Naked Wines & Customer Lifetime Value | In Practise

Naked Wines & Customer Lifetime Value

Group Director of Strategy and Performance at Majestic Wine

Learning outcomes

  • How Naked Wines is different from other wine clubs
  • The importance of the connection between the wine maker and Angels
  • How Naked Wines set a tone of voice and communication style with customers
  • Customer onboarding and managing churn
  • The power of discount vouchers as a customer acquisition channel
  • Challenges optimizing lifetime value
  • Potential growth channels for Naked in UK and US
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Executive Bio

Neil Campbell

Group Director of Strategy and Performance at Majestic Wine

Neil has nearly 20 years of experience in consumer internet with experience at large companies such as Amazon and smaller growth companies such as Naked Wines. Neil joined Naked in 2016 as the business 6 months after Majestic Wine purchased the company and his role was to run Strategy where he was responsible for getting the right data architecture in place for Naked’s growth plan. After a MBA at Harvard in 2008, Neil spent 4 years at Amazon running various categories before launching a startup which eventually sold to Google in 2014. Neil also previously worked at Betfair and is now VP of Growth at Moneybox, a UK fintech startup. Read more

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Neil, can you start with a short introduction to your background, please?

My name is Neil Campbell and I am currently the VP of Growth, at Moneybox, who are a financial management app, focusing on wealth management, ISAs, lifetime ISAs, etc., for young people. My background, in general, has always been in consumer internet. I started off at OC&C Strategy Consultants and after a stint there and an MBA at Harvard, I worked at Amazon for many years. I ran handheld electronics, in the UK – mobile phones, cameras and satnavs. After that, I did a startup with a bunch of Amazon guys, called Rangespan, which was eventually sold to Google. Then I had a brief stint at Betfair and three years at Naked Wines, before joining Moneybox about a year and a half ago.

Did you join Naked after the Majestic Wine purchase?

Yes; it was probably about six months after the deal had gone through. Rowan was in place as the CEO and he was at that point where he was filling out the management team with various people; some Naked people he had brought over but also some external hires, like myself.

I guess your role was to come in and professionalize the growth plan for Naked?

Yes; I had a whole range of roles at Naked. A lot of the time, I headed up the structure of things that Rowan was thinking of and how we could approach it. I’m quite a data-led person, so a lot of it was, do we have the right kind of data stuff in place. But really, a whole range of things.

Why was Naked growing relatively slowly, under Majestic?

That’s an interesting question and it probably points to the reason that, ultimately, the two were separated, which was just a management time thing. Taking on two very different organizations, with very different cultures and very different approaches to their business and different challenges, is just a bit of a distraction. One of the reasons that the Majestic deal happened when it did was that, essentially, the realization was that Naked Wines USA, as led by the current CEO of the group, Nick Devlin, was just absolutely flying. They realized that was the big opportunity here and, if we’re going to go after that, then you need the focus on it and you need all your resources to be put towards that.

That was really part of the reason that Naked grew slower than it could have done, under the Majestic ownership and has boomed since. Obviously, it has been helped very much by coronavirus, as being a pure, online business. But yes, that is probably one of the reasons.

Obviously, there is the million-dollar question as to what would have happened if we hadn’t had Covid, but would you have expected a product market fit in the US, even without coronavirus, for Naked?

I think the main impact of coronavirus has been to accelerate a bunch of trends that were already happening. Working from home and doing Zoom calls like this was always something that was happening and, for a proportion of the population, it just happened a lot quicker and became a new thing, very quickly. Once we get past the vaccine stage, we’ll be back to a point where it will settle down at a much higher level. I think you have seen the same in internet retailing, in the UK. One of the most advanced markets and it was sitting at about 25% penetration, ex-grocery. The word on the street now is that it has jumped to 40%. It was always increasing, but you’ve just seen that jump come a lot quicker.

I think that applies to Naked, as well. It was already making nice, solid, strong progress in the US. It had a really good business model. It sat in a regulatory environment, which could exploit the three-tier distribution system quite well, in the US, and had an advantage there that gave it a real gross margin advantage. But at the same time, the trend was just towards online wine and towards provenance of goods and authenticity of experience and Naked had all those things, in advance.

How, exactly, is Naked different from the other wine clubs in the market?

Naked has really been based around the wine maker as the central person, and around the customer and the connection between those two. Really, that is what the naked part of Naked Wines means; there is just nothing in between. You get to see the full, unbridled truth. As they put the wine maker central, it’s less about this amazing bottle of Châteauneuf-du-Pape and that Châteauneuf-du-Pape is an appellation that you absolutely need and all the rest. That is a lot less important than the story of the person who has started this vineyard, in Provence, and how they got it together and the challenges they faced, and the choices and crises that they faced, along the way.

They really put the wine maker at the center of things and, in the early iterations of Naked Wines, you actually backed a wine maker. It wasn’t that you just put money into the general fund of Naked Wines and that was used to support wine makers. It was more, I back this actual individual wine maker; I have £5 a month go to one wine maker and £5 a month go to another one. That talks to the fact that the early iterations, which they then moved away from, were really about putting the wine maker centrally.

Some of the stories are just really wonderful. Carmen Stevens was the first black female wine maker in South Africa and it was just the kind of story that people really get behind and feel an ownership of. That was what Naked was based around. Here is this wine maker; you can see her story. Not only that, you can talk to her, you can review her wines and have her respond to them. You can meet her on the tasting tour, when it happens in the UK. It was really about putting them centrally, whereas a lot of other online wine clubs tend to be much more about the wine. It was the classic long-tail Amazon model which is, if a supermarket has got 50 wines, we’re going to go online and have 2,000 wines. We’re going to list every wine we can find. We’re going to cover all the appellations and we’re going to have this depth.

Naked isn’t that. Depending on the time of year, it’s about 500 to 600 wines listed, but it’s much more about the wine maker stories behind them. I think that’s what makes it unique. What is really lovely about that is that is actually makes the whole thing quite consistent. Rowan talks about the business model, but how much of the price of your bottle of wine is going into the sales and marketing of that wine and that’s just dead cost. When you add that up with the dead cost of the bottle and duty and the VAT, suddenly you discover that your £7 bottle of wine doesn’t have a huge amount of wine in it. Whereas if you can cut out some of that sales and marketing stuff, then you really can get better quality wine, for a better price.

It just worked really well on that level of, here is the wine maker; we’re doing the selling for them, because you’ve bought into this story up front. Now you are getting great quality wine from them that you really believe in.

It is interesting to look at the parallels between Amazon and Naked. Naked is much more of an emotional connection with the customer but could also offer a cheaper and better product. Amazon is all about scale but also, to a degree, offers a cheaper, all-in solution, potentially. How do you look at the parallels between Amazon and Naked?

Firstly, with Naked, I wouldn’t say it was a cheaper product. It really comes down to this leverage of how much wine is in the bottle. We used to have this great graphic on site, which took a bottle of wine and said, where is your money going? What you find is, in a cheaper bottle wine, something less than £6, once you’ve accounted for the bottle, the VAT, the glass, the duty, the shipping, you get to the point where, within that £6 bottle of wine, there is probably about 20p to 30p of wine. In order to do that, you have to take a bit of a Lidl approach which is that we are just making loads of it. We are just going out for absolute volume; that’s the only way you are going to compete at that level. By its very nature, you are getting something that is a bit more of a commodity product.

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Naked Wines & Customer Lifetime Value

November 25, 2020

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