February (No. 493)
UniSA research reveals price before brand loyalty in wine marketing
Customers place more importance on the price and grape variety than on the region and brand when purchasing wine, according to a University of South Australia study.
The research, which uses data based on people’s actual wine purchases, is the first of its kind to be undertaken in the world, according to lecturer and PhD student Wade Jarvis from UniSA’s School of Marketing.
“This behaviour-based data enables us to look at what people are actually doing in the market, whether they are buying by brand name, style, region, grape variety or price. In a sense they are buying all of the above, but we can determine the different levels of loyalty that people give to these attributes, which has never been done before,” Jarvis said.
Measuring loyalty in wine-purchasing behaviour is the key to UniSA’s research, according to Larry Lockshin, Professor of Wine Marketing, who is jointly supervising the research with Dr Cam Rungie, a senior lecturer in the school.
“Our loyalty model enables us to assess low and high market share varieties with high loyalty as well as small wineries that have high loyalty. Current market share analysis gives small producers no indication about their equity of brand strength in the market,” Lockshin said.
The longitudinal study is based on a database that includes 564,000 transactions made by 5000 individuals for purchases of 1500 different brands of wine over three years. Rungie developed the computer-based mechanism for measuring repurchase rates based on information in the database, giving Jarvis a valuable tool for his research.
“Using the model we can look at loyalty levels for each attribute, such as white varieties, and look within that attribute at individual attribute levels such as Semillon and Riesling.
“The study reveals high loyalty for both Chardonnay and Riesling, with loyalty for these two wines of about 40% above the average loyalty for white varieties. Chardonnay drinkers tend to drink Chardonnay and Riesling drinkers tend to drink Riesling. Other white wines, which have much lower loyalty, are what we call ‘change of pace’ wines. Consumers who purchase Chardonnay and Riesling are repeat buyers of these varieties and only occasionally include other white varieties in their repertoire.
“With reds it is very different. Most red grape varieties have a loyalty level that is closer to the average for reds. Shiraz and Cabernet Sauvignon have higher than average loyalty but are not nearly as accentuated as Riesling and Chardonnay. Red drinkers are not as loyal to one variety, with drinkers of Shiraz and Cabernet Sauvignon switching between the two varieties, unlike Chardonnay and Riesling drinkers,” Professor Lockshin said.
“One of the really interesting findings is that consumers tend to favour straight varieties rather than blends. They see single varieties as easy to recognise and remember, while blends may be products that they are not sure of so they treat them as ‘change of pace’,” Jarvis said.
Jarvis believes that blends such as Cabernet Merlot will always be potentially ‘change of pace’ varieties and recommends renaming blends as single names that people can get used to. Wineries in the Napa Valley, California, are marketing a Bordeaux-style blend as a single name called Meritage, which is gaining acceptance in the United States.
“Another finding from the study is that even with some really great wines, the majority of consumers still approach the wine category like other supermarket categories. The average time that people spend choosing a bottle of wine is 12 seconds. They just want a good-tasting drop that’s easy to pick. Only a few people turn the bottle, read the label and make a really informed decision,” Lockshin said.
“Big brands are being purchased more often than we would have expected. They’re easy to find, with shelf space in good locations, but most people don’t care much if they buy a Jacob’s Creek or Lindemans’ brand.
“A high-loyalty product like Chardonnay plus a big brand drives up the loyalty so wine producers should be constantly looking out for attribute levels that become sub-categories (such as Chardonnay). As an example, many of the big brands are big because they utilise high-loyalty varieties such as Chardonnay.
“Interestingly, if we clump the small brands together, we get excess loyalty as well. As a group, people like to buy from small wineries but buy from any one of them, however, there is high loyalty for some small brands, which is good sign,” Lockshin said.
“Another interesting aspect is Australia’s over-supply of red and under-supply of Chardonnay. In the mid-1990s growers and wineries planted 85% red in the belief that red wine was a growing market, even though the market was 50/50. Had these people looked at our findings, they would have known that Chardonnay and Riesling drinkers are more loyal, and there is no real evidence to support their earlier belief that people start with white and then move to red wine.”