Continuous Improvement – preparing for the competitive storm
By Carl Giavanti and Aron Brajtman, CPA
If I had mentioned KPI’s eight years ago when I started doing marketing consulting, I would have been escorted out of the room, maybe even the AVA. That is not the case anymore.
Measuring your sales performance is critical, as much as we’d like to not believe it. Remember the “field of dream” days, when you could just make great wine and it would sell itself? Until the great recession (2008-2009) timeframe you may have had this experience. We have fond memories of inventory depletions, really big Memorial Day and Labor Day weekends, and festivals and events where you sold a lot of wine. I remember many wineries saying they didn’t bother getting emails from consumers, nor doing a lot of marketing or tracking sales performance. KPIs? What?
Now we all know those days are long gone and wineries must run themselves like well oiled marketing machines to ensure their survival. I like to say that 50% of total staff time (including your own) needs to be spent on marketing – wholesale, retail, trade and DTC – whatever your channel mix.
Peter Drucker, business management guru once stated “If you can’t measure it, you can’t improve it”, which brings us to the point of this article – Key Performance Indicators.
Don’t think these business measurements apply to your winery? Unless you are a cult winery that is fully allocated with a substantial wait list, bear with me and continue reading.
KPIs are a way for wineries to define success and measure performance, and make progress toward your business goals. For most small producers, DTC goals are selling more wine, improving sales efficiency, acquiring and retaining customers, and retaining staff and improving morale.
This article is primarily concerned with improving DTC sales performance, because the pool of high-end high-frequency consumers is limited and there are many more wineries marketing to them than ever. Additionally, we know that consumers can be fickle. They support your brand and bring their friends around when the value they get from interacting with the winery exceeds the price they are asked to pay. This is a topical issue as we are seeing early signs that the “premiumization” trend is weakening, with the introduction of new marks and second labels at lower price points.
When I query winery owners and managers about tracking and using metrics, I find that most can give me basic sales data such as total revenue by month or compared to last year, percent of tasting room versus wine club sales, DTC compared to other channels, and statistical data such as number of club members, size of email list, number of social followers, etc. However, not everyone successfully tracks total number of tasting room visitors (new, repeat, paid, comp, club), referral sources (how they heard about you), and staff performance and labor metrics.
Once you are capturing all of this data you’re ready to turn it into actionable management information that will drive business results. If you are not great with spreadsheets, or current system does not provide performance tracking functionality, find one that does.
Here are some basic winery DTC sales measurements (KPIs) to implement:
- Sales per employee: The higher the number in the tasting room indicates whether the staff focuses on supplying the customer with value and whether staff captures a portion of that value for the winery.
- Conversion ratios: What percentage of visitors to the tasting room actually buy? What percentage join the wine club? What percentage leave their email for further communication?
- Average order value (AOV): Average sale per tasting room visitor? Is the trend going up?
- Average annual wine club sales per member? What is the average add-on percentage?
- What is the Wine Club attrition rate annually?
- What is average tenure? What measures are taken to retain loyal customers?
Tie your winery’s goals to these measurements and clearly communicate the importance to staff:
- Post individual, team and winery goals
- Review and make adjustments monthly
- Share success, and highlight team members
- Establish a bonus program to reward staff
Continuous Improvement is the mantra for small production wineries and the key to survival in this ultra competitive environment. Start now – Create goals, track data, establish KPIs, then measure, improve and Repeat!
I track wine industry benchmarks for these KPIs. Feel free to contact me if you’d like that data.
Finally, thanks to Aron Brajtman for initiating this article, providing the KPIs from an accountant point of view and reminding me that even wineries need to be run as businesses. If you found the KPIs helpful, the next step is to understand KFIs (Key Financial Indicators) such as Liquidity, Earnings Growth, Profitability, Activity, Efficiency and Leverage. If you’d like a copy of the winery Financial Metrics white paper by Aron, please email me request at " target="_blank" rel="noopener">
CARL GIAVANTI is Winery Publicist with a DTC Marketing background. He’s completing his 8th year of winery consulting. Carl has been involved in business marketing and public relations for over 25-years; originally in technology, digital marketing and project management, and now as a winery media relations consultant. Clients are or have been in Napa Valley, Willamette Valley, and the Columbia Gorge. (www.CarlGiavantiConsulting.com/Media).
ARON BRAJTMAN is a CPA and the owner of a CPA firm that deals uniquely in supplementing the operational skills and talents of entrepreneurs with accounting and finance strategy. Aron has over 30 years of experience providing accounting and business solutions to small and mid-sized businesses and nonprofit institutions. He is located in a fast growing wine region in Canada known as Prince Edward County where he provides services to local wineries and other businesses. http://www.abrajtman.com/