths who monopolize the wine stores.

    2. In a lengthy and spirited 2014 exchange of comments between an anonymous California winery digital media marketer and me found here . . .

      "A winery digicom manager on his job"


      . . . let me cite this factoid:

      "[Fortune 500 company and international producer and marketer of beer, wine and spirits behemoth] Constellation’s social media marketing efforts generated $17 million in incremental sales.

      [Bob's aside: let's assume that includes mailing list marketing for Constellation-owned brands like Napa Valley-based Mondavi winery.]

      "Let me cite this report: 'Constellation Brands Reports Fiscal 2013 Results and Fiscal 2014 Outlook'

      "Their net sales were [U.S.]$2,796 million and operating income was [U.S.] $523 million.

      "[U.S.] $17 million represents six-tenths of 1% of their net sales. Restated, that represents an incremental hourly sale revenue of [U.S.] $1,941 (times 24 hours in a day and 365 days in a year). Contrasted against Constellations’s [U.S.] $319,178 hourly sales revenue.

      "Clearly, [U.S.] $1,941 is a rounding error level of sales revenue."

  3. Thanks for taking the time to go over the data David. To answer a couple of your questions about length of time in a club: Washington State does a better job (marginally) because their wineries are in Eastern Washington and tasting rooms which drive club growth then are well away from major cities. People who drive out to Eastern Washington are going there for one reason and that's the wines of that region. I've over time noted similar trends in other more remote regions like the Sierra Foothills, Mendocino, and Paso Robles.

    You didn't ask, but the growth in Napa is most likely due to the fact Napa is leading the industry in many DtC practices and was the first region to begin applying metrics to club and tasting room activity. They are a little ahead of best practices.

    Finally with British Columbia, the region is dominated by the Okanagan Valley which is an emerging fine wine region. Know more for tree fruit 20 years ago, varitel wine growing has been a more recent growth business and many of the orchards are being pulled. So while the Okanagan is spectacular and worth the visit, the tasting rooms are a newer component of business. That's been more recently augmented by more liberal shipping laws in Canada that allow more inter-provincial shipping. So that's a region that is starting from behind.

    Thanks again for looking at the data. We like everyone's views and critique. It makes us all better.

    1. Thanks for your reply, and for the extra information. It will be interesting to see how many of the mailing-list acquisitions continue to come via winery visits, and how much can be generated through other means. This would be useful for the more remote wineries.