The sordid topic of coin

We get to the subject of Price - the second of the 4P's - in the wine marketing masterclass. We also have some good fortune.

(Some of you found the one-to-one meeting link yesterday didn’t work. I’ve added a new one that I HOPE works at the bottom of the post)

Some weeks fate vomits on your eiderdown. Other weeks it spit-polishes your shoes. This is one of those second weeks.

No sooner had I sat down to write about the Pricing “P” in the toolkit of marketing tactics, than this article dropped into my inbox.

According to a YouGov study, price is the decisive factor for American wine consumers when selecting a bottle. *Insert your favourite cliché about bears, popes, or Sherlock here*. Apparently 49% of wine drinkers rate price as "very important." It’s no doubt fair to say most of the other 51% said it was “important”. I have only ever met two people who told me that they never looked at the price of the wine they drank, and both were gangsters.

The study surveyed over 1,000 U.S. drinkers and revealed that the most commonly paid price range for wine is $11-20, chosen by 45% of respondents. It turns out only a very small percentage of shoppers are willing to spend over $50 on wine. No matter how good, or what other things they liked about the wine. And while a significant number of respondents (26%) believe they could tell the difference between a $10 and a $100 bottle, rather more (35%) doubted their ability to tell the difference. Things like alcohol content, region, vintage, and even bottle and label design are far less influential in people’s purchase decisions.

This is a 50-part masterclass in wine marketing. But following these results we might as well just take this session, and the two or so that follow, and dump the rest.

Except… it’s a little bit more complicated than that. We need to look at why we don’t discuss price; if price actually relates to quality; and if quality doesn’t explain everything about a wine’s price… then what does?

“The sordid topic of coin”

If we know less about the price sensitivities of UK consumers it’s probably because it’s rather common to talk about money. And I don’t mean “common” in the sense of “happens often”. Quite the opposite. I mean common as in saying “toilet”, “airline pyjamas” and “pronouncing the ‘e’ in furore”. Price and money is “the sordid topic of coin” as the fabulous Joyce Grenfell had it. But the price of a bottle of wine is what pays everyone’s wages no matter where they sit in the wine value chain. So discuss it we must, even if it means holding our noses and hoping the neighbours don’t hear us. You could perhaps play a tape of yourself having sex to mask your embarrassment.

QPR - Quality Price Ratio

Mention QPR to someone in Britain and they’ll think you’re talking about “troubled” soccer club Queens Park Rangers. The first team in the UK to have a plastic pitch. And the first to remove one too.

In wine - especially the US - it means quality-price-ratio. The idea that there is some sort of correlation between how good a wine is (however you measure THAT) and how much it costs. Not surprisingly, people have looked into this, and it turns out there is. Kind of.

This interesting analysis from WineGourd uses critics’ scores. And it reveals that there is a relationship. An exponential one. Price increases outpace quality improvements, especially beyond the 86-point quality score. Wines priced below 86 points offer a minimal increase in quality despite their similar pricing. But it also finds curious, and significant, biases in scoring. Particularly around the 89 point mark that they love, and the 90-point mark that they hate. Suggesting some arbitrariness among those gold-standard palates who are currently assessing wine during Bordeaux en primeurs. I mention this solely to provide an excuse to give you this evergreen en primeur tweet-joke:

Anyway, back to pricing.

The WineGourd findings generally tally with other researchers. Studies usually find a statistically significant, but not perfectly linear correlation between price and score. They also usually find the relationship is stronger at higher price points or for wines from certain regions. But…

I think you’ll find it’s a little bit more complicated than that

While the correlation exists, exceptions are legion. Not all expensive wines receive high scores, and there are numerous examples of moderately priced wines that score very well in competitions and critical reviews. There are two - immediate - complicating factors too.

The first is that critics’ scores are made by, well, critics. Wine professionals. And who said that wine professionals, who taste wine all the time, have the same preferences as everyone else? Turns out… they don’t. In a study in 2008 “Do More Expensive Wines Taste Better? Evidence from a Large Sample of Blind Tastings*” the authors found:

Individuals who are unaware of the price do not derive more enjoyment from more expensive wine. In a sample of more than 6,000 blind tastings, we find that the correlation between price and overall rating is small and negative, suggesting that individuals on average enjoy more expensive wines slightly less.

Does this mean that more expensive wines actually taste less good? Of course not. Once more, it depends. As the authors go on to point out:

For individuals with wine training, however, we find indications of a non-negative relationship between price and enjoyment.

For those untying the tortuous academic grammar there, non-negative means positive. People with wine training liked the pricey stuff more. Why? We don’t know, But they do. Even so, given that most people don’t have wine training, the more important finding was that:

…non-expert wine consumers should not anticipate greater enjoyment of the intrinsic qualities of a wine simply because it is expensive or is appreciated by experts

Except…

More expensive wine tastes better, so long as you “know” it is more expensive. This was the finding in this paper, which comes with the HUGE caveat that the research subjects were all lying in an MRI scanner while wine was administered to them through some sort of pipette. Subjects were given the same wine three times, but told it was three different wines, at different prices:

the subjects stated that the wine with the higher price tasted better than an apparently cheaper one

It’s our old friend the placebo effect. If you tell people that a wine costs more - or if people have actually spent more on a bottle - they’ll think it’s nicer. Not only will they think it’s nicer, it will actually BE nicer in terms of activating the pleasure responses in the brain that are associated with nice wine.

So Quality-Price-Ratio does hold - kind of. But actually, it’s a weak correlation with a lot of exceptions.

So let’s come out of the MRI scanner, dust ourselves off, put our jewellry back on, and get down to business. You’re a wine marketer. How do you know what to charge, and so you can charge as much as (reasonably) possible, so you can retire, hit your bonus, avenge some deep-seated competitive issues you have from school?

Over the next couple of weeks we’ll look at a few. Including some pricing models to help you come up with a figure. But let’s just start with three essential themes.