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Segmentation and Targeting Strategy for a Wine Club

Cooper's Hawk, a wine and dining restaurant chain, saw a 4.64% decrease in total revenue from year 1 to year 2. Their wine club revenues decreased slightly while restaurant revenues decreased more. They have many competitors both direct and indirect. A segmentation analysis divided customers into 6 segments based on their total revenue and length of membership. The highest spending "Vintage Full-Bodied" segments contributed the most revenue and saw a small revenue increase, while the second highest spending "Unripe Full-Bodied" segment saw the largest revenue decrease.

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Marketing Communications Strategy Anchie Chen, Jane Flis, Prakarsh Gupta & Abby Rudd
Background
Business Context •  Focuses on handcrafted wine and modern casual dining •  Offers signature menu and Cooper’s Hawk wines, made in its private winery •  Opened first location in 2005 in the Chicago area; now located in seven states •  Each location has distinctive layout and décor, but all have same warmth and elegance that guests have come to expect •  Offers the following: •  Upscale casual dining restaurant •  Full-service bar •  Private barrel-aging room •  Napa-style tasting room and retail gift store •  Wine Club memberships
Competitors •  Cooper’s Hawk faces many competitors, both locally and nationally, that serve in the wine club industry (direct competitor), wine club and restaurant industry (direct) or wine industry (indirect). Direct Competitors While many competitors exist, many are online or not in the same regions as Cooper’s Hawk.
Competitors (continued) Indirect Competitors •  Traditional wineries •  Grocery stores •  Liquor stores •  Bars •  Wine warehouses •  Wine searcher services •  Online wine library chateaus •  Collectible wine stores
Situation Analysis Total Revenue •  Revenue decreased 4.64% from year 1 to year 2. $3,354,876 $3,199,162 $3,000,000 $3,250,000 $3,500,000 Year 1 Year 2 Total Revenue
Situation Analysis Yearly Revenues Broken Down by Wine Club and Restaurant Number of Customers Monthly Fee Monthly Total Wine Club Revenues Yearly Total Wine Club Revenues Total Year 1 Restaurant Revenues Total Year 2 Restaurant Revenues Silver 2,901 $16.99 $49,287 $591,455 $1,257,743 $1,152,887 Gold 1,364 $33.98 $46,348 $556,184 $949,492 $898,635 TOTAL 4,265 - $95,636 $1,147,640 $2,207,236 $2,051,522
Situation Analysis Average Number of Transactions •  Decreased 6.49% from year 1 to year 2 Average Transaction Amount •  Decreased .7% from year 1 to year 2 Year  1   Year  2                       33867   31668   $66.02     $65.56     $65.30     $65.40     $65.50     $65.60     $65.70     $65.80     $65.90     $66.00     $66.10     30,500   31,000   31,500   32,000   32,500   33,000   33,500   34,000   34,500  
SWOT Analysis STRENGTHS WEAKNESSES •  High reputation in the industry: 200 wine awards nationally and internationally •  In-store pick-up service •  Food program that pairs food and wine •  Relatively inexpensive monthly fee of ~$18.99 •  Customized banquet or party design service •  Tasting room with house-made wine designed for better drinking experience •  Reward system was designed without difference in segmentation - as a result, all customers are treated the same •  Competitors also have mostly vintage, classic wines •  Monthly delivery service is very expensive •  Tasting room has limit of drinks before purchase of membership OPPORTUNITIES THREATS •  The healthy eating trend has contributed to the growth of wine drinking in the last decade •  Wine is a popular gift to give someone •  The drinking trend has shifted towards lighter alcohol and healthier ingredients •  House-made wines are now able to compete with non-house wines •  Strong competitors have most of the wines Cooper’s Hawk has in its tasting room •  Some competitors have personal tasting profile records for individual customers to tailor products/ marketing •  Customers expect high levels of customer service, especially Wine Club members
Customer Profitability Analysis
Decile Analysis •  50% of customers contribute 83% of the total revenue. Decile Total Revenue Percent of Total Revenue 1 $1,484,326.11 34% 2 $757,739.05 18% 3 $551,627.31 13% 4 $431,845.92 10% 5 $345,691.54 8% 6 $268,824.55 6% 7 $202,901.01 5% 8 $147,245.86 3% 9 $88,931.17 2% 10 $33,002.69 1% Revenue is more widely dispersed among customers than Pareto’s 80/20 Rule typically suggests.
Decile Analysis (continued) 0% 5% 10% 15% 20% 25% 30% 35% 40% 1 2 3 4 5 6 7 8 9 10 Decile Percent of Total Revenue Contributed
Seasonality 0 100 200 300 400 500 600 700NumberofMembers New Wine Club Members by Month February and December are the most popular months for Wine Club registrations.
Segmentation
Segmentation Overview •  Only customer files with complete data were analyzed •  4,265 customer files included in segmentation scheme (66 were missing data) •  Customers were split into two groups before segmenting because the average total revenue varies substantially between them: •  Gold: 2-Bottle Wine Club members •  Silver: 1-Bottle Wine Club members •  Fixed base segmentation was used because it allowed us to define clear breaking points based on variables that differentiated customers. Furthermore, we could clearly determine our mid-spenders to target them in marketing communications; these customers have high potential to be migrated to high-spenders and thus increase future revenue. •  Total revenue and length variables were used because correlation among these two variables was low (.189). Because the Wine Club is a subscription-based service, length becomes a vital variable. Furthermore, nearly all customers in the database are active customers, meaning that recency isn’t a vital variable. In addition, the correlation between total revenue and recency was relatively high (-.341).
Segmentation Overview (continued) Silver Club Members •  Total Revenue Break Points: •  Median, 50th Percentile: ~$1,800 •  Even breaking point to distribute segment sizes •  90th Percentile: ~$3,000 •  Isolates high-revenue customers who require different communication messages •  Length Break Points: •  Median, 50th Percentile: 68 months •  Even breaking point to distribute segment sizes
Segmentation: Silver Club Members Unripe Light-Bodied Revenue ≤ $1,800 Length < 68 Months Unripe Medium-Bodied $1,800 < Revenue < $3,000 Length < 68 Months Unripe Full-Bodied Revenue ≥ $3,000 Length < 68 Months Vintage Light-Bodied Revenue ≤ $1,800 Length ≥ 68 Months Vintage Medium-Bodied $1,800 < Revenue < $3,000 Length ≥ 68 Months Vintage Full-Bodied Revenue ≥ $3,000 Length ≥ 68 Months $1,800 $3,000 68 Months Total Revenue Length 6 4 2 5 3 1
Segmentation Overview (continued) Gold Club Members •  Total Revenue Break Points: •  Median, 50th Percentile: ~$3,400 •  Even breaking point to distribute segment sizes •  90th Percentile: ~$5,200 •  Isolates high-revenue customers that require different communication messages •  Length Break Points: •  Median, 50th Percentile: 68 months •  Even breaking point to distribute segment sizes
Segmentation: Gold Club Members Unripe Light-Bodied Revenue ≤ $3,400 Length < 68 Months Unripe Medium-Bodied $3,400 < Revenue < $5,200 Length < 68 Months Unripe Full-Bodied Revenue ≥ $5,200 Length < 68 Months Vintage Light-Bodied Revenue ≤ $3,400 Length ≥ 68 Months Vintage Medium-Bodied $3,400 < Revenue < $5,200 Length ≥ 68 Months Vintage Full-Bodied Revenue ≥ $5,200 Length ≥ 68 Months $3,400 $5,200 68 Months Total Revenue Length 6 4 2 5 3 1
Segment Profiling
Segment Descriptions Segment #/Name Description 1 Vintage Full-Bodied High total revenue; longer than median length of relationship 2 Unripe Full-Bodied High total revenue; shorter than median length of relationship 3 Vintage Medium-Bodied Moderate total revenue; longer than median length of relationship 4 Unripe Medium-Bodied Moderate total revenue; shorter than median length of relationship 5 Vintage Light-Bodied Low total revenue; longer than median length of relationship 6 Unripe Light-Bodied Low total revenue; shorter than median length of relationship
Silver Club Total Revenue 6% 4% 25% 15% 22% 28% Vintage Full-Bodied Unripe Full-Bodied Vintage Medium- Bodied Unripe Medium- Bodied Vintage Light- Bodied Unripe Light-Bodied Percentage of Total CustomersSegment Name Total Revenue* Vintage Full-Bodied $667,357.32 Unripe Full-Bodied $466,190.86 Vintage Medium-Bodied $1,649,705.49 Unripe Medium-Bodied $984,820.42 Vintage Light-Bodied $991,235.99 Unripe Light-Bodied $1,109,125.34 Total $5,868,435.42 * Based on two years of restaurant revenue and approximately seven years of Wine Club revenue
Silver Club Revenue Contribution 1 2 3 4 5 6 % of Revenue 11.40% 7.90% 28.10% 16.80% 16.90% 18.90% % of Customers 5.7% 3.9% 25.4% 15.3% 22.1% 27.6% 0% 5% 10% 15% 20% 25% 30% Percentage Segment
Silver Club YOY Change in Revenue •  Revenues are declining within all segments of Silver Club customers, except the vintage full-bodied. •  Segment 2, unripe full-bodied, is experiencing the greatest decline in revenues compared to other segments. 1 2 3 4 5 6 Year 1 $256,430 $212,212 $495,779 $355,506 $221,770 $307,502 Year 2 $261,925 $179,495 $461,601 $335,830 $214,505 $290,989 % Change 2.1% -15.4% -6.9% -5.5% -3.3% -5.4% 0 100,000 200,000 300,000 400,000 500,000 600,000
Profile: Silver Club Members Vintage Full-Bodied Unripe Full-Bodied Vintage Medium-Bodied Unripe Medium-Bodied Vintage Light-Bodied Unripe Light-Bodied # of Customers 166 112 738 443 646 800 Total Revenue $667,357.32 $466,190.86 $1,649,705.49 $984,820.42 $991,235.99 $1,109,125.34 % Contributed to Total Revenue 11.40% 7.90% 28.10% 16.80% 16.90% 18.90% Average Length of Relationship 76.83 months 63.14 months 79.22 months 62.99 months 74.88 months 61.57 months Average Total Revenue in Wine Club $1,305.36 $1,072.79 $1,345.87 $1,070.25 $1,272.19 $1,046.05 Average Total Revenue in Restaurant $2,714.86 $3,089.62 $889.50 $1,152.82 $271.79 $340.35 Average Recency 0.669 months 0.696 months 1.875 months 1.535 months 5.397 months 4.634 months Average Frequency 29.67 28.50 13.62 15.54 5.37 6.26
13% 6% 28% 16% 16% 22% Vintage Full-Bodied Unripe Full-Bodied Vintage Medium- Bodied Unripe Medium- Bodied Vintage Light-Bodied Unripe Light-Bodied Gold Club Revenue Percentage of Total CustomersSegment Name Total Revenue* Vintage Full-Bodied $667,772.48 Unripe Full-Bodied $303,248.73 Vintage Medium-Bodied $1,433,909.06 Unripe Medium-Bodied $794,073.33 Vintage Light-Bodied $814,228.02 Unripe Light-Bodied $1,098,471.64 Total $5,111,703.26 * Based on two years of restaurant revenue and approximately seven years of Wine Club revenue
Gold Club Revenue Contribution 1 2 3 4 5 6 % of Revenue 13.10% 5.90% 28.10% 15.50% 15.90% 21.50% % of Customers 7.3% 3.4% 25.7% 14.5% 19.9% 29.3% 0% 5% 10% 15% 20% 25% 30% 35% Revenue Segment
Gold Club YOY Change in Revenue •  Revenues are declining within all segments of Gold Club customers. •  Segment 6, unripe light-bodied, is experiencing the greatest decline in revenues compared to other segments. 1 2 3 4 5 6 Year 1 $239,622 $123,769 $389,409 $272,461 $178,802 $301,615 Year 2 $235,960 $118,247 $379,852 $257,384 $175,745 $287,632 % Change -1.5% -4.5% -2.5% -5.5% -1.7% -4.6% 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000
Profile: Gold Club Members Vintage Full-Bodied Unripe Full-Bodied Vintage Medium-Bodied Unripe Medium-Bodied Vintage Light-Bodied Unripe Light-Bodied # of Customers 99 46 350 198 272 399 Total Revenue $667,772.48 $303,248.73 $1,433,909.06 $794,073.33 $814,228.02 $1,098,471.64 % Contributed to Total Revenue 13.10% 5.90% 28.10% 15.50% 15.90% 21.50% Average Length of Relationship 81.13 months 63.17 months 79.88 months 63.27 months 73.74 months 61.56 months Average Total Revenue in Wine Club $2,756.84 $2,146.65 $2,714.52 $2,150.01 $2,505.53 $2,091.77 Average Total Revenue in Restaurant $3,988.33 $4,445.71 $1,382.37 $1,860.46 $487.96 $661.29 Average Recency 0.263 months 0.609 months 0.909 months 0.687 months 2.790 months 2.120 months Average Frequency 49.32 48.67 22.72 27.02 9.84 12.44
Targeting
Targeting StrategyTargeting Strategy We selected vintage medium-bodied segments as our targets for both Sliver and Gold levels for following reasons: •  Longer relationship with Cooper’s Hawk and more engaged (30% of total transactions) •  Contribute more than a quarter of total revenue •  Average check size is $60, which is well below that of vintage full-bodied ($97) and unripe full-bodied ($82). •  The average total revenue is $2,834, which is way below the top spenders at $5,038 •  The average annual frequency for Gold level is 11.36, which is half of the full-bodied segments 1 2 3 4 5 6 Check_Total $82.53 $97.11 $59.69 $67.58 $47.29 $50.57 $0 $20 $40 $60 $80 $100 $120 Average Check Total – Gold & Silver 1 2 3 4 5 6 TotalRevenue $5,038 $4,870 $2,834 $2,775 $1,975 $1,841 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 Average Total Revenue – Gold & Silver
Silver Club Vintage Medium-Bodied Profile Total Revenue Contributed $1,649,705.49 Percent of Total Revenue Contributed 28.10% Average Length 79.22 months Average Total Revenue Spent in Wine Club $1,345.87 Average Total Revenue Spent in Restaurant $889.50 Average Recency 1.88 months Average Frequency (2-year period) 13.62 Club Type Red: 34.1% Sweet: 4.1% Variety 52% White: 9.8% Most Recent Revenue Center Banquet: 0.8% Bar: 25.2% Patio: 3.8% Server: 47% Tasting Room: 23.2%
Silver Club Vintage Medium-Bodied Profile •  Contribute largest portion to Silver Club’s total revenue (28.1%), but their average total spend is moderate compared to the vintage and unripe full-bodied segments. •  Indicates there is a larger number of customers that fall into this segment. •  Typically spend more through restaurant as compared to Wine Club. •  Extremely frequent and recent with a long-term relationship with Cooper’s Hawk that provides evidence of their preference for the brand. •  The variety club type is preferred by these customers as they receive one bottle of wine per month and desire a mix between receiving red and white wines.
Gold Club Vintage Medium-Bodied Profile Total Revenue Contributed $1,433,909.06 Percent of Total Revenue Contributed 28.10% Average Length 79.88 months Average Total Revenue Spent in Wine Club $2,714.52 Average Total Revenue Spent in Restaurant $1,382.37 Average Recency 0.91 months Average Frequency (2-year period) 22.72 Club Type Red: 37.7% Sweet: 2.6% Variety 55.1% White: 4.6% Most Recent Revenue Center Banquet: 0.0% Bar: 29.4% Patio: 3.1% Server 43.7% Tasting Room 23.7%
Gold Club Vintage Medium-Bodied Profile •  Contribute largest portion to Gold Club’s total revenue (28.1%), but their average total spend is moderate compared to the vintage and unripe medium-bodied segments •  Indicates there is a larger number of customers that fall into this segment. •  Typically spend more through restaurant as compared to Wine Club. •  Extremely frequent and recent with a long-term relationship with Cooper’s Hawk that provides evidence of their preference for the brand. •  Variety club type is preferred by these customers as they receive two bottle of wine per month and desire a mix between receiving red and white wines. •  Red wines are extremely popular as well.
Marketing Communications
Key Survey Results and Insights 25% 18% 20% 22% 10% 5% Reason for Joining Quality Variety Reasonable Fee Exclusive Benefits Peers Others 0 0.5 1 1.5 2 2.5 3 3.5 More Educational Opportunity Wine Diversity Special Event and Celebrations Rewards Ranking* for Areas of Improvement Wine quality and exclusive benefits were the top two reasons for joining the Wine Club. Rewards program received the highest ranking for things Cooper’s Hawk could improve upon *Lower value is means higher ranking
$3,354,876 $3,199,162 $3,359,120 $3,000,000 $3,250,000 $3,500,000 Year 1 Year 2 Year 3 Marketing Objective Cooper’s Hawk aims to grow total revenues generated by 5.0%, or $161,194, in the next year (year 3). Must increase Revenue by $159,958
Silver Vintage Medium-Bodied Behavioral Objective To convert 50% of the Silver Vintage Medium- Bodied members to the Gold Club level in year 3. Mental Objective Cooper’s Hawk Gold Wine Club offers benefits that are exclusively available for Gold Club members; as a Gold Club Member, you are rewarded for the value you bring to the company. Why purchase just one bottle a month when you can purchase two to share with your friends and family?
Achieving the Marketing Objective Silver Vintage Medium-Bodied Segment Year 2 # of Customers Price Monthly Revenue Yearly Revenue 738 $16.99 $12,538.62 $150,463.44 Year 3 # of Customers Price Monthly Revenue Yearly Revenue 369 $16.99 $6,269.31 $75,231.72 369 $33.98 $12,538.62 $150,463.44 INCREASE OVER YEAR 2 $75,231.72
Silver Vintage Medium-Bodied Marketing Communications: Tactic 1 •  Email campaign delivered to Silver Vintage Medium- Bodied customers that communicates the new incentive package when upgrading from the Silver Level to Gold Level wine club. •  If customers upgrade to the higher club level, they are rewarded with a personalized bottle of an exclusive, handcrafted wine with the member’s name and anniversary date included on packaging. •  Survey results indicate that customers desire to be rewarded more and to receive exclusive benefits that make club members feel special and appreciated. •  This special gift is a symbolic trophy of the relationship between Cooper’s Hawk and the club member. •  This special incentive taps into a customer’s self- motivation and esteem for being a highly-valued club member.
Silver Vintage Medium-Bodied Marketing Communications: Tactic 2 •  Email campaign delivered to Silver Vintage Medium-Bodied customers each week that promotes the increased incentives for Gold level members. •  Gold Level members will receive 1.5 points for every $1 spent, as opposed to the previous 1- for-1 reward system. •  Survey results revealed that customers want to be rewarded and feel like they are valued. •  This strategy incentivizes customers to upgrade to the Gold Level membership and by increasing the pace of redemption for rewards.
Gold Vintage Medium-Bodied Behavioral Objective To increase frequency of restaurant visits by 4 from 11.36 per year to 15.36 per year for 50% of Gold Vintage Medium-Bodied customers in year 3. and To increase average transaction amount by $20.11 from $57.45 to $71.81 (an increase of 35%) for 50% of Gold Vintage medium-Bodied customers in year 3. Mental Objectives Every meal at a Cooper’s Hawk Winery and Restaurant location is the ideal accompaniment to one of their exclusive, unique, and perfectly- paired wines to enjoy with your family and friends.
Gold Vintage Medium-Bodied Achieving the Marketing Objective Transaction Amount Year 2   Number of Customers 350 Average Transaction Amount - Restaurant $57.45 Frequency  11.36 Yearly Revenue $228,421.20 Year 3   Number of Customers 175 Average Transaction Amount - Restaurant $57.45 Frequency  11.36 Yearly Revenue From Lower Average Spend $114,210.60 Number of Customers 175 New Average Transaction Amount – Restaurant $77.56 Frequency 11.36 Yearly Revenue From Higher Average Spend $154,189.28 Total Yearly Revenue $268,399.88 New Overall Average Transaction Amount - Restaurant $67.50 REVENUE INCREASE OVER YEAR 2 $39,978.68
Gold Vintage Medium-Bodied Achieving the Marketing Objective (Continued) Frequency Year 3   Number of Customers 175 New Average Transaction Amount - Restaurant $67.50 Increase in Average Frequency 4 REVENUE INCREASE OVER YEAR 2 $47,250.00
Gold Vintage Medium-Bodied Marketing Communications: Tactic 1 •  Gold Vintage Medium-Bodied customers are given a a special stamp card at their next wine pick-up. •  The stamp card correlates to the year-long promotion where customers collect stamps for each transaction made in a Cooper’s Hawk restaurant serving-area, bar, patio or tasting room. •  If a club member collects 15 stamps in one year, he/she is invited to an exclusive, year-end tasting of new dishes being tested for future menu changes. •  Survey results indicate that customers desire to be rewarded more and invited to more exclusive events that make club members feel special and appreciated.
Gold Vintage Medium-Bodied Marketing Communications: Tactic 2 •  In-restaurant promotion encouraging Gold Vintage Medium-Bodied customers to bring a group of five or more people. •  Promotion includes receiving 20% off a bottle of wine for the table if the member’s party is five or more. •  This encourages positive word-of-mouth marketing as customers and club levels share this information across networks and encourage people to come with them to Cooper’s Hawk. •  Survey results revealed that customers want to be rewarded in more ways.
Achieving the Marketing Objective Year 2 vs. Year 3 Year 2 Total Revenue $3,199,162 Percentage Increase in Revenue Needed for Year 3 (From Marketing Objective) 5% Amount Increase in Revenue Needed for Year 3 (From Marketing Objective) $159,958 Year 3 Revenue Increase From Silver Club Members Converting to Gold Club $75,231.72 Year 3 Revenue Increase From Gold Increased Restaurant Transaction Amount $39,978.68 Year 3 Revenue Increase From Gold Increased Frequency $47,250.00 YEAR 3 TOTAL REVENUE INCREASE OVER YEAR 2 $162,460.40
Summary
Summary Background •  Total revenue from Wine Club members is decreasing from year 1 to year 2. Customer Profitability •  52% of customers contribute 80% of the total revenue. Revenue is more widely dispersed among our customers than Pareto’s 80/20 Rule typically suggests. Segmentation •  Fixed basis segmentation was used to segment 4,265 complete customer data files on the variables of total revenue and length of relationship split between Silver Club and Gold Club members. Targeting •  Vintage Medium Bodied segments were selected as targets for both Silver and Gold members. These targets are moderate-value, longer-term customers. Marketing Communications •  Communication messages focused on maximizing membership level, increasing frequency, increasing average transaction size and making the relationship more rewarding.

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Segmentation and Targeting Strategy for a Wine Club

  • 1.
  • 2.
  • 3.
    Business Context •  Focuseson handcrafted wine and modern casual dining •  Offers signature menu and Cooper’s Hawk wines, made in its private winery •  Opened first location in 2005 in the Chicago area; now located in seven states •  Each location has distinctive layout and décor, but all have same warmth and elegance that guests have come to expect •  Offers the following: •  Upscale casual dining restaurant •  Full-service bar •  Private barrel-aging room •  Napa-style tasting room and retail gift store •  Wine Club memberships
  • 4.
    Competitors •  Cooper’s Hawkfaces many competitors, both locally and nationally, that serve in the wine club industry (direct competitor), wine club and restaurant industry (direct) or wine industry (indirect). Direct Competitors While many competitors exist, many are online or not in the same regions as Cooper’s Hawk.
  • 5.
    Competitors (continued) Indirect Competitors • Traditional wineries •  Grocery stores •  Liquor stores •  Bars •  Wine warehouses •  Wine searcher services •  Online wine library chateaus •  Collectible wine stores
  • 6.
    Situation Analysis Total Revenue • Revenue decreased 4.64% from year 1 to year 2. $3,354,876 $3,199,162 $3,000,000 $3,250,000 $3,500,000 Year 1 Year 2 Total Revenue
  • 7.
    Situation Analysis Yearly RevenuesBroken Down by Wine Club and Restaurant Number of Customers Monthly Fee Monthly Total Wine Club Revenues Yearly Total Wine Club Revenues Total Year 1 Restaurant Revenues Total Year 2 Restaurant Revenues Silver 2,901 $16.99 $49,287 $591,455 $1,257,743 $1,152,887 Gold 1,364 $33.98 $46,348 $556,184 $949,492 $898,635 TOTAL 4,265 - $95,636 $1,147,640 $2,207,236 $2,051,522
  • 8.
    Situation Analysis Average Numberof Transactions •  Decreased 6.49% from year 1 to year 2 Average Transaction Amount •  Decreased .7% from year 1 to year 2 Year  1   Year  2                       33867   31668   $66.02     $65.56     $65.30     $65.40     $65.50     $65.60     $65.70     $65.80     $65.90     $66.00     $66.10     30,500   31,000   31,500   32,000   32,500   33,000   33,500   34,000   34,500  
  • 9.
    SWOT Analysis STRENGTHS WEAKNESSES • High reputation in the industry: 200 wine awards nationally and internationally •  In-store pick-up service •  Food program that pairs food and wine •  Relatively inexpensive monthly fee of ~$18.99 •  Customized banquet or party design service •  Tasting room with house-made wine designed for better drinking experience •  Reward system was designed without difference in segmentation - as a result, all customers are treated the same •  Competitors also have mostly vintage, classic wines •  Monthly delivery service is very expensive •  Tasting room has limit of drinks before purchase of membership OPPORTUNITIES THREATS •  The healthy eating trend has contributed to the growth of wine drinking in the last decade •  Wine is a popular gift to give someone •  The drinking trend has shifted towards lighter alcohol and healthier ingredients •  House-made wines are now able to compete with non-house wines •  Strong competitors have most of the wines Cooper’s Hawk has in its tasting room •  Some competitors have personal tasting profile records for individual customers to tailor products/ marketing •  Customers expect high levels of customer service, especially Wine Club members
  • 10.
  • 11.
    Decile Analysis •  50%of customers contribute 83% of the total revenue. Decile Total Revenue Percent of Total Revenue 1 $1,484,326.11 34% 2 $757,739.05 18% 3 $551,627.31 13% 4 $431,845.92 10% 5 $345,691.54 8% 6 $268,824.55 6% 7 $202,901.01 5% 8 $147,245.86 3% 9 $88,931.17 2% 10 $33,002.69 1% Revenue is more widely dispersed among customers than Pareto’s 80/20 Rule typically suggests.
  • 12.
    Decile Analysis (continued) 0% 5% 10% 15% 20% 25% 30% 35% 40% 12 3 4 5 6 7 8 9 10 Decile Percent of Total Revenue Contributed
  • 13.
    Seasonality 0 100 200 300 400 500 600 700NumberofMembers New Wine ClubMembers by Month February and December are the most popular months for Wine Club registrations.
  • 14.
  • 15.
    Segmentation Overview •  Onlycustomer files with complete data were analyzed •  4,265 customer files included in segmentation scheme (66 were missing data) •  Customers were split into two groups before segmenting because the average total revenue varies substantially between them: •  Gold: 2-Bottle Wine Club members •  Silver: 1-Bottle Wine Club members •  Fixed base segmentation was used because it allowed us to define clear breaking points based on variables that differentiated customers. Furthermore, we could clearly determine our mid-spenders to target them in marketing communications; these customers have high potential to be migrated to high-spenders and thus increase future revenue. •  Total revenue and length variables were used because correlation among these two variables was low (.189). Because the Wine Club is a subscription-based service, length becomes a vital variable. Furthermore, nearly all customers in the database are active customers, meaning that recency isn’t a vital variable. In addition, the correlation between total revenue and recency was relatively high (-.341).
  • 16.
    Segmentation Overview (continued) Silver ClubMembers •  Total Revenue Break Points: •  Median, 50th Percentile: ~$1,800 •  Even breaking point to distribute segment sizes •  90th Percentile: ~$3,000 •  Isolates high-revenue customers who require different communication messages •  Length Break Points: •  Median, 50th Percentile: 68 months •  Even breaking point to distribute segment sizes
  • 17.
    Segmentation: Silver ClubMembers Unripe Light-Bodied Revenue ≤ $1,800 Length < 68 Months Unripe Medium-Bodied $1,800 < Revenue < $3,000 Length < 68 Months Unripe Full-Bodied Revenue ≥ $3,000 Length < 68 Months Vintage Light-Bodied Revenue ≤ $1,800 Length ≥ 68 Months Vintage Medium-Bodied $1,800 < Revenue < $3,000 Length ≥ 68 Months Vintage Full-Bodied Revenue ≥ $3,000 Length ≥ 68 Months $1,800 $3,000 68 Months Total Revenue Length 6 4 2 5 3 1
  • 18.
    Segmentation Overview (continued) Gold ClubMembers •  Total Revenue Break Points: •  Median, 50th Percentile: ~$3,400 •  Even breaking point to distribute segment sizes •  90th Percentile: ~$5,200 •  Isolates high-revenue customers that require different communication messages •  Length Break Points: •  Median, 50th Percentile: 68 months •  Even breaking point to distribute segment sizes
  • 19.
    Segmentation: Gold ClubMembers Unripe Light-Bodied Revenue ≤ $3,400 Length < 68 Months Unripe Medium-Bodied $3,400 < Revenue < $5,200 Length < 68 Months Unripe Full-Bodied Revenue ≥ $5,200 Length < 68 Months Vintage Light-Bodied Revenue ≤ $3,400 Length ≥ 68 Months Vintage Medium-Bodied $3,400 < Revenue < $5,200 Length ≥ 68 Months Vintage Full-Bodied Revenue ≥ $5,200 Length ≥ 68 Months $3,400 $5,200 68 Months Total Revenue Length 6 4 2 5 3 1
  • 20.
  • 21.
    Segment Descriptions Segment #/NameDescription 1 Vintage Full-Bodied High total revenue; longer than median length of relationship 2 Unripe Full-Bodied High total revenue; shorter than median length of relationship 3 Vintage Medium-Bodied Moderate total revenue; longer than median length of relationship 4 Unripe Medium-Bodied Moderate total revenue; shorter than median length of relationship 5 Vintage Light-Bodied Low total revenue; longer than median length of relationship 6 Unripe Light-Bodied Low total revenue; shorter than median length of relationship
  • 22.
    Silver Club TotalRevenue 6% 4% 25% 15% 22% 28% Vintage Full-Bodied Unripe Full-Bodied Vintage Medium- Bodied Unripe Medium- Bodied Vintage Light- Bodied Unripe Light-Bodied Percentage of Total CustomersSegment Name Total Revenue* Vintage Full-Bodied $667,357.32 Unripe Full-Bodied $466,190.86 Vintage Medium-Bodied $1,649,705.49 Unripe Medium-Bodied $984,820.42 Vintage Light-Bodied $991,235.99 Unripe Light-Bodied $1,109,125.34 Total $5,868,435.42 * Based on two years of restaurant revenue and approximately seven years of Wine Club revenue
  • 23.
    Silver Club RevenueContribution 1 2 3 4 5 6 % of Revenue 11.40% 7.90% 28.10% 16.80% 16.90% 18.90% % of Customers 5.7% 3.9% 25.4% 15.3% 22.1% 27.6% 0% 5% 10% 15% 20% 25% 30% Percentage Segment
  • 24.
    Silver Club YOYChange in Revenue •  Revenues are declining within all segments of Silver Club customers, except the vintage full-bodied. •  Segment 2, unripe full-bodied, is experiencing the greatest decline in revenues compared to other segments. 1 2 3 4 5 6 Year 1 $256,430 $212,212 $495,779 $355,506 $221,770 $307,502 Year 2 $261,925 $179,495 $461,601 $335,830 $214,505 $290,989 % Change 2.1% -15.4% -6.9% -5.5% -3.3% -5.4% 0 100,000 200,000 300,000 400,000 500,000 600,000
  • 25.
    Profile: Silver ClubMembers Vintage Full-Bodied Unripe Full-Bodied Vintage Medium-Bodied Unripe Medium-Bodied Vintage Light-Bodied Unripe Light-Bodied # of Customers 166 112 738 443 646 800 Total Revenue $667,357.32 $466,190.86 $1,649,705.49 $984,820.42 $991,235.99 $1,109,125.34 % Contributed to Total Revenue 11.40% 7.90% 28.10% 16.80% 16.90% 18.90% Average Length of Relationship 76.83 months 63.14 months 79.22 months 62.99 months 74.88 months 61.57 months Average Total Revenue in Wine Club $1,305.36 $1,072.79 $1,345.87 $1,070.25 $1,272.19 $1,046.05 Average Total Revenue in Restaurant $2,714.86 $3,089.62 $889.50 $1,152.82 $271.79 $340.35 Average Recency 0.669 months 0.696 months 1.875 months 1.535 months 5.397 months 4.634 months Average Frequency 29.67 28.50 13.62 15.54 5.37 6.26
  • 26.
    13% 6% 28% 16% 16% 22% Vintage Full-Bodied Unripe Full-Bodied VintageMedium- Bodied Unripe Medium- Bodied Vintage Light-Bodied Unripe Light-Bodied Gold Club Revenue Percentage of Total CustomersSegment Name Total Revenue* Vintage Full-Bodied $667,772.48 Unripe Full-Bodied $303,248.73 Vintage Medium-Bodied $1,433,909.06 Unripe Medium-Bodied $794,073.33 Vintage Light-Bodied $814,228.02 Unripe Light-Bodied $1,098,471.64 Total $5,111,703.26 * Based on two years of restaurant revenue and approximately seven years of Wine Club revenue
  • 27.
    Gold Club RevenueContribution 1 2 3 4 5 6 % of Revenue 13.10% 5.90% 28.10% 15.50% 15.90% 21.50% % of Customers 7.3% 3.4% 25.7% 14.5% 19.9% 29.3% 0% 5% 10% 15% 20% 25% 30% 35% Revenue Segment
  • 28.
    Gold Club YOYChange in Revenue •  Revenues are declining within all segments of Gold Club customers. •  Segment 6, unripe light-bodied, is experiencing the greatest decline in revenues compared to other segments. 1 2 3 4 5 6 Year 1 $239,622 $123,769 $389,409 $272,461 $178,802 $301,615 Year 2 $235,960 $118,247 $379,852 $257,384 $175,745 $287,632 % Change -1.5% -4.5% -2.5% -5.5% -1.7% -4.6% 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000
  • 29.
    Profile: Gold ClubMembers Vintage Full-Bodied Unripe Full-Bodied Vintage Medium-Bodied Unripe Medium-Bodied Vintage Light-Bodied Unripe Light-Bodied # of Customers 99 46 350 198 272 399 Total Revenue $667,772.48 $303,248.73 $1,433,909.06 $794,073.33 $814,228.02 $1,098,471.64 % Contributed to Total Revenue 13.10% 5.90% 28.10% 15.50% 15.90% 21.50% Average Length of Relationship 81.13 months 63.17 months 79.88 months 63.27 months 73.74 months 61.56 months Average Total Revenue in Wine Club $2,756.84 $2,146.65 $2,714.52 $2,150.01 $2,505.53 $2,091.77 Average Total Revenue in Restaurant $3,988.33 $4,445.71 $1,382.37 $1,860.46 $487.96 $661.29 Average Recency 0.263 months 0.609 months 0.909 months 0.687 months 2.790 months 2.120 months Average Frequency 49.32 48.67 22.72 27.02 9.84 12.44
  • 30.
  • 31.
    Targeting StrategyTargeting Strategy Weselected vintage medium-bodied segments as our targets for both Sliver and Gold levels for following reasons: •  Longer relationship with Cooper’s Hawk and more engaged (30% of total transactions) •  Contribute more than a quarter of total revenue •  Average check size is $60, which is well below that of vintage full-bodied ($97) and unripe full-bodied ($82). •  The average total revenue is $2,834, which is way below the top spenders at $5,038 •  The average annual frequency for Gold level is 11.36, which is half of the full-bodied segments 1 2 3 4 5 6 Check_Total $82.53 $97.11 $59.69 $67.58 $47.29 $50.57 $0 $20 $40 $60 $80 $100 $120 Average Check Total – Gold & Silver 1 2 3 4 5 6 TotalRevenue $5,038 $4,870 $2,834 $2,775 $1,975 $1,841 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 Average Total Revenue – Gold & Silver
  • 32.
    Silver Club VintageMedium-Bodied Profile Total Revenue Contributed $1,649,705.49 Percent of Total Revenue Contributed 28.10% Average Length 79.22 months Average Total Revenue Spent in Wine Club $1,345.87 Average Total Revenue Spent in Restaurant $889.50 Average Recency 1.88 months Average Frequency (2-year period) 13.62 Club Type Red: 34.1% Sweet: 4.1% Variety 52% White: 9.8% Most Recent Revenue Center Banquet: 0.8% Bar: 25.2% Patio: 3.8% Server: 47% Tasting Room: 23.2%
  • 33.
    Silver Club VintageMedium-Bodied Profile •  Contribute largest portion to Silver Club’s total revenue (28.1%), but their average total spend is moderate compared to the vintage and unripe full-bodied segments. •  Indicates there is a larger number of customers that fall into this segment. •  Typically spend more through restaurant as compared to Wine Club. •  Extremely frequent and recent with a long-term relationship with Cooper’s Hawk that provides evidence of their preference for the brand. •  The variety club type is preferred by these customers as they receive one bottle of wine per month and desire a mix between receiving red and white wines.
  • 34.
    Gold Club VintageMedium-Bodied Profile Total Revenue Contributed $1,433,909.06 Percent of Total Revenue Contributed 28.10% Average Length 79.88 months Average Total Revenue Spent in Wine Club $2,714.52 Average Total Revenue Spent in Restaurant $1,382.37 Average Recency 0.91 months Average Frequency (2-year period) 22.72 Club Type Red: 37.7% Sweet: 2.6% Variety 55.1% White: 4.6% Most Recent Revenue Center Banquet: 0.0% Bar: 29.4% Patio: 3.1% Server 43.7% Tasting Room 23.7%
  • 35.
    Gold Club VintageMedium-Bodied Profile •  Contribute largest portion to Gold Club’s total revenue (28.1%), but their average total spend is moderate compared to the vintage and unripe medium-bodied segments •  Indicates there is a larger number of customers that fall into this segment. •  Typically spend more through restaurant as compared to Wine Club. •  Extremely frequent and recent with a long-term relationship with Cooper’s Hawk that provides evidence of their preference for the brand. •  Variety club type is preferred by these customers as they receive two bottle of wine per month and desire a mix between receiving red and white wines. •  Red wines are extremely popular as well.
  • 36.
  • 37.
    Key Survey Resultsand Insights 25% 18% 20% 22% 10% 5% Reason for Joining Quality Variety Reasonable Fee Exclusive Benefits Peers Others 0 0.5 1 1.5 2 2.5 3 3.5 More Educational Opportunity Wine Diversity Special Event and Celebrations Rewards Ranking* for Areas of Improvement Wine quality and exclusive benefits were the top two reasons for joining the Wine Club. Rewards program received the highest ranking for things Cooper’s Hawk could improve upon *Lower value is means higher ranking
  • 38.
    $3,354,876 $3,199,162 $3,359,120 $3,000,000 $3,250,000 $3,500,000 Year 1 Year2 Year 3 Marketing Objective Cooper’s Hawk aims to grow total revenues generated by 5.0%, or $161,194, in the next year (year 3). Must increase Revenue by $159,958
  • 39.
    Silver Vintage Medium-Bodied BehavioralObjective To convert 50% of the Silver Vintage Medium- Bodied members to the Gold Club level in year 3. Mental Objective Cooper’s Hawk Gold Wine Club offers benefits that are exclusively available for Gold Club members; as a Gold Club Member, you are rewarded for the value you bring to the company. Why purchase just one bottle a month when you can purchase two to share with your friends and family?
  • 40.
    Achieving the MarketingObjective Silver Vintage Medium-Bodied Segment Year 2 # of Customers Price Monthly Revenue Yearly Revenue 738 $16.99 $12,538.62 $150,463.44 Year 3 # of Customers Price Monthly Revenue Yearly Revenue 369 $16.99 $6,269.31 $75,231.72 369 $33.98 $12,538.62 $150,463.44 INCREASE OVER YEAR 2 $75,231.72
  • 41.
    Silver Vintage Medium-Bodied MarketingCommunications: Tactic 1 •  Email campaign delivered to Silver Vintage Medium- Bodied customers that communicates the new incentive package when upgrading from the Silver Level to Gold Level wine club. •  If customers upgrade to the higher club level, they are rewarded with a personalized bottle of an exclusive, handcrafted wine with the member’s name and anniversary date included on packaging. •  Survey results indicate that customers desire to be rewarded more and to receive exclusive benefits that make club members feel special and appreciated. •  This special gift is a symbolic trophy of the relationship between Cooper’s Hawk and the club member. •  This special incentive taps into a customer’s self- motivation and esteem for being a highly-valued club member.
  • 42.
    Silver Vintage Medium-Bodied MarketingCommunications: Tactic 2 •  Email campaign delivered to Silver Vintage Medium-Bodied customers each week that promotes the increased incentives for Gold level members. •  Gold Level members will receive 1.5 points for every $1 spent, as opposed to the previous 1- for-1 reward system. •  Survey results revealed that customers want to be rewarded and feel like they are valued. •  This strategy incentivizes customers to upgrade to the Gold Level membership and by increasing the pace of redemption for rewards.
  • 43.
    Gold Vintage Medium-Bodied BehavioralObjective To increase frequency of restaurant visits by 4 from 11.36 per year to 15.36 per year for 50% of Gold Vintage Medium-Bodied customers in year 3. and To increase average transaction amount by $20.11 from $57.45 to $71.81 (an increase of 35%) for 50% of Gold Vintage medium-Bodied customers in year 3. Mental Objectives Every meal at a Cooper’s Hawk Winery and Restaurant location is the ideal accompaniment to one of their exclusive, unique, and perfectly- paired wines to enjoy with your family and friends.
  • 44.
    Gold Vintage Medium-Bodied Achievingthe Marketing Objective Transaction Amount Year 2   Number of Customers 350 Average Transaction Amount - Restaurant $57.45 Frequency  11.36 Yearly Revenue $228,421.20 Year 3   Number of Customers 175 Average Transaction Amount - Restaurant $57.45 Frequency  11.36 Yearly Revenue From Lower Average Spend $114,210.60 Number of Customers 175 New Average Transaction Amount – Restaurant $77.56 Frequency 11.36 Yearly Revenue From Higher Average Spend $154,189.28 Total Yearly Revenue $268,399.88 New Overall Average Transaction Amount - Restaurant $67.50 REVENUE INCREASE OVER YEAR 2 $39,978.68
  • 45.
    Gold Vintage Medium-Bodied Achievingthe Marketing Objective (Continued) Frequency Year 3   Number of Customers 175 New Average Transaction Amount - Restaurant $67.50 Increase in Average Frequency 4 REVENUE INCREASE OVER YEAR 2 $47,250.00
  • 46.
    Gold Vintage Medium-Bodied MarketingCommunications: Tactic 1 •  Gold Vintage Medium-Bodied customers are given a a special stamp card at their next wine pick-up. •  The stamp card correlates to the year-long promotion where customers collect stamps for each transaction made in a Cooper’s Hawk restaurant serving-area, bar, patio or tasting room. •  If a club member collects 15 stamps in one year, he/she is invited to an exclusive, year-end tasting of new dishes being tested for future menu changes. •  Survey results indicate that customers desire to be rewarded more and invited to more exclusive events that make club members feel special and appreciated.
  • 47.
    Gold Vintage Medium-Bodied MarketingCommunications: Tactic 2 •  In-restaurant promotion encouraging Gold Vintage Medium-Bodied customers to bring a group of five or more people. •  Promotion includes receiving 20% off a bottle of wine for the table if the member’s party is five or more. •  This encourages positive word-of-mouth marketing as customers and club levels share this information across networks and encourage people to come with them to Cooper’s Hawk. •  Survey results revealed that customers want to be rewarded in more ways.
  • 48.
    Achieving the Marketing Objective Year2 vs. Year 3 Year 2 Total Revenue $3,199,162 Percentage Increase in Revenue Needed for Year 3 (From Marketing Objective) 5% Amount Increase in Revenue Needed for Year 3 (From Marketing Objective) $159,958 Year 3 Revenue Increase From Silver Club Members Converting to Gold Club $75,231.72 Year 3 Revenue Increase From Gold Increased Restaurant Transaction Amount $39,978.68 Year 3 Revenue Increase From Gold Increased Frequency $47,250.00 YEAR 3 TOTAL REVENUE INCREASE OVER YEAR 2 $162,460.40
  • 49.
  • 50.
    Summary Background •  Total revenuefrom Wine Club members is decreasing from year 1 to year 2. Customer Profitability •  52% of customers contribute 80% of the total revenue. Revenue is more widely dispersed among our customers than Pareto’s 80/20 Rule typically suggests. Segmentation •  Fixed basis segmentation was used to segment 4,265 complete customer data files on the variables of total revenue and length of relationship split between Silver Club and Gold Club members. Targeting •  Vintage Medium Bodied segments were selected as targets for both Silver and Gold members. These targets are moderate-value, longer-term customers. Marketing Communications •  Communication messages focused on maximizing membership level, increasing frequency, increasing average transaction size and making the relationship more rewarding.