Naked Wine Angel Retention

How did you really look at retention at Naked? For example, after an angel has been depositing for three months, then you know they are going to stay for at least two years?

It’s never quite as simple as that. You have to deal in broad brushes. The basic model was, if you can retain them for four months, then the fundamental economics get better. The level of retention goes through an inflection point and they are a more stable customer. The reason why it’s four months is partly that, after four months, regular payments become a bit of a habit but also that’s when the second wine case comes in. There are, on average, 3.5 orders a year. Therefore, it’s roughly every four months when they are ordering wine. If you want to broad brush how you are going to drive these metrics, you can look at how many mature angels do I produce; how many do I get to that level?

It’s a real lifecycle economic business, so you have to think about the customer lifecycle. Obviously, you have your cost to acquire, at the start, which is both the media and getting the voucher out there to someone. It is also the case and the delivery and any money you make or lose at that level. There are the customer service costs, as well, that goes into that, serving those customers early on. It then really becomes a question of, what is the lifetime value and what is the payback time on that? A lot of people think about these things as lifetime value divided by the CAC and, if that is an acceptable number, then where are we going to go? But I think you’ve also got think about the payback time because if that is too long, you end up in a world where you are just going to run out of cash, in terms of acquiring these things. It’s a bit too long and it’s a bit too uncertain to know when this money is going to come back.

If you contrast it with Moneybox where our lifetime values are fine, but they are back-weighted, because it takes people time to build up a balance before you earn management fees and things on that. With Naked, it was much more upfront so the payback times were pretty good.

The other thing is, if you are doing that, you really have to look at it from a cohort basis. You have to really think about the customers in terms of how long it has been since they joined and how they are performing relative to other cohorts. You track those things over time. A classic example is Christmas customers; although their first purchase tends to be quite big, they tend to be not great cohorts because they are slightly less like to purchase regularly, throughout the year. A lot of them will come back next Christmas, but they definitely have lower frequency during the year.

Do they still deposit as an angel?

Most of them would still deposit as an angel. The way Naked works is that you can get the money back at any time. There is no cost of depositing, apart from earning whatever meagre interest your bank account is going to pay.

In the UK, it’s roughly £20 a month that is deposited?