Segmentation and Targeting Strategy for a Wine Club
-
Upload
prakarsh-gupta -
Category
Data & Analytics
-
view
479 -
download
0
Transcript of Segmentation and Targeting Strategy for a Wine Club
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
700 N
umb
er o
f Me
mb
ers
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 Customers Segment 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%
Perc
ent
ag
e
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 Customers Segment 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%
Reve
nue
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 Strategy Targeting 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.