Academic journal article International Journal of Marketing Studies

Wine and the Consumer Price-Perceived Quality Heuristics

Academic journal article International Journal of Marketing Studies

Wine and the Consumer Price-Perceived Quality Heuristics

Article excerpt

Abstract

Does price have anything to do with Wine? The consumer price-perceived quality has always been used by consumers when they gauge the quality of a product or service. In this article, we develop three propositions which show how the consumer uses the price-perceived quality in the wine industry. For all types of wines, there will be attributes like ratings, brand name and word of mouth that will affect the purchase. The goal in this paper is to offer propositions that can motivate empirical research pertaining to the factors that influence how consumers use the price-perceived quality heuristic to determine which wine is worth the money that they are paying for. The findings will point to several ways that wine sellers can realign programs and reallocate resources to raise profitability levels and reduce costs. Primary among them are the development and articulation of whether to upgrade to meet the rating criteria, whether to invest in the brand name or to address public perception through viral marketing.

Keywords: Price-perceived quality heuristic, Wine, Rating, Brand perception, Viral marketing, Proposition

(ProQuest: ... denotes formula omitted.)

1. Introduction

Wine Spectator stated that "price has nothing to do with wine" while in Hibbs, Jensen, Sraiheen (2011), an analysis reveals a statistically significant positive correlation between price and quality. For many ordinary consumers, buying wine is largely based on recommendations or with reference to price. Consider the following headline from the Wall Street Journal (December 4, 1996 p A2), "A jewelry-store owner instructs the shop clerk to cut prices on turquoise, to clear the merchandise. The clerk mistakenly raises prices instead. Quickly, all the merchandise sells, because unsophisticated buyers associate high prices with high quality." The price-perceived quality heuristic is one of the most important heuristics in consumer behavior (Chao and Schor, 1988; Erickson and Johansson, 1985; Lichtenstein and Burton, 1989; Monroe and Krishnan, 1985; Stafford and Enis, 1969; Zeithaml, 1988). Previous studies found that the use of this heuristic is a common behavioral feature among consumers (Stafford and Enis, 1969; Monroe and Krishnan, 1985; Erickson and Johansson, 1985; Zeithaml, 1988), and that even though the heuristic exists in many product categories, it is particularly strong for status-oriented products, durable goods, and products that are difficult to evaluate (Chao and Schor, 1988; Gerstner, 1985; Lichtenstein and Burton, 1989; Owen, Wright and Griffin, 2000).

Wine is definitely one of the aspects of consumer purchase where gauging the quality is subject to a multitude of factors and parameters like age, appellation, the process, the packaging etc. The relationships between wine quality and price per bottle or case is hence of great interest. This is especially so given the growing consumption for wine in developed countries, the higher expectations of the growing middle class as well as the importance of wine in fine dining in today's economies of emerging markets. The wine market in China reached 125m cases in 2010, making it the fastest growing major still light wine market with growth of 34.4% on 2009. (Wehring, 2011).

For many seasoned wine lovers, gauging quality prior to purchase and tasting is something done through experience and awareness of source. However for majority of the layman customers in the market, gauging the quality is often via price on the wine list. Thus this lead to restaurant owners and managers needing to know about the consumer's-perceived quality heuristic to be able to better fairly price the rack rates and position the quality perception in the consumers' mind.

For the consumer dining in a restaurant or who had limited experience tasting different types of wine, looking at a wine list or menu is how wine is ordered. The customer generally believe that the higher the price on the menu, the higher the wine quality. …

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