Yesterday's class got me thinking about how wine is priced. More specifically, one of us asked the question (I'm sorry that I forget who it was), "How does Far Niente decide where to price its wines. Some are hundreds of dollars and some are ~$50?" As I recall, the response to the question was about consumer WTP that is associated with a brand as powerful as Far Niente.
While I didn't expect Far Niente's $500 wine to be 10 times better than its $50 wine, I was a bit surprised to hear that the quality of the wine is all but a non-factor in the consideration of price for over $50 wine. So, I started reading online about how wine is priced and what correlation the price has to quality or consumer preference. I found this video to be a good summary (please watch till the end, rather than throwing tomatoes in the middle): http://www.openculture.com/2017/11/expensive-wine-is-for-dupes-scientific-study-finds-no-strong-correlation-between-quality-price.html
There are a couple major takeaways from the video:
1. The distribution of wine awards is highly inconsistent.
2. The average consumer frequently prefers cheaper wine over expensive wine.
3. #2 is true, unless the person knows the price of the wine, then they like the most expensive wine the best.
It's amazing to me that knowing the price of the wine actually causes a noticeable change in the enjoyment/preference of the consumer. If I tell you that you are drinking a $100 bottle, you will like it more. I suppose this is obvious if you think of nice wine as a luxury good, but if you think about it was a beverage, it's nuts.
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