The search for the true value of a bottle of wine
A couple of years ago, one of the presenters at the WSET BACK Course received a fair amount of sympathy from the audience when he described his embarrassment at being offered a glass of Ogio by friends. He’d found out that they had paid £8.99 for what he knew was a brand designed to be sold as a BOGOF at half the price. I would suggest that his view, that such wines represent a rip-off, is not uncommon within our industry.
I found this incident and the ensuing discussion (which I try to recreate in my Diploma Marketing classes) very interesting. I believe it gets to the essence of one of the problems we face as an industry, which is that we often get too close to the product.
Inevitably those of us who work in the category are much closer to being able to judge the true value of the liquid in any bottle than outsiders. This helps us all spot bargains as well as obvious overpricing, but it has two major drawbacks.
The first is that we can believe that we have a greater understanding than is actually the case. I would suggest that even the wine experts among us fall some way short, and that’s simply because we are all inevitably prisoners of our history and of our experience.
Prisoners of history
As an example, if I presented a buyer with a good Pinot Noir at £10 per bottle, and said it was from Eastern Europe, the perception would probably be that I was pushing it at that price. If however I said that the same wine was a Burgundy, then it would likely be seen as a bargain. What is perceived as fair or appropriate pricing varies significantly by region, style, varietal, and even by producer. There isn’t some global standard.
Given experts can judge much, if not all, of the above from a blind tasting, then preconceptions must surely play a role in determining their view of a wine’s value, however much they attempt to keep an open mind.
Emperors with no clothes
As a follow on point, if we are concerned about overpricing, I would suggest that if there was a survey of the world’s most overpriced wines, nothing under £10 would come remotely close to the shortlist. Our focus would surely fall on emperors wandering around their estates without any clothes, rather than lesser mortals hanging around naked in supermarkets.
BOGOFs, however, seem to be a particular cause of irritation and I don’t fully understand it. By all means let’s criticise an excess of deep discounting as being bad news for the category (and I’m quite prepared to accept my share of the responsibility for that trend). We might also be uncomfortable with mechanics which encourage bulk purchase, but both these criticisms are not the point under discussion here.
The interesting point in the story above is surely that the consumers in this case selected Ogio from a crowded shelf, were happy to pay £8.99 and – we were subsequently informed – enjoyed the wine. If that was the case, then if anything we should be questioning why Tesco needed to discount the wine at all!
And the same point is valid all the way through the price spectrum up to fine wine. If consumers believe someone is wearing a particularly fine Armani suit, and all we can see is a pair of flip flops, then it’s the consumers’ vision that matters, not ours. By all means let’s suggest they buy stronger glasses, or point them in the direction of someone we believe more appropriately dressed. But in the end it’s their choice.
What is the correct price for a bottle of wine?
Which brings me to the second drawback. Ultimately the issue with any discussion about the true value of the liquid in the bottle, and whether or not that makes a wine overpriced, is that it’s all rather meaningless. The correct price for a bottle of wine is the price that someone is happy to pay. The consumer’s level of contentment will be determined by a number of factors and the value of the actual wine as perceived by an expert may not even feature on the list.
Consumers behave in the wine category as we (wine people) almost certainly behave in other categories: often irrationally, probably far more aware of brand imagery than we would like to admit, and generally overly influenced by factors that have nothing directly to do with the substance or function of the product.
All of which implies that there are assuredly many instances where we are all making purchases which insiders would regard as significantly overpriced. However if we do so quite happily and are inclined to repeat the purchase, and even to recommend the product to others, then surely that is the true measurement of value.
the mike paul blog 
“we often get too close to the product” Hear, hear!
I’d put it this way, by stepping through the basis of brand management.
A brand is a set of images and experiences in a person’s mind. A product is a wine, winery or wine store. The product you have direct control over, whereas a brand you only have some influence over – because it’s in the customer’s mind.
It’s an important distinction because wineries make a series of very rational decisions in producing or choosing their wine and perhaps feel that customers are similarly rational. However customers are emotional beings who make split second decisions based on how they perceive your brand.
Four key truths about why people buy wine help to explain why brands are so important:
One. Wine drinkers never understand a premium wine as well as the winery company that sells it. Their relationship is not through months of hard and loving graft but rather fleeting and superficial.
Two. Wine drinkers perceive premium wine brands in their own terms. Given they have imperfect knowledge of the wine they have to select something relevant to them perhaps by label design rather than taste.
Three. Wine drinkers’ perception will focus on benefits that are often intangible – this can seem irrational to wine growers. This is because consumers focus on what a wine can do for them rather than what it actually is. The benefits to them are intangible but are still real in their minds.
Four. Wine drinkers’ perceptions are not at the conscious level. When we ask people why they purchased a wine we may get a rational answer but not the whole story. Feelings about wine are not always easily articulated because they are complex and emotional.
Sometimes we get just too close to our industry and can’t step into our customer’s shoes. Enter the discipline of brand management.
(the 4 points are b*stardised from David Arnold’s book ‘Brand Handbook something-a-rather’)
(BTW Tesco discounts wine so it can sell more full margin nappies).
I agree completely with this Bruce. It’s important for all wine producers to put themselves in the minds of their target consumers and understand that they are almost certainly coming at their wine from a totally different direction. It’s not easy of course particularly if you have international aspirations and want to sell in markets where the perception of your region,or you as a producer ( if there is one ), may well be very different from that of your regular consumers in your home market.
Seems to me we are re-iterating the oldest rule of buying and selling: any article or service is worth what someone is prepared to pay for it. There are no absolutes. Being too close to any product means you are burdened with an overdose of knowledge that regular consumers are happily ignorant of! An example – when I read learned articles in the Economist I am always impressed by the knowlege and insight shown by the authors – with one exception: when they are writing about the wine or spirits industry, when the reasoning can seem shallow at best and often trivial. If I extrapolated I should, by rights, be disatisfied with all articles but I remain perfectly content with all others. In other words, a typical wine consumer!
That’s an interesting point Peter. Perhaps more generally we can take our own knowledge for granted and\or assume others think in the same way. And conversely we can be over impressed by people who clearly have knowledge or skills that we lack.It’s very difficult to get the balance right in my experience.