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February 19, 2008 | Customer Relationship Management (CRM), eCommerce , WineDirect Products and Services | WineDirect Admin

Simple Math: CRM Conversion

Over the past few months we have blogged about various ways that our winery partners leverage the REthink Engine to increase their sales, and a topic that comes up time and again is conversion (check out some of the recent BLOG entries that touch on this subject: How much is your average order? & Email Campaign Effectiveness). The subject of conversion should begin with one question: how much does 1% of your total sales represent? All things being equal in the world of Customer Relationship Management (CRM) tools, the best solution is one that drives the highest % conversion. In speaking with wineries who struggle to justify the cost of such a solution, especially when they currently possess all the CRM “pieces”, some simple math usually helps them to see the light…so to speak.

What do I mean by conversion? Well, there are many types of conversion when it comes to Direct Sales. One common example of conversion is the % of sales transactions relative to the total # of campaign/promotion recipients (email, direct mail, etc.) For example, if you send an email blast to 1500 people which results in 15 orders, the conversion rate is approx. 1%. Unlike email campaigns which have relatively zero cost (depending on your email solution), this conversion rate for direct mail campaigns is critical to understanding ROI associated with cost of paper, stamps, etc. Here are some other examples of conversion that are the result of a sound CRM solution: conversion rate for customers vs. club members, conversion rate for declined credit cards, conversion rate for allocated wines vs. non-allocated, and so forth…

What is the relevance of 1% of sales when it comes to conversion? Again, if all CRM solutions are the same in terms of cost, the solution that provides the highest compound rate of conversion will provide the highest ROI. By doing some simple math to determine the % of sales and/or cost savings (i.e. declined credit card conversion) that can be achieved through leveraging the right CRM solution, most wineries come to the realization that a significant amount of the costs are offset. One more factor in the conversion equation is Time: by converting time previously dedicated toward costly administrative activities to customer-facing, revenue-generating activities a winery can focus on what they do best…making great wine and building customer loyalty for their brand. The conversion rate math is simple, especially when it comes to calculating based on sales, but the tough question is…what is your time worth? By answering this question, you will undoubtedly come to the conclusion that working smarter and leveraging a better CRM solution is the best decision for your direct sales business.
 

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