WinePulse - Definitions of DTC Terms

DTC - Direct to Consumer
AOV Average Order Value
KPI - Key Performance Indicators
Conversion Rate - Wine Order Conversion Rate (CR)
Promotions in WinePulse DTC Reports
What is RFM? Recency, Frequency, Monetary analytics of your DTC business
Wine Club Attrition in the DTC world
Blank WineDirect's Contact Status appear as 'Other' Customer Type in WinePulse
WinePulse RFM Segments & Scoring

Common wine-centric DTC Terms

DTC - Direct to Consumer

DTC stands for Direct to Consumer. When a winery sells directly to a consumer, that is a DTC sale. Wine sales to consumers through a wholesaler or broker are not DTC sales. DTC Sales can be via a Tasting Room, Ecommerce (website), Winery Events, Social Media etc.

AOV Average Order Value

AOV stands for Average Order Value. When using WinePulse this AOV value is calculated for each Sales Channel based on the Total Wine Sales (orders that include bottles of wine) divided by the number of orders that include bottles of Wine.

KPI - Key Performance Indicators

KPI stands for Key Performance Indicators. Examples of DTC/Tasting Room KPI's are number of visitors/tasters, wine conversion rate, average order value (AOV), etc.

Use KPI's to set measurable DTC targets and help to achieve defined benefits. Reporting on the identified targets over time provides a way to gauge success in the achievement your DTC goals.

Conversion Rate - Wine Order Conversion Rate (CR)

In WinePulse the Wine Order Conversion Rate (CR) is based on the number of tasters who purchased bottles of wine. For example if there are 50 tasters in a day and 25 purchase wine, the wine order conversion rate is 25/50 or 50%.

Note that wine purchases are calculated by counting the number of orders that included Product Type = 'wine'. Zero value and refund orders are not included.

We count the number of tasters, then we count the number of orders that included Product Type ='Wine'.

Conversion Rate - Wine Club Signup Conversion

In WinePulse, the Wine Club Sign up conversion rate is the number of NON-wine club tasters who joined the Wine Club. For example if 30 of today's 50 tasters are non-wine club and 3 join the wine club, the wine club conversion rate is 3/30 or 10%.

FYI: Normal Industry range is between 5-7%.

Note in WinePulse the 'Customer Type' field (Guest Customer, 1st Time Customer, Repeat Customer) is used to identify a non-wine club customer. Individual tasting SKU's are not used for this calculation.
Wine Club Signups with No (or a Blank) Sales Associate are not counted in the Signup Conversion calculation.

Promotions in WinePulse DTC Reports

The existing WinePulse Promo Reports are using only the '1st Promotion' applied to a wine product in an order. This is the only value displayed in the Order Detail report. )Future new WinePulse promotion reports may provide the ability to show all promotions applied to a product as in some situations multiple promotions may apply to a product).

What is RFM? Recency, Frequency, Monetary analytics of your DTC business

There is a lot of buzz in the wine business world right now about 'RFM'. All of your customers (from the 'Best Customers' to the 'Lost Customers') have different needs and will respond to marketing campaigns in different ways.

Being able to segment your customers will allow you to make your campaigns more relevant to your customers and therefore improves the likelihood of your customers responding to your marketing, and in turn increasing your sales.

What is RFM analysis?

Recency-Frequency-Monetary (RFM) analysis is a relatively simple technique that allows you to use past purchasing behavior to segment your customers, which can dramatically improve your marketing effectiveness:

Recency (R) - Days since last purchase

Frequency (F) - Total number of wine orders

Monetary value (M) - Total monetary value

Customer segmentation with RFM Analysis

WinePulse scores your customers on a 1- 5 scale against each of the RFM definitions (5 being the highest score).

For example, one of your 'Best Customers' who has purchased Recently, Frequently and spends a lot of Money on those purchases would score a 5 in each category, whereas a 'Lost Customer', who has not purchased Recently or Frequently and spends little Money, would score a 1 for each category:

	R	F	M
Best Customer	5	5	5
Lost Customer	1	1	1

Please note the following important points with respect to WinePulse’s approach to RFM:

We use two year’s worth of wine purchase history and only orders containing one or more bottles of wine are counted
Customers are included in the analysis if they have made at least two wine order purchases in the last two years or if they are an Active/Canceled WC member with one or more wine orders.
Only wine revenue is included in the M amount
Wine orders with a value of zero $ or less are excluded (examples of these could be wine club exchanges/refunds, replacement for corked/damaged bottles, complimentary wine club memberships).
Where a customer score fits into more than one segment, the first on the list will be where the customer is placed.
We ignore club status when performing the analysis, so you could find, for example, a Canceled club member in the 'Best Customer' segment.
Recency scoring is calculated as shown in this table:

Last Order Recency	Recency Score
Between 0 and 30 days (one month)	5
Between 31 and 120 days (1 - 4 months)	4
Between 121 and 270 days (4 - 9 months)	3
Between 271 days and 360 days (9 - 12 months)	2
Between 361 and 730 days (12- 24 months)	1

Below is a table showing each of WinePulse's RFM segments and detailed scorings for each.:

Customer Segment	R	F	M	Activity	Suggested Actions
Best Customers	4+	3+	5	Bought recently, buy often and spend the most!	Reward them. Offer early release of new vintages. Will promote your brand.
Potential Best Customers	3+	1-2	4-5	Made a few big purchases - need to keep them engaged	Keep them sweet via special offers, don’t lose them to competition, talk to them.
Best Customers at Risk	3	3+	5	Spent big money and purchased often, but haven’t purchased for a few months. Need to ensure they stay!	Call them or send personalized emails to reconnect, offer incentives, provide helpful resources.
Loyal Customers	4+	4+	3-4	Spend good money with us often. Responsive to promotions.	Upsell higher value wines. Ask for reviews. Engage them.
Potential Loyal Customers	4+	2-3	3-4	Recent customers, bought a few times	Offer club membership / loyalty program, recommend other wines they might like.
Loyal Customers at Risk	3	2+	3-4	Above average frequency and monetary values. Not purchased for a few months though.	Make limited time offers, Recommend new wines based on past purchases. Reactivate them.
Regular Customers	4+	3+	1-2	Regular shoppers, but don’t spend much.	Create brand awareness, try to upsell to higher value wines.
Newer Customers	4+	1-2	1-4	Recent shoppers, but not frequent purchasers	Provide on-boarding support, give them early success, capture wine preferences, start building relationship.
Dormant Customers	2-3	1+	1+	Last purchase was several months ago; unremarkable frequency and monetary scores	Offer other relevant wines and limited time discounts. Recreate brand value. Focus on high LTV customers.
Lost Customers	1	1+	1+	Lowest recency scores - haven't seen them all year.	Revive interest with reach out campaign, especially high LTV, ignore otherwise.

Now you can work on ideas for your marketing campaigns for each type of Customer Segment.

Use the following two reports to identify your customers and to export them. (WineDirect users: Learn how to create a targeted marketing campaign using Contact Types).

07- Customer Analysis > 06- RFM Analysis

07- Customer Analysis > 07- RFM Customer Data

Wine Club Attrition in the DTC world

Simply put, attrition is a way of quantifying how many people are leaving your wine club. A healthy wine club will always have some attrition, balanced by new members joining.

This balancing act - new people joining, versus existing members leaving - is quantified using four different metrics:

Attrition Rate: percentage of members leaving within a certain period of time (typically monthly or yearly)
Retention Rate: percentage of members staying in the club within a certain period of time
Acquisition Rate: percentage of new members joining the club within a certain period of time
Growth Rate: net growth in your club after taking into account attrition and acquisition.

Consider the following example scenario. It is January 1st and you have 1,000 members in your club. Let’s imagine that by Jan 31st, you have signed up 100 new club members in the tasting room, but 50 club members have decided to cancel. So at the end of the month you have increased club members by 50 so that you now have 1,050 club members.

Here are how your monthly metrics look:

Monthly Attrition Rate: 5% (50 cancelled members / 1000 starting members)
Monthly Retention Rate: 95% (950 retained members / 1000 starting members)
Monthly Acquisition Rate: 10% (100 new members / 1000 starting members)
Monthly Growth Rate: 5% (50 net new members / 1000 starting members)

A monthly attrition of 2-3% is considered healthy, as long as you keep your acquisition rate higher than this number to ensure your club continues to grow.

Blank WineDirect Contact Status appear as 'Other' Customer Type in WinePulse

WineDirect categorizes customers using the following 'Contact Status:

1st Time Customer
Repeat Customer
Club Member
Prospect
Blank

This information is included in Wine Direct's order detail, but sometimes this field is blank. WinePulse uses this Contact Status to determine Customer Type. Any order with a [Blank] Contact Status is shown as 'Other' Customer Type in WinePulse reporting.

A brief explanation of these Contact Statuses is provided below, but please refer to WineDirect's documentation for more detail on how WineDirect classifies contacts.

1st Time Customer

Has email address
$+ order value
1 order

If a Guest Customer Order is Held and then Resumed on the POS, it creates a 'No Name' Customer, which WineDirect classifies as a 1st Time Customer. It can also be a prospect who buys for first time - or is a Quick Add on the POS has created a contact before check out.

Repeat Customer

Customer with a Contact record (email, name etc), who is not a current Club Member and has 2+ orders. (Could be a cancelled Club Member).

[Blank] Customer

Likely to be a Guest Customer. Order was not put on hold as no contact was created prior to checkout. Order value can be >$0. Email address for receipt not given.WineDirect Contact not created. Billing Name within the order may have been pulled from credit card but no contact will be created for that order. In WinePulse these are displayed as 'Other'.

Prospect

May/may not have email address
$0+ order value

Note: it is possible for a Prospect to have a single order, which has some value. One business scenario that gives this result is when an email address was provided for a receipt for a 'Guest Customer' (after the order is processed and marked complete). In this case the WineDirect LTV and Contact Status is not updated in the customer statistics/data

These types of orders will have a blank Contact Status and will appear in the 'Other' customer WinePulse bucket. A second order under this contact would convert Contact Status to 'Repeat Customer'.

Entering a name/email Address after processing the order for an email receipt WILL result in a new contact being created BUT since the new contact is created AFTER the order transaction is processed, it will not consider the order as the 'first transaction' and therefore the customer is not marked as 1st time customer (the email receipt dialog appears after the order has been processed). Note that reporting on these type of orders WinePulse updates the customer order record and displays these customer orders correctly as 1st Time Customer.

Additional Information on WineDirect order processing

If a Guest Customer order is placed on hold, the Contact Status updates to 'Prospect' or '1st Time Customer,' but instead of showing as Guest Customer, it will display as 'no name'. WineDirect’s POS includes a 'Clear Contact' feature, which allows changes to a resumed held order - this can restore the contact name to Guest Customer for any 'No Name' orders.

WinePulse RFM Segments & Scoring

WinePulses RFM (Recency, Frequency, Monetary) segments and detailed scorings for each.

Customer Segment	R	F	M	Activity	Suggested Actions
Best Customers	4+	3+	5	Bought recently, buy often and spend the most!	Reward them. Offer early release of new vintages. Will promote your brand.
Potential Best Customers	3+	1-2	4-5	Made a few big purchases - need to keep them engaged	Keep them sweet via special offers, don’t lose them to competition, talk to them.
Best Customers at Risk	3	3+	5	Spent big money and purchased often, but haven’t purchased for a few months. Need to ensure they stay!	Call them or send personalized emails to reconnect, offer incentives, provide helpful resources.
Loyal Customers	4+	4+	3-4	Spend good money with us often. Responsive to promotions.	Upsell higher value wines. Ask for reviews. Engage them.
Potential Loyal Customers	4+	2-3	3-4	Recent customers, bought a few times	Offer club membership / loyalty program, recommend other wines they might like.
Loyal Customers at Risk	3	2+	3-4	Above average frequency and monetary values. Not purchased for a few months though.	Make limited time offers, Recommend new wines based on past purchases. Reactivate them.
Regular Customers	4+	3+	1-2	Regular shoppers, but don’t spend much.	Create brand awareness, try to upsell to higher value wines.
Newer Customers	4+	1-2	1-4	Recent shoppers, but not frequent purchasers	Provide on-boarding support, give them early success, capture wine preferences, start building relationship.
Dormant Customers	2-3	1+	1+	Last purchase was several months ago; unremarkable frequency and monetary scores	Offer other relevant wines and limited time discounts. Recreate brand value. Focus on high LTV customers.
Lost Customers	1	1+	1+	Lowest recency scores - haven't seen them all year.	Revive interest with reach out campaign, especially high LTV, ignore otherwise.