When it comes to wine, one debatable question first comes to mind: does price dictate perceived quality?
My over-generalized opinion is yes. Because price is one of marketing's four P's that a firm can control (price, position, product, place), when a wine consumer believes a glass of wine is $50 per pour, they will enjoy the wine more than a glass that they believe is $1 per pour.
Time magazine and Insead University agree. After studying MRI data of 30 people when they consumed wine, they discovered that people who are told a wine is more expensive carried more value (see article). “Our findings also show that high price tags (within a range of acceptable qualities) makes you happier,” said Insead marketing professor Plassmann.
In the Global Dynamics of the Wine Industry class, setting a high price absolutely impacted the success of Inniskillin. As we discussed in class, Inniskillin notably, and arguably geniusly, was able to to re-brand the low-cost ice wine into a luxury brand. This provided a large margin, and gave them a competitive advantage because ice wine can only be produced in tundra-esque regions like Canada, from which Inniskillin operates.
But to examine data points, a few months ago I had an experience that contradicted the notion that price dictates quality. One evening, I opened a $30 bottle of wine that I had purchased a few years before. My boyfriend and I were blown away by the quality, so much that we decided we wanted to purchase additional bottles. However, when I called the wine maker the next day, much to my dismay, they informed me that the new price was $400. In this scenario, I knew that the wine was priced at $30, and by taste, thought it was worth more, which as it turned out, was true. The perception of price had not impacted our perceived value, and the smart wine maker was capitalizing on their successful vintage.
Putting that singular example aside, I am a firm believer in science, so have to side with Insead's findings and conclude that yes, price influences perceived quality. And Inniskillin's grasp of ice wine is a pristine example of such.
Sunny,
ReplyDeleteI'm going to ask you to recap this live in the beginning of class today.
Hello Professor - Thanks for the opportunity. Great discussion - look forward to learning more about this subject in the course.
ReplyDeleteThis definitely reminded me of an experience I had with a tasting here at the Stanford Wine Society (a group of about 60 that get together weekly on campus), and which is led by a person who joined our first Wine Industry class to participate in the tasting.
ReplyDeleteSimilar to the experience that Sunny mentions, Edward (the person who leads the wine society) does well to expose us to those less expensive wines that taste like they could cost 10x the price (and vice versa). At times we would have a $10-$15 trader joes' purchased wine lined up against a $150 bottle from K&L.
Sunny's find of an awesome $30 bottle and my own experience with just trusting what I like -- rather than exclusively relying on price as an indicator of "quality" -- is important, especially if we also consider the subjectivity of tastes (what tastes like what to each of us, but also simply what we enjoy).
It also speaks to the subjective level of pricing, that it's all supply demand coupled with brand awareness that drives wine pricing just like everything else more or less. Who knows what happened between the time Sunny initially purchased it, maybe a wine critic added it to its favorite's list, it started being sold at a major distributor, it made it on the wine list at a famous restaurant (or whatever the cause).. but my goal is to find those $10-$30 that taste amazing to me:)