Challenge for Virgin Wines

With Virgin, what was the real challenge?

Repeat purchase was the issue. Acquiring customers is the cost of acquiring a customer. The allowable cost of acquiring a customer is determined by the lifetime value you get out of them. The cost to acquire a customer is actually not just an assumption, it’s a reality. If that’s up here and you can’t get people to come back and repeat purchase, then you are in trouble. The problem was, we had a great website but, in those days, it was hard to get people to come back. In fact, what we used to say is, it’s like we would go out there and we would win the customer, from all the other competitors, sell them the wine and then those customers would go back out amongst all the competitors and we’d have to go out and win them again. The repeat purchase was the issue.

I don’t think, at that time, it had really been thought through that an online business could also roll out a subscription model. That was the thing that turned it around because it said, the allowable cost to acquire a customer is now satisfactory because these customers are repeat purchasers because they are now subscribing to something.

Just getting them to subscribe to something isn’t as easy as having a proposition that makes sense, that isn’t an old wine club. At that time, people were getting locked into mobile phone deals and so were a bit wary of subscription, so what we had to do was come up with an attractive proposition that people wanted to be a part of and that turned the business around.

Were Virgin mainly doing outbound sales, rather than vouchering or digital marketing?

We were doing everything. We were using vouchers to get you to Virgin. Then we had a huge outbound sales team. By the time I left, I think it was about a quarter of the size, but we had a huge outbound sales team. They would be saying, these guys aren’t coming back to the website naturally, so we’re just going to ring them. The outbound sales team was the one that was trying to get those repeat purchases. It had some success and, to be fair, we learnt some amazing things and we really did optimize that. But the thing that flipped the business was went we decided to get people into the subscription. In fact, the outbound sales team ended up being one of the ways we got people into the subscription.