The price of a bottle of wine plays two vital yet competing roles: price is both the amount a consumer must pay to make the purchase, AND the most important indicator of product quality. If your label conveys good quality and your price is too low, the price will reduce consumer perception of quality and reduce sales. If the price is too high compared to the look of your label, many may feel the brand is over-priced. Understanding the sweet spot where the look of your label and the price combine to drive purchasing can increase profits and prevent costly pricing mistakes.

For example, knowing that your label conveys a higher price than you charge allows you to raise the price to match shoppers’ perception of quality, thereby increasing sales. To provide just such insights, Label Analytics has developed a new research tool, Label Analytics Wine Pricing Sleuth.

“We have been working with a select group of top 50 wineries over the past seven years,” says John Lawlor, CEO and co-founder of Label Analytics, "helping them evaluate new vs. existing labels vs. competitive brands. Our experience made us realize we could expand our research to help them make pricing decisions that increase sales and profitability."

The example shown in the first chart illustrates that the retail price sweet spot for this $9.99 brand is actually $2.00 higher among Boomers. At $11.99, it attracted a higher overall purchase interest — 16 points above the level of interest before seeing the retail price. The Top Picks purchase interest of 6% of shopper respondents is higher than the 5% seen for the current retail price. How can the brand manager use this insight? They could arrange for an in-store price test to confirm these results on their way to raising the price. Or, they could use the results to give their sales team a compelling case to push for expanded distribution.

Here is what their sales team will want to know about how this test was conducted.

• Each price is tested independently with a unique set of shopper respondents that has been matched across the four cells by randomly selecting each cell’s shoppers.
• Each priced package is tested alongside a broad range of competitive brands.
  1. Shopper Respondents do not know it is a price test.
  2. They have no way of knowing which brands are the subject of the study.
  3. The study never asks their opinion. Instead, it measures their reaction to each package.

The second half of the Label Analytics Wine Pricing Sleuth study addresses the promotional pricing decisions where many brands spend most of their marketing dollars.  

In the second example, each price discount performed better than the regular unpromoted retail price.  A discount of $2.00 outperformed the other options tested and did considerably better than a $3.00 discount. The fourth option ($11.99 discounted by $2.00 to $9.99) supports the earlier observation that this brand could support a $2.00 retail price increase.

The company uses a virtual online shelf that simulates how consumers choose wine. Randomly-selected respondents select from nine sets of nine competitive products (81 in all) based on which look most expensive, which grab their attention first and which they would purchase. A three-tiered ranking algorithm converts their clicks into a solid recommendation for the optimal label choice. Because the respondents are blind to which brand is being studied and that it is a pricing test, the metrics simulate how consumers make decisions at the shelf. When a shopper enters a store — in real life or online — their first perceptions of wine labels arrayed on the shelf are often the primary motivating factor behind their purchase decision.

Emerging from the tumultuous pandemic year, wineries know that business as usual isn't enough in the face of dramatic market changes. Consumers are buying more wine online. Retailers are cutting back on the number of brands they carry and increasing their store brand facings. In response, some wineries are increasing prices while others are lowering them, and discount pricing is proliferating.

Understanding how shoppers will react to these changes is critical as wineries reevaluate how to do business going forward. Because brand managers make intuitive decisions about pricing wines — just as consumers do about buying them — Label Analytics Wine Pricing Sleuth was developed for that select group of marketers who recognize that label-related pricing decisions can put money in their pocket.

To turn your wine label into a sales advantage with Label Analytics Wine Pricing Sleuth insights please click the "SEND ME INFO" button or email John.Lawlor@LabelAnalytics.com.

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Wine Pricing Sleuth is a service mark of Label Analytics LLC