What makes us special
Majestic Wine PLC is a leading wine specialist, operating in four separate divisions, each targeting unique customer segments with unique customer propositions.
We are committed to delivering sustainable growth in shareholder value:
To be truly sustainable growth has to be driven by:
- Growing the customer base, rather than the number of stores
- The best way to grow the customer base is by retention
- To get retention you need loyalty, which requires a market-leading proposition
- To deliver a market-leading proposition you need the loyalty of your people and suppliers
Why? Because customer loyalty is the engine that drives sustainable growth.
How we create value
We aim to deliver sustainable growth in shareholder value, by doing the right thing for our customers, people and suppliers. Doing the right thing creates a virtuous circle, which is self-reinforcing and creates compound growth.
To deliver this plan we need to excel at three disciplines:
- Doing the right thing for our customers, people, suppliers and shareholders
- A disciplined and aggressive approach to investment
- A test and learn, data driven culture
These are all driven by the virtuous circle.
Doing the right thing for our customers, people and suppliers
It is very fashionable to claim to be profitable and nice. We don’t go along with that. We believe you have to be nice to be profitable. We don’t just focus on customer retention, we obsess about it. Let me show you an example:
We ask all customers who interact with us to rate the experience on a scale of 1-5. Customers who had a 5* experience were 62% more valuable than customers who had a 4* experience. 62%!
We rebuilt our customer service function to deliver 5* experience:
- We changed the name. From customer service to The Customer Happiness Team.
- By reading the data behind our tests we can change how we motivate our teams. We stopped measuring the number of calls per hour and now only measure 5* ratings.
- We put a new pay scheme in place where someone who does their job well can grow their income by 20% a year.
The result… 5* ratings have increased from 86% to 90% this year and customer retention has increased from 78% to 80% in the same period.
A disciplined and aggressive investment approach
Being disciplined and aggressive sounds like a contradiction in terms. This is what we mean by it:
We are instinctively a lean company. We don’t pay fancy salaries the offices are not too glossy and we don’t do vanity projects.
So when we talk about a disciplined investment strategy, any proposal has to answer three questions:
- Does it create value?
- How do we know it’s working?
- Can we get our money out again if it stops working?
Many companies regard investment as a necessary evil. We regard it as an opportunity to beat the market. Where we can spend more money and get a return we will. When we talk about investment, we don’t just mean bricks and mortar – we mean any opportunity to deploy cash to generate value. This means we are agnostic about whether we invest in Capex or Opex, in the UK or the US, in Naked Wines or the original Majestic businesses. An investment we made this year which delivered attractive ROI is wine quality. We measure our wine quality through “Buy It Again” (BIA) scores that our Angels give our wines. We saw that Angels with stronger BIA ratings across their first orders deliver much greater loyalty and lifetime value. So we tested investing more into our wines; this reduced gross profit at first but increased the BIA ratings by 10 basis points in Financial Year 2016, increasing the lifetime value of our Angels.
A data driven test and learn culture
We don’t debate, we test. Because that way we know what works, and we know it a lot sooner than if we spent ages debating it.
Test and learn companies are also able to spot the stars of tomorrow; they are the ones looking to find a better way today. An example is the current recalibration of Naked Wines, away from a loss leading recruitment strategy to one where we focus on higher quality customers with higher retention through better quality wines. As a result we are recruiting less, but higher quality Angels and are focusing more on lifetime values. In the USA, for example, our customer attrition rate in the past year has fallen materially from these new measures.
The end result of this is that we are delivering the same or better ROI, can open new channels of marketing, i.e. invest more, and will have a bigger business in three years than we would have had.