Wineries uncork predictive analytics with tools from e-commerce provider

Wineries are preparing to tackle customer retention with predictive analytics tools thanks to a new partnership between an e-commerce provider and Information Builders.

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When Matt Wood worked as a tasting room and wine club manager for Franciscan Estate winery in Napa Valley, Calif., it meant taking on Saturday shifts. Over the next 18 months, Wood began recognizing those making repeat visits.

“I began to think, if I ever had good enough data, I should be able to predict when someone is going to leave the [wine] club based on the last time they visited the tasting room,” said Wood, a 14-year industry veteran and now the estate director for Domaine Chandon and Newton Vineyard.

Wineries record customer data, but information gathered in the tasting room tends to reside in a separate, disconnected repository than wine club subscriptions. That left Wood with the desire -- but an inability -- to perform a historical analysis in the hopes of gleaning insight into future behavior.

The problem Wood describes is a fairly common one for the wine industry, according to Ronald Scharman, the chief operating officer for e-commerce Software as a Service (SaaS) provider eWinery Solutions. Scharman describes the wine industry as “slow adapters to everything,” and analytics or business intelligence (BI) is no exception.

“Wineries will have an accounting system, a warehouse management system, a different software system for managing the wholesale distribution, tasting room point of sale, a CRM system, mobile,” Scharman said. “So they could have seven or eight different software systems they’re trying to get information from.”

EWinery, which provides a toolkit for the back-end functions of a winery’s website and currently works with 400 vineyards around the world -- including 12 of the 15 top wine producers -- hopes to remove those silos. In August, the SaaS provider and Information Builders, a BI software company, announced a partnership aimed at arming wineries with a platform to integrate disparate systems and enable easier methods for populating dashboards, tracking key performance indicators (KPIs) and taking advantage of data to more precisely market to customers.

An industry unlike any other
The fractured environment is due, in part, to the unique nature of the wine and spirits industry, which faces compliance restrictions and regulations that differ from other retail markets. For example, wineries need proper licenses to ship both in and out of state.

“That aspect makes it difficult to use services not specific for wineries,” Scharman said, referring to online shopping cart features.

Additionally, the product lifecycle for wineries can cause hiccups. While some retailers may be able to change production at the flip of the switch, once wineries have dedicated space and resources to a particular varietal of grape, it means dedicating years of time as well.

“Look at what happened to merlot after Sideways,” Scharman said, referencing the 2004 film credited with causing sales of one of America’s most widely purchased wines to plummet.

External factors press certain constraints upon the industry, but wineries are also held back by internal factors as well, such as culture and finances.

“It’s a very resource-constrained environment,” Wood said.

Scharman echoed the sentiment, stating that wineries will choose to invest in wine makers and wine club managers before IT, a role most vineyards employ part time or outsource completely.

“How you make decisions in a winery is not the same as it is in most businesses,” Scharman said. “As a result, technology is treated as a cost and not as a revenue generator.”

The financial impediment and industry culture challenges leave midsize and smaller wineries without the resources to invest in expensive analytics or business intelligence tools, making self-service BI an affordable option.

Yet, according to Scharman, even larger wineries with enough capital for such expenditures are signing on to eWinery Solutions.

“People realize one aspect may be security, but a bigger aspect is sticking to what you’re good at rather than trying to be all things to all people,” Scharman said.

He refers to the wineries he works with as “partners,” as ideas from one winery may be implemented into the software and made available to every customer.

Software as a Service slices up some answers
Direct customer sales, through wine clubs and tasting rooms, have become a necessary approach for vineyards, Scharman said, and one that can be influenced by analytics.

The shift came in 2005 when a U.S. Supreme Court’s decision removed obstacles for direct customer purchases. While wineries may have been slow to embrace direct sales, many were spurred on by a sharp economic downturn just a few years later.

“Distributors did what everyone else did: They cleaned up their balance sheets,” Scharman said. “Wineries couldn’t count on them, so they spent more time on direct sales.”

A hurdle, though, was data. Information from distributors kept track of depletions but didn’t reveal much about who was actually purchasing wine at a package store. Data wineries collected themselves through tasting room visits commonly had a hygiene problem.

“CRM is talked about, but wineries are not using it the way they should be,” Scharman said. “They should be using the data to determine who their customers are.”

Wine club members, for example, sign on to receive on monthly or bimonthly gift. Capturing and integrating data from multiple systems to reveal customer behavior may help wineries determine how to reach them before they cancel their subscriptions. The same thing can be said regarding those visiting the tasting room.

“If people who are buying never bought wine over $30 but bought lots of wine under $30, why would you market wines to them over $30?” Scharman said.

In other words, it’s accessing and analyzing the data to accomplish what Wood was looking to do years ago, and it’s something he hopes he’ll still be able to do.

Having started his position at Domaine Chandon less than a month ago, Wood said one of his first orders of business is to delve into historical analysis. He plans to identify at-risk customers who may cancel their wine club subscriptions and experiment with ways -- such as invitations to attend a dinner at the winery -- to keep them from leaving.

“We’ll see by interacting with people at specific periods of time if we can actually improve our profitability on those customers,” Wood said. “When you walk into a winery, in the space of about 30 minutes, you’re giving someone your credit card and having them make decisions for you. You don‘t really interact with other businesses that way. I’m intrigued by our ability to understand those behaviors. … If we can predict where we’re losing them, we can act.”

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