Wine club attrition is one of the most important metrics to measure for your wine club.
The industry average for wine club attrition is around 30% annually.
How to Calculate Wine Club Attrition
When we talk about wine club attrition, we generally think about it on an annual basis. The most accurate way to measure it is to take the total number of cancellations for the year and divide it by the average number of members for the year.
For instance if you started the year with 1000 members, added 300 members, and lost 100 members, you would end up with 1200 members at the end of the year. The average number of members of the year would be 1100. Your annualized attrition rate would be 100 canceled members divided by 1100 average members for an attrition rate off 9.09%.
When you are tracking attrition on a monthly basis, you need to remember to annualize the results. For instance, if you start the year with 1000 members an din January you add 20 members and lose 10 members, then you would end up with 1010 members at the end of the month and an average number of members of 1005. Without annualizing, your monthly attrition rate would be 10 cancelations divided by 1005 average members for a rate of .995%. However, if you sustained that attrition rate over the year your annual attrition rate would be 12 time that, or 11.94%.
If you tell another winery that you have an attrition rate of 1%, they might look askance at you. If you tell them you have an annual attrition rate of 12%, they should be duly impressed.
How to Make Sense of Seasonal Ups and Downs in Your Wine Club Attrition Rate
Attrition can vary massively through the year. It is typical for cancellations to peak sharply when you announce an upcoming shipment. With an average membership of 10000, if you suddenly have 40 members cancel right before a shipment, your annualized attrition rate would be 40/1000 x 12 = 48%. Yikes! What this means is that if you continue to lose 40 members a month, you will lose 48% of your membership by the end of the year.
Of course, that isn't what's going to happen.
For this reason, it make sense to look at your wine club attrition rate over a longer period than one month. Here are some approaches you can take:
- Trailing 12 months. Take the total cancellations over the prior 12 months divided by the average number of members for that period. This will give you an annual rate. Track this number every month and see if your average is going up or down.
- Quarterly Attrition. Take the total cancellations for the prior quarter divided by the average number of members for that period. Multiply this number by 4 to give you an annualized rate. This metric may be the most useful if you are paying out a bonus to your wine club manager based on keeping attrition rates below a certain level. You could also choose not to annualize this rate and just set metrics for each quarter. For instance maybe you expect a (non-annualized) quarterly rate of 8% attrition in Q1 and Q4 but only 3% in Q2 and and Q3 when your tasting room is open. This would lead to an annual attrition rate of 22%, but you could reward incentive bonuses just based on the raw quarterly number. (Note that in this scenario the annualized rates would be 32% for Q1 and Q4 and 12% in Q2 and Q3.)
As with all metrics, the key is to 1) know why you are tracking this metric and 2) be consistent in the way you track it. This is particularly important if you are using the metric to pay out performance bonuses.