The value of that customer relationship is typically 5-6 times what they spend during their tasting room visit, and it takes some effort to ascertain this value, but this is critical to understanding how much can a winery spends to attract more customers.
Ever wondered about the true value of a customer relationship at your winery? It’s not just about their initial purchase; it’s about the potential long-term gains. Studies suggest that a customer’s lifetime value can be 5-6 times their first spend. Understanding this figure is key to smart marketing investments. But here’s the kicker: it’s not just about getting them in the door; it’s about maximizing their visit. By analyzing customer data, tracking spending patterns, and optimizing hospitality efforts, you can unlock the full potential of each guest. So, don’t just focus on attracting more visitors; focus on converting them into loyal customers. Trust me, it’s a game-changer!
Direct-to-consumer sales continually grow in importance for small wineries in the face of distributor consolidation. Wineries now have a greater range of options for eCommerce and POS systems, but few wineries effectively harness all the data they have to grow sales. A good financial team can help capture, organize, and analyze this information to support management and sales to increase revenue.
This data collection and analysis should start even before a guest arrives. Hotels use pace reports to judge how well they are progressing toward their occupancy goals, and tasting rooms should use them, as well. Your tasting room seats are like hotel rooms or seats in a restaurant – if you don’t sell them, you will never have a chance to sell that same seat again. Of course, if you don’t sell a bottle of wine today, you will still have a chance to sell it tomorrow, but you will have missed the opportunity to use that perishable seat to develop another customer relationship.
The value of that customer relationship is typically 5-6 times what they spend during their tasting room visit, and it takes some effort to ascertain this value, but this is critical to understanding how much can a winery spends to attract more customers. If you know the typical customer arriving at your winery is going to spend $3,000 and generate $2,000 in marginal profit over the next three years, you can justify a fairly healthy marketing budget to find more customers.
This process does require a few steps to develop actionable information. The winery needs to track customers over time in order to determine the customer’s lifetime spend. Fortunately, most CRM software will provide sufficient historical transaction data that your accounting team can download the transaction history, clean up the data to provide a year-by-year summary of each customer’s purchases. From this, you can determine a customer’s spend over a certain period. Then, combining this purchase history along with good costing information on the wines the customer has purchased (see previous post on costings), and a good understanding of the operating costs (credit card processing fees, shipping costs not borne by the customer, commissions paid to sales staff, etc.) allows the winery to determine the marginal profit from a customer. That provides guidance on how much a winery can spend to acquire more customers. If the cost of acquiring a customer is less than the customer’s lifetime marginal profit for the winery, the winery will see a steady growth in DTC sales and profitability.
Once the customers are on-site, it is time for the hospitality staff to shine, but the financial team should be helping the hospitality staff refine their efforts by looking at conversion rates, data capture, and order sizes on a routine basis. An aggressive marketing effort to attract more customers isn’t effective if it increases visits, but the staff isn’t capturing visitor data (so you can sell them more wine in the future) and converting them into customers. Given the difference in value between a visitor and a customer, the financial team should be able to help management develop an incentive plan that will reward staff and help the business turn more visitors into customers. In some cases, we have seen simple sales incentives more than double a tasting room’s performance.
FAQ Section: Enhancing Winery Sales and Customer Relationships
1. What is the typical value of a customer relationship at a winery?
- The typical value of a customer relationship at a winery is often 5-6 times what they spend during their tasting room visit. Understanding this figure is crucial for determining the marketing budget needed to attract more customers and foster long-term loyalty.
2. How can wineries harness data to boost sales?
- Wineries can harness data by tracking customer spending over time, analyzing purchase history, and understanding operational costs. By utilizing CRM software and organizing transaction data, wineries can identify customer lifetime value and tailor marketing efforts accordingly.
3. Why is it important for wineries to capture visitor data?
- Capturing visitor data allows wineries to convert them into customers and build lasting relationships. This data helps in understanding customer behavior, preferences, and purchase patterns, enabling targeted marketing strategies and personalized experiences.
4. What role does the financial team play in winery operations?
- The financial team plays a crucial role in refining hospitality efforts, analyzing conversion rates, and optimizing order sizes. By collaborating with the hospitality staff, they ensure that marketing efforts translate into increased sales and customer satisfaction.
5. How can wineries justify marketing budgets for customer acquisition?
- Wineries can justify marketing budgets by calculating the lifetime marginal profit from each customer. If the cost of acquiring a customer is lower than their lifetime value, wineries can expect steady growth in direct-to-consumer sales and profitability.
6. What steps are involved in developing actionable customer information?
- Developing actionable customer information involves tracking customer spending, analyzing purchase history, and understanding operational costs. CRM software, transaction data, and costing information are essential tools for this process.
7. Why should wineries prioritize customer relationships over one-time sales?
- Prioritizing customer relationships over one-time sales leads to long-term loyalty and increased customer lifetime value. Building strong connections with customers encourages repeat visits and referrals, ultimately driving revenue growth.
8. How can wineries optimize their tasting room seats for maximum profitability?
- Wineries can optimize tasting room seats by treating them like perishable inventory. By selling seats and converting visitors into customers, wineries maximize revenue potential and foster ongoing relationships with patrons.
9. What strategies can wineries employ to increase visitor conversion rates?
- Wineries can increase visitor conversion rates by offering incentives, optimizing hospitality experiences, and capturing visitor data. By rewarding staff for converting visitors into customers, wineries create a culture of sales excellence.
10. How do direct-to-consumer sales benefit small wineries?
- Direct-to-consumer sales benefit small wineries by reducing reliance on distributors and providing greater control over sales channels. With the right financial team and data-driven strategies, small wineries can capitalize on eCommerce opportunities and maximize revenue growth.
