An Introduction to Marketing Wine

Question 1

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Answer 1

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Question 2

What is marketing?

Answer 2

Marketing is a hard term to define satisfactorily. Many definitions have been proposed, some of which are very complex and technical. A useful and simple definition is given by the Chartered Institute of Marketing (CIM), which states that marketing is: ‘the management process which is responsible for identifying, anticipating and satisfying consumer requirements profitably’.

As can be seen from this definition, identifying the target consumer and understanding their needs and wants is fundamental tosuccessful marketing. However, it is often not simply the wine that the consumer wants but also the experience the wine will bring: for example, confirmation of social status, ownership of something perceived as valuable or return on investment capital. Themarketing should therefore emphasise how the product can give the consumer the experience they are looking for.

The ultimate aim of marketing is to create profits, whether this is through volume of sales (attracting new consumers, encouraging existing consumers to buy more) and/or value of sales (convincing consumers that it is worth spending more money on this product, compared to its lower-priced competitors). Marketing campaigns cost money and resources; a successful campaign is onewhich achieves an adequate level of profit within a specified timetable

Question 3

Explain the marketing process?

Answer 3

Given that the entire company will be involved in the marketing process, it is important that there is a clear marketing strategy inplace so that everyone knows what is expected of them. Creating and implementing the marketing strategy consists of a number ofkey stages:

1. identifying the product/brand to be marketed;
2. analysing the current market;
3. identifying the target market;
4. setting the objectives of the marketing strategy;
5. devising the marketing strategy (the ‘marketing mix’);
6. implementing and monitoring the marketing strategy.

This is not necessarily a linear process: for example, stages 3, 4 and 5 are closely interlinked. However, for the purposes of thisguide, each of these stages will be taken in the above order.

Question 4

How to identify the product/brand to be marketed?

Answer 4

At its most basic level, marketing is about a product (or a range of products): a bottle of wine, a wine shop, bar or restaurant. Understanding the product’s characteristics is essential to a successful marketing campaign (see Product in Promotion). Theproduct may be brand new, launched to fill a perceived gap in the market, which may have been identified by the company throughmarket analysis or as a result of market research. Alternatively, the marketing strategy may be for an existing product, which mayor may not have been updated.

All products have a ‘life cycle’. As shown by the figure below, sales of most new products start slowly but, if the product establishes itself in the market, will then start to grow quickly as more and more people buy the product. Eventually, sales will stabilise as there are fewer people left who have not yet bought it or if competition increases and, finally, sales will begin to decline.

A different marketing strategy is needed in each of the stages:

1. Introduction – The strategy should focus on getting the product into the market and gaining recognition and reputation.Initially, distribution may be limited to a few carefully-selected channels to begin with.
2. Growth – The product should be increasingly widely distributed and aimed at a broader target market, to encourage stronggrowth.
3. Maturity or stabilisation – The strategy should highlight the differences between the product and the other competingproducts which, by now, will have entered the market.
4. Decline – Faced with the prospect of declining sales, a company may take steps to extend the life cycle, perhaps byimproving the product, updating the packaging, reducing the price to make it more competitive or seeking new markets. Eachof these will need to be communicated to prospective customers through an appropriate marketing strategy.

Question 5

How does branding work?

Answer 5

Without branding, products would simply become commodities. Provided a product meets a certain standard of quality and style,the consumer would buy the cheapest option available and sales of the more expensive options would decline.

Branding seeks to move a product away from being a commodity to the extent that consumers will want to buy that product even ifit costs more than the minimum possible price. For example, a consumer may see two bottles of Marlborough Sauvignon Blanc ona shelf. One bottle is a mid-priced wine from a producer who is unknown to the consumer, whereas the other is ‘Cloudy BayMarlborough Sauvignon Blanc’ and sells at a premium price. The consumer may choose the more expensive wine because theyspecifically want to buy what ‘Cloudy Bay’ represents and not just any example of a Marlborough Sauvignon Blanc. Manysuccessful brands command higher prices than similar generic products.

Question 6

How do you as a brand create a positive image in the consumer’s mind?

Answer 6

Substance – Successful brands consistently deliver the same level of quality and style. For example, Champagne housesproduce a non-vintage (NV) wine in a house style that is consistent from year to year and which is not marked by vintagevariation.

Consumer trust – As a result of this consistency, consumers come to trust a brand always to give them what they want. Manylow-involvement consumers (see Identifying Target Consumers) will therefore regularly buy their favourite brand of wine inpreference to a cheaper, unbranded alternative which they do not know. This is an important factor in the success of supermarket own-brand wines.

Consumer engagement – The consumer should have a relationship with the brand and will ask for it by name. They will feelthat the brand’s marketing strategy is aimed directly at them (although this will clearly not be the case). Because of the‘closeness’ of this relationship, successful brands are aware that even that the smallest change to their marketing strategy, sucha minor label redesign, risks alienating loyal customers and will consider any such changes very carefully before implementingthem.

Brand story – Successful brands have a ‘story’ (see below) to which consumers can relate – this creates an emotional
attachment between the consumer and the brand.

Price premium – Many successful brands command higher prices than similar generic products. Many consumers view higherprices as a guarantee of quality.

Longevity – Many leading brands have been in existence for a long time. This is particularly true of leading Champagne brands(see Leading Wine Brands). Yet, whilst a number of the biggest wine brands overall are relative newcomers, some have alsobeen in existence for a long time: for example, Hardys (1850s), Gallo (1930s) and Robert Mondavi (1960s).

Strong brand name – Choosing the correct brand name is very important. The name must be easy to remember and, if the wineis to be sold in countries which speak different languages, easy to pronounce in all the relevant languages. An important issue toconsider is whether a name that is perfectly innocent in one language could be offensive or obscene in another: for example, aco-operative in Saint-Tropez created a rosé to which they and gave the brand name ‘Mist’ (Made in Saint-Tropez) – all went welluntil the wine was distributed in Germany where the word ‘Mist’ translates as (polite version) excrement.

Question 7

How to create a story behind a wine?

Answer 7

Many marketers believe that the story of a product or brand is one of its most valuable attributes. Research has shown thatmany consumers, especially millennials (i.e. those between legal drinking age and their mid-30s), are attracted to productswith strong stories.

Compared to some products, it is relatively easy to tell the story of a wine. For example:

• What is the producer’s history? Have they been producing wine for generations? In newer wine-producing regions, did theirancestors come from older wine-producing regions and bring vines with them? Did the producer have an interesting previouscareer?
• Where are the grapes grown? Do they come from a single vineyard, perhaps with an unusual or evocative name? What is thevineyard like? Is it steep, rocky, prone to mist in the morning etc.? What other vegetation or animal life is there in the vineyard?
• How is the wine made? Is there a particular philosophy used, such as e.g. organic, biodynamic or natural? Does thewinemaker use any distinctive processes? Do they use unusual or especially old equipment?
• Is there a story behind the name of the wine, the label design or the bottle design?

This type of information creates a sense of authenticity; it links a wine to a particular place and a particular producer in a waythat bulk production wines do not.

However, there is more to a successful story than just this. The story also covers matters such as price, where the wine is soldand how it is sold (i.e. the ‘marketing mix’). Significantly, it also includes what other people say about the product, makingconsumers part of the story.

Question 8

Emphasize more in detail on the importance of a strong brand (name) across different markets?

Answer 8

In some instances, it may be beneficial to have different brand names in different markets. This is not merely a translation, but adifferent name usually that is designed to better appeal to and resonate with the target market. Successful examples that havebeen tailored to the Chinese market include Penfolds (奔富‘Ben Fu’), Lafite (拉菲‘La Fei’) and Casillero del Diablo (红魔鬼‘HongMo Gui’).

Many successful wine brands have names that contain references to geographical features (e.g. Cloudy Bay, Blossom Hill,Banrock Station, Felton Road, Terrazas de los Andes). It may be that, because wine is a product very closely linked to agricultureand the land, such names give the wine a sense of place (even if many are made up). The name of a company founder can alsobe a successful brand name as it links the product to its heritage and gives a sense of longevity. This is very common forChampagne (e.g. Krug) and fortified wines (e.g. Taylor’s Port). Some wine brands have not only a brand name but also a logo.

For a successful brand, protecting such assets through trademark registration is vital. In China, trademark rights are given to thefirst person/company to file an application, rather than being based on usage. Due to this, a number of companies that own well-known wine brands, have needed to enter expensive legal battles to gain the right to own their brand name in the Chinese market;for example Treasury Wine Estate’s battle to cancel the prior registration of the trademark ‘Ben Fu’ (used for their Penfolds brand)by a person not using the trademark for any commercial means.

Measuring the strength of a brand or its value to a company is not as easy as the measurement of a tangible asset. The value ofthe brand to its owner tends to be termed ‘brand equity’ and, typically, includes components such as brand awareness (the extentto which consumers are familiar with the brand) and brand image (how consumers perceive the brand), often amongst othermeasures. Brand equity is an abstract concept, with many people simply talking about positive and negative brand equity.However, some companies employ specialist consultants to calculate the financial value of their brand equity to include as an asseton their balance sheet.

Question 9

What terms are used to describe different aspects of branding or types of brands?

Answer 9

Brand position –
Where a brand ‘sits’ within a market and the cues used to indicate that position. It is often linked to retail price.Various ways of categorizing brand position within a market have been suggested, one common method beingvalue;

standard;
premium; and
super-premium.

However, the use of these terms, and the price ranges to which they apply, can vary considerably even within the same market.

A brand’s position is usually set at launch, having been intended to hit a particular price point. If competition increases, a brandmay have to lower its position to remain competitive. It is rare, but nevertheless possible over time and with a lot of work, to raise abrand’s position: one example is Symington Family Estates’ efforts to raise the market position of their Cockburn’s Port brand bymodernising production, updating the brand image and introducing new higher-end products.

Nevertheless, the cheapest end of the market should not be ignored as this offers the opportunity for high-volume sales. Somelarge wine companies, such as Concha y Toro and Hardys, have a variety of brands positioned in different parts of the market in anattempt to attract as wide a range of consumers as possible.

Private label –
As discussed in Supermarkets and Deep Discounters, in many countries, such as the USA and the UK,supermarkets, deep discounters and larger chains of bars and restaurants have created a range of wines from different regionsunder their own brand name, such as Sainsbury’s Taste the Difference in the UK, or an exclusive brand name, such as KirklandSignature by Costco in the USA. These wines may be produced by well-known producers that have their own brands, but theproducer’s name will not appear prominently on the private label, if at all. Private label products are only available from theretailer or restaurant that created the brand. The benefits of this for the retailer are detailed in Supermarkets.

Ladder brand –
These are intended to give consumers easy-to-understand ‘rungs’ to help them trade up to a higher-priced and better-quality expression of the brand.
The whole range benefits from the identity of the most prestigious expression of the brand.

Ladder brands tend to have three rungs:

1. Accessible – the least expensive with the greatest distribution and the one that consumers will buy most often;
2. Stretch – affordable but only for special occasions;
3. Aspiration – the most prestigious expression of the brand. Most of the brand’s consumers will never buy it as it costs far more than they are willing or able to spend on wine. However, it should cast its super- premium identity over the entire ladder.

Ladder branding works very well for luxury products such as
Champagne: for example:

1. Accessible – Pol Roger non-vintage;
2. Stretch – Pol Roger vintage;
3. Aspiration – Pol Roger Cuvée Winston Churchill.

As for still wines, ladders may work for some ‘soft brands’ (see below) bought by high-involvement consumers, for example inBurgundy:

1. Accessible – Bourgogne Rouge;
2. Stretch – Gevrey-Chambertin;
3. Aspiration – Le Chambertin Grand Cru.

However, ladder brands tend to work less well with wines bought by low-involvement consumers. This is because, whilst theaccessible and stretch rungs may work, few, if any, consumers who buy the accessible wine will be aware that the aspiration wineexists. As a result, there is no identity given by the aspiration wine to the rest of the ladder. In the worst situation the image of theentire ladder is based on the accessible wine and consumers could be reluctant to trade up even to the stretch rung as they believeit to be overpriced.

Soft brand –
A term sometimes used to describe any cue used by a consumer when choosing to buy one product in preferenceto another. In the wine industry, this could be a country of origin (e.g. ‘Brand Australia’); region (e.g. Rioja); geographical indicator (e.g. Pouilly-Fumé); grape variety (e.g. Merlot); or even a style of wine (e.g. oaky Chardonnay).

The concept of a soft brand is controversial. Some marketing professionals are
happy to accept the existence of soft brands and to use the term; others do not
consider these to be brands at all. Certainly, a soft brand does not conformeasily to the definition of a brand as given by the American Marketing Association. Yet a soft brand does share many, but not all, the characteristics
identified as features of leading brands.

Whatever it may be called, this is a very important element of wine marketing.
Many wine-producing countries and regions promote themselves successfully in
this way and the significance of geographical indicators in creating a regional
identity of brand is increasingly acknowledged. Whilst Sauvignon Blanc is
produced around the world, only wine from a small, specifically designated area
in the Loire Valley can be labelled Pouilly-Fumé AOC. Most producers within the
appellation are too small to become a well-known brand but they can benefit
from the AOC’s reputation to market their wines. Even outside the EU, GIs are
being created largely for marketing purposes: witness the ever-growing number
of AVAs being created in California.

Luxury brand –
As with ‘fine wine’ (see Wine Investment in Wine Investment
Companies), there is no agreed definition of what makes a luxury brand. These tend to be super-premium priced wines whichonly a very few consumers can afford, including Champagne prestige cuvées, Bordeaux Premier Cru Classé and the mostexpensive Californian wines.

Luxury brands promote the idea that they are scarce even if, as in the case of many Champagnes, this is not always the case. Thisperceived scarcity is one reason why luxury brands can usually charge a large premium. The marketing may also promote otherassets of the product such as the quality of the fruit or of the vineyard in which it was harvested, no expenses spared duringwinemaking, a rich heritage, etc. Every aspect of marketing strategy for the product is likely to promote the idea of luxury; forexample, sponsorship of exclusive and luxury events, and positioning in the most upmarket retailers and on the wine lists of finedining restaurants.

Question 10

What were the world’s 10 best-selling wine brands in 2016?

Answer 10

1. Barefoot USA 202.5m
2. Concha y Toro Chile 146.7m
3. Gallo USA 135m
4. Changyu China 135m
5. [yellow tail] Australia 103.5m
6. Sutter Home USA 94.5m
7. Robert Mondavi USA 90m
8. Hardys Australia 81m
9. Beringer USA 67.5m
10. Great Wall China 63m

Question 11

What were the 10 best-selling champagne brands in 2015?

Answer 11

1. Moët & Chandon 22.5m
2. Veuve Clicquot 14.25m
3. Nicolas Feuillatte 8.1m
4. G.H. Mumm 5.7m
5. Laurent Perrier 5.4m
6. Taittinger 4.1m
7. Pommery 3.3m
8. Piper-Heidsieck 3.2m
9. Lanson 3.1m
10. Canard-Duchêne 3.1m

Question 12

How do you analyze the current market?

Answer 12

Another important activity when preparing to create a market strategy is to identify and analyse the factors (both internal andexternal) which affect the product, the company and the market in which it operates. This should be an objective analysis of thehealth of the business, its current and potential customers, trends within the particular market and the position of the businesswithin it.

The most common way to achieve this is by carrying out a ‘SWOT’ analysis to identify Strengths, Weaknesses, Opportunities andThreats. A SWOT analysis can be done very simply by taking a sheet of paper and dividing it into four quarters as in the diagrambelow. The diagram highlights examples of what might be included under the various headings by a wine producer.

In simple terms, strengths and weaknesses are those of the particular product or company, whereas opportunities and threats areexternal factors which affect the market as a whole.

Once they have been identified, strengths and opportunities can be exploited; where possible, these should be highlighted in themarketing campaign. Steps should also be taken to eliminate weaknesses and mitigate threats as far as possible. It may bepossible to achieve some of this through marketing (e.g. improving a poor brand image, lowering prices to compensate forexchange rate rises).

Question 13

How do you identify target consumers?

Answer 13

Segmentation is often based on four sets of variables: geographic, demographic, psychographic and behavioural. A segment willusually be defined as a combination of variables.

GEOGRAPHIC VARIABLES
These relate simply to where the consumers live (e.g. a country, region or city) and whether they live in an urban or rural area.Usually, these are too broad and cover too wide a range of people to be meaningful on their own.

DEMOGRAPHIC VARIABLES
These include:

age;
gender;
ethnicity;
family status (e.g. are they single? Do they have children?);
income;
level of education (e.g. are they university-educated?);
occupation;
socioeconomic status: this is an individual or family’s position in society relative to others based on their income, level ofeducation and occupation.

PSYCHOGRAPHIC VARIABLES
These are psychological characteristics, such as:

lifestyle (e.g. people who like to go out to eat and drink, the health-conscious);
personality (e.g. people who like to show off their wealth or knowledge of wine);
values and beliefs (e.g. vegetarians, people who prefer products that are organic, environmentally-friendly or Fairtrade);interests (e.g. those who are interested in wines from a particular country or region).

BEHAVIOURAL VARIABLES
These are variables based on consumers’ observable behaviour such as:

what benefit do they want from wine (e.g. quality, value for money, prestige)?
when do they buy wine (e.g. regularly, only on special occasions)?
where do they buy wine (e.g. supermarkets, specialist wine retailers)?
how often do they buy wine and in what volume?
what is their level of brand loyalty?
what is their level of interest in wine (e.g. enthusiast, moderate interest, indifferent)?
are they early adopters (i.e. people who are keen to buy new products when they come on to the market) or late adopters?People who share psychological or behavioural characteristics are more likely to behave in a similar way than those who live in thesame area or are in the same age group

Question 14

What’s a different way to divide wine consumers into narrower segments?

Answer 14

1. wine lovers – those with a great interest in, and knowledge of, wine; high income and high level of education;
2. wine-interested – those with a great interest in wine, moderate wine knowledge, university-educated with moderate income;
3. wine curious – those with a moderate interest in wine but limited knowledge, moderate income and medium level ofeducation; they see wine as an opportunity to maintain social relations.

Whilst level of interest and knowledge is a useful way to separate wine consumers, it is too simplistic to link this to income andlevel of education.

Question 15

What is Wine intelligence’s series of models known as portraits? Explain the US portraits from 2016?

Answer 15

Experienced Explorers

Who are they:
Aged primarily
35-54, higher
spenders who are
confident in their
wine knowledge

Why do they drink wine:
Wine allows them
to relax or
socialise with
friends and
family, it’s a
regular treat for
them

What do they drink?
Large repertoire,
and enjoy trying
new styles and
regions

Millennial Treaters

Frequent and
adventurous wine
drinkers, highest
spenders

Wine is a part of
their social lives,
they enjoy it as
part of their
lifestyle and it’s
good for their
image

Open to a large
repertoire, enjoy
trying new styles
and regions, yet
with limited
awareness of
brands

Premium Brand Suburbans

Frequent, ‘core’
wine drinkers
from across the
US and across all
age groups

A glass of wine at
the end of the day
is a frequent treat

Looking for good
value everyday
wine and know
their brands

Bargain Hunters

Older drinkers,
more preoccupied
with price and
looking for a
cheap deal

Drink wine
infrequently,
mostly at home

Tend to stick to
‘easy choices’ in
terms of brands
and varietals

Senior Sippers

Older, lessfrequent winedrinkers, lowspenders,
unconfident andunknowledgeable

A relativelyaffordable andhealthy choice for
an occasional
drink

Consume from anarrow repertoirethat is driven bylow prices

Kitchen Casuals

Middle-aged orolder andinfrequent winedrinkers, typicallydisengaged withthe category

To relax at homewith an informalmeal

Like SeniorSippers, consumefrom a narrowrepertoire that isdriven by lowprices

Question 16

What is market research and how to conduct it?

Answer 16

Market research is the gathering and analysis of data about a particular market segment in order to understand what that segmentwants or needs.

Market research can be useful at all stages of the marketing process. Prior to starting work on a new product, a company can usemarket research to understand whether there is a need in the market for that product and, if so, what features people would like itto have and how much they might pay for it.

However, market research is especially important in creating the market strategy as it can confirm whether the approach suggestedby the segmentation exercise is accurate or not, before the company embarks on a potentially expensive and time-consumingmarketing campaign.

Market research takes time and effort to arrange and some methods can be relatively expensive, such as setting up a focus group.It is therefore important to be clear about the aims of the research from the outset.

• what information is needed: e.g. what price are consumers prepared to pay for a particular product?
• from whom will the researchers gather data: e.g. a small group of consumers from a particular segment or a cross-section of thepublic?
• how will the research be carried out, for example:
• survey – a series of questions designed to investigate the opinions, feelings, actions or behaviours of a large group of people;
• focus group – a small group of people drawn from the relevant consumer segment, brought together to discuss and commenton the topic being researched;
• interviews – one-to-one discussion of the topic being researched;
• observing consumer behaviour – (see below);
• secondary research – market research is carried out by using data already available in the public domain or available as areport from a market research company.

Once the market research has been conducted, the data can be analysed and acted upon.

Question 17

Explain how observing consumer behaviour works?

Answer 17

Another form of research involves observing and analysing the behaviour of target consumers. This may be to find out the needsand wants of these consumers, or it may be used later in the marketing process to monitor the success of a campaign and possiblymake adjustments to make it more successful.

Marketing can have an influence on consumer behaviour in several ways. It can bring to the attention of the consumer somethingthat they need or want. Some marketing (e.g. an advert for a local wine shop) can direct consumers to where they can buy theproduct, reducing the effort needed to buy that product. In various ways, marketing will also usually highlight the selling points ofthe product (whether that be a luxury status, the fact that the grapes were organically grown or a competitive price) and thus caninfluence the evaluation of the alternatives available and the final purchase decision. Therefore, understanding what appeals to thetarget consumer, their lifestyle (where they live, where they shop, what they read or watch, etc.) and what influences their decisionmaking can be very useful data to ensure the marketing strategy is as effective as possible.

Methods of observing and recording consumer behaviour include watching how consumers move around a shop, interacting withconsumers (e.g. retail or hospitality staff may build up a profile of the preferences of regular customers), store loyalty cards(records of purchases), web analytics (information recorded about what web pages you have visited, how long you spent on thepage, etc.). There are also many academic studies that have researched factors that can influence consumer behaviour, such asthe lighting, music or decor in a shop or restaurant.

Question 18

How do you set the objectives of the marketing strategy?

Answer 18

The first vital part of creating a marketing strategy is to define its objectives. Clearly defined objectives will help people in differentparts of the company understand their role in the marketing process. Objectives will also make it easier for the company to analysewhether the strategy is working or not.

The objectives should cover four key areas:

1. What type of marketing strategy does the company want to pursue? There are three broad options:

Undifferentiated or mass – appealing to the whole market, or a large section of it, with a single product; for example, manybranded wines available in supermarkets and other large retailers.

Niche – aiming a product at a specific segment of the market; many wines are niche products.

Multiple – either appealing to numerous segments with one brand (each segment will potentially require a different marketingapproach) or launching several brands each targeting different segments.

2. What are the aims of the marketing strategy? For example:

launch a new product;

communicate improvements to existing product;

increase sales;

increase market share;

improve brand awareness;

improve brand identity;

attract new consumers.

3. How will the success of the strategy be measured; for example, profits, value of sales, market share?
4. Within what time period should the objectives be achieved? It could be a short-term strategy or be for a period of severalyears.

Another important element is to set the marketing budget. Marketing can be a very expensive activity and, whilst some largecompanies have enormous budgets, most can only set aside a limited amount of money to promote their products. The budgetshould be set by reference to the profits which the marketing campaign is expected to produce; there is little point to a marketingcampaign which costs more than it ever brings in.

Question 19

How do you devise the marketing strategy?

Answer 19

Having understood the product or brand to be marketed, identified the target market including their needs and wants, and set theobjectives of the marketing strategy, a company can then devise the marketing strategy to achieve those objectives.

The elements of the strategy are often referred to as the ‘marketing mix’, a combination of factors that must work together for thestrategy to work. If any one element is weak, this will weaken the entire marketing effort.

One common way of identifying those factors is the ‘5 Ps’: Product, Price, People, Place and Promotion. Some marketers omit‘People’ and refer only to the ‘4 Ps’. Others use the ‘7 Ps’, although the additional factors (Physical Evidence and Process) relatemainly to the delivery of services rather than products, they are not covered here.

Question 20

How do you market the product?

Answer 20

This is the product which is being marketed, including all packaging and branding and any value-added features; for example, giftwrapping in a wine shop and a winery’s wine club.

Marketing should communicate the characteristics of the product that will appeal to target consumers and how it will satisfy theirneeds and wants. The presentation of the product (i.e. the bottle, label and any other packaging) should be designed to appeal tothe target consumer; different types of consumers are often attracted to different features on labels. The marketing should alsodescribe the experience that the product will deliver to the consumer as this is seen as an increasingly important part of marketing(see The Story of Wine in Branding).

The wine market is often described as ‘saturated’; in other words, there are already enough products to satisfy consumers’ needsand there are few gaps in the market. There is therefore strong competition between relatively similar products. In such a market,companies need to explain clearly how their product is different to that of a competitor, such as higher quality, better value formoney, organic, vegetarian/vegan, Fairtrade, etc.

Question 21

What’s the important of price?

Answer 21

This is the amount which a consumer pays for a product. It is not just the price of a product on the shelf; it includes any additionalcosts such as delivery as well as discounts. It also includes the cost (in time or effort) which the consumer is willing to go to in orderto buy the product.

In an ideal world, the pricing strategy for a product would strike a balance between the producer’s desire to make a reasonableprofit and the price that sufficient numbers of consumers are willing to pay for it. However, this balance will be affected by thevarious factors which contribute to the price of wine discussed in the chapters on Supply and Demand and Costs through theSupply Chain.

In addition, there are many different pricing strategies which a company may use when setting the price of its products. Forexample, the price of a new product may be set relatively low (or enter the market on a price promotion) to undercut thecompetition and rapidly reach a wider section of the market – the expectation is that consumers will permanently switch to the newbrand because of the lower price (this is known as a penetration strategy). However, subsequent attempts to raise the price of theproduct may not be successful if the consumer feels that the product now offers less value for money than its competitors.

Academic studies have shown that consumers are strongly influenced by price when making their purchase decision. Researchusing brain scans indicates that many people get more pleasure from a wine they think is expensive than from the same wine ifthey think it is cheap. Consumers with lower wine knowledge who are looking to buy a wine for someone with greater knowledgeare therefore more likely to buy a more expensive bottle on the assumption that it will meet the recipient’s expectations.

On the other hand, some studies emphasise the psychological importance of certain price points; whilst these vary from country tocountry, consumers may, for example, be more likely to buy a wine priced at USD 9.95 than USD 10, simply because it is in singlefigures. Knowing this, a producer may reduce the price of their wine slightly so that retailers can hit the desired price point.

Question 22

What is the importance of the people element?

Answer 22

The ‘people’ element is sometimes interpreted in different ways depending on the model. Some marketers will use ‘people’ tomean the attitudes and behaviours of the target consumer (see Identifying Target Consumers and Market Research). The otheraspects of the marketing mix will need to be tailored accordingly; for example, if the target consumers are not very active on socialmedia, there is little to be gained by running an intensive social media campaign.

In other models, ‘people’ refers to the relationship between the company, its staff, its partners, and its customers, and includesaspects such as employee attitudes and skills, and customer service (whether that customer be the target consumer or a businesscustomer such as a distributor). The attitudes and behaviours of the target consumers may be considered separately, usuallyinitially as this factor impacts all other aspects of the marketing mix.

Wine producers should ensure they have enough sufficiently knowledgeable and trained staff to sell their products, either to finalconsumers at a cellar door or consumer event, or to distributors or retailers. It is important that any companies a producer workswith, such as distributors and PR agencies, share the producer’s image and vision. This should make it easier to present aconsistent message at all stages of the supply chain. This may require resources supplied by the producer; for example, awinemaker or a sales representative of the producer may conduct a complimentary masterclass for the employees of the distributoror retailer to highlight the brand image and story as well as showcase the products (see Promotion).

Question 23

What’s the importance of place?

Answer 23

This relates to where the product is sold. A company needs to identify where its target market shops, such as supermarkets, deepdiscounters, specialist wine shops or online, and focus on those outlets.

For example, high-involvement consumers buy wine in independent specialist retailers. They are more likely to shop at thepremium supermarket chains but are being increasingly attracted to the deep discounters. They tend to drink at specialist winebars and dine out at casual and fine dining establishments. As these consumers are keen to experiment and expand theirrepertoire, these outlets are ideal for placing wines from lesser known regions and/or grape varieties – provided the quality issuitable. Even if there is only a limited supply, that does not matter as such outlets will tend to sell low volumes.

In contrast, low-involvement consumers are looking for wines with a simple aroma/flavour profile but which meet a certain qualitystandard. They tend to buy wine at the supermarket and eat and drink in general bars and non-destination restaurants. Productslikely to appeal to the low-involvement consumer should therefore be placed in such outlets.

This element also involves identifying the most effective distribution channels. The types of wines preferred by high-involvementconsumers are often sold through specialist intermediaries, whereas those favoured by low-involvement customers tend to bedistributed by larger intermediaries and are more likely to be shipped in bulk.

There are additional considerations when a producer is deciding whether to sell its wine in more than one market. Consumer tastesvary from country to country and, in order to satisfy these, it may be necessary to produce wines with different aroma/flavourprofiles, levels of sweetness and alcohol.

Issues such as legislation, taxation and duty or restrictions on distribution, such as monopoly markets and the US three-tiersystem, may make some markets less attractive than others. Also, a producer may decide that they cannot sell their wine profitablyin so-called ‘price-sensitive’ markets

Question 24

Explain how Wine Intelligence’s wine market maturity table works?

Answer 24

Mature Market

Description:
Markets where wine appears to have
reached its potential with stable or
declining volumes.

Examples:
Germany, France,
Switzerland, UK

Established Market

Markets with strong historical growth which
is tailing off.

Australia, Netherlands,
Ireland, Japan

Growth Market

Markets where wine is a mainstream
product and/or experiencing growth.

USA, Canada, Italy,
Poland

Emerging Markets

Markets where wine is experiencing growth
and shows potential from a relatively low
base.

China, Russia, Brazil,
Taiwan

New Emerging Markets

Markets where wine is still a relatively new
and unknown beverage, but showing some
potential.

Malaysia, Philippines,
Vietnam, Thailand

Markets can move both up and down in this categorisation. For example, Italy used to be categorised as a ‘mature market’, but isnow experiencing an increase in sales again and is therefore now classified as a ‘growth market’.

In very general terms, mature and established markets show the greatest amount of saturation and least growth, but have theadvantage not only of reliable trade structures and routes to market, but also an established wine culture. By contrast, emergingand new emerging markets may hold potential for most growth but also carry the most risk and often do not have the structures inplace for an easy route-to-market

Question 25

What’s the importance of promotion?

Answer 25

This covers all the methods used to promote a particular product. Because psychographical and behavioural segments will includepeople from different geographical locations and with a variety of demographic characteristics, a single type of promotion will notbe enough to appeal to the whole segment. The marketing campaign should therefore consist of a variety of elements to connectwith as many members of the segment as possible.

For products being marketed in more than one country, it is important to be aware of the legal constraints of different countries, inparticular in relation to alcohol advertising.

Promotional activities can be divided into those which take place at the point of sale and those which happen elsewhere.

Question 26

How does promotion at the point of sale work?

Answer 26

• Price promotions
• Free merchandise
• Limited edition packaging/presentation
• Competitions
• Consumer tastings
• Staff training and incentives

Question 27

How do price promotions at the point of sale work?

Answer 27

Price promotions

Many retailers regularly offer price promotions of one sort or another (although these promotions are rarely used by deepdiscounters). The typical aim is to increase sales of existing products, gain volume sales for new products or attract newcustomers; however, sometimes they can be used to help shift old stock or discontinued lines (often called ‘bin ends’).

There are many types of price promotion, i.e. those which effectively reduce the price of a product, usually for a limited period.Common examples include:

• a specified amount or percentage discount on all or selected items;
• seasonal sales: e.g. in the run up to Christmas, ‘summer wine’ promotions;
• discounts on certain days (often used by the hospitality trade to encourage business on quieter weekdays);
• discounts for certain groups of people: e.g. students, members of the armed forces.

Another common form of price promotion is the ‘multi-buy’ or volume discount. Whilst the price of the product is not itself reduced,consumers pay less if they buy more than one. Common examples include:

• buy one, get one free (also known as ‘BOGOF’);
• buy one, get one half price;
• buy three for the price of two;
• save a specified amount or percentage when spending over a certain amount or buying a certain number of bottles or more;
• (in the hospitality sector) buy, for example, two large glasses (25cl) of wine and get the rest of the bottle free.

The success of a price promotion cannot be judged until the promotional period has ended and the price returns to normal. If theprice reduction has worked, although sales will drop once it is increased again, they will still be higher than they were before thepromotional period. However, there is a risk that the promotion will not build consumer loyalty to the product, or even the retailer,when the price returns to normal. Consumers will view price promotions simply as ways of buying products cheaply and will switchto the next similar product to be on promotion. In this case, post-promotion sales will be no higher than those before the pricereduction.

Another risk of a price reduction is that it may damage the image of the product in the mind of the consumer, who may come toview the reduced price as the ‘correct’ price for that particular product and not be willing to pay the full price again once thepromotion is over. For this reason, the Champagne industry has been very concerned about the regular price promotions on theirwines in British supermarkets over recent years.

• Multi-buys and volume discounts are less likely to affect the consumer’s image of the product, as the reduction in the price of theindividual products may not be immediately apparent. However, these promotions have been particularly controversial as they areseen to encourage excessive alcohol consumption. For that reason, they have been banned in some places, including Sweden andScotland, and there are calls in many countries to limit price promotions on alcohol generally, either by banning them altogether orintroducing policies such as minimum unit pricing.
• There are two further types of price promotion which carry less risk of devaluing the product image. ‘Link saves’ offer consumerswho buy one product a reduced price on another product from a different category. So, for example, where a retailer suggests thata particular wine will complement a certain type of food, they may keep the wine at full price but offer a reduction on the food item. Also, many wine retailers offer discounts not on the wine itself but on delivery costs by, for example offering free delivery for ordersover a certain amount (of bottles or price).

Promotions can be highly beneficial to wine producers as they can increase sales and brand awareness. However, many big retailers expect producers to meet the cost of any promotions, including any loss in sales revenue, with the result that they mayonly be financially viable for larger producers.

Question 28

How does free merchandise at the point of sale work?

Answer 28

This is another way to generate sales without the need to reduce the price of a product. Such offers are particularly common beforea national holiday or any other time when alcoholic drinks are given as gifts; for example, a bottle of wine could be offered for salein a special presentation pack with two glasses. Big producers also have various promotional items which they offer to consumerswho buy their products, such as ice buckets, corkscrews and even items not directly related to wine, like umbrellas.

However, because this merchandise is available to everyone, it is rarely seen as anything valuable by consumers and is unlikely tocreate many additional sales.

Question 29

How does limited edition packaging/presentation at the point of sale work?

Answer 29

It is common for companies to create limited edition packaging for their products. Some producers of super-premium wines offerexclusive, elaborately designed presentation cases for particular wines which are prized by wine investors and so contribute to theluxury brand image.

Other producers create limited-edition packaging linked to major events such as the football World Cup or the Olympic Games. Ifthis is a regular promotion, such as Champagne Lanson’s limited edition packaging to tie in with its sponsorship of the WimbledonTennis Championships each year, this can help promote the brand’s image. However, most limited-edition packaging is seen byconsumers as little more than a bit of fun: whilst some consumers may be introduced to the brand in this way and then buy again, itdoes not tend to increase sales in the longer term.

Question 30

How do competitions at the point of sale work?

Answer 30

Competitions can be used to encourage consumers to buy a particular product. For example, a New Zealand wine producer couldoffer anyone in a particular export market who buys a bottle of their wine the chance to enter a draw to wine a two-week holiday inNew Zealand. This may be a more attractive, higher-value proposition to consumers than merchandise as it gives them the chanceto win something exclusive.

Most companies running competitions also use them as an opportunity to collect consumers’ contact details which they can use forfurther promotions, subject to data protection laws in the relevant jurisdiction.

Question 31

How do consumer tastings at the point of sale work?

Answer 31

Retailers are increasingly seeing the value of offering in-store tastings, particularly to introduce customers to new products orvintages.

There can be a cost to the retailer of opening bottles which they could have otherwise sold, although many distributors andproducers are willing to provide a few free bottles for tasting purposes. However, studies have shown that offering tastings canincrease sales. Many consumers, especially low-involvement ones, are nervous about spending money on wine when they do notknow if they will like the taste. If customers try the wine and like it, they are more likely to buy it, not just at the tasting but again in the future. Even if the customers do not like the wine at the tasting, they may well buy something else whilst they are in the shop.

Many distribution companies offer to host in-store tastings to promote their wines and will send a representative to talk about them.Sometimes, they will arrange for the winemaker to come and tell the story of the wine. Many restaurants also now host wine tastingdinners where the wines are matched with different courses of food.

Question 32

How do staff trainings and incentives at the point of sale work?

Answer 32

A less direct promotional tool is to ensure staff are trained and educated on particular products. Such training may be provided bythe retailer, the distributor or the producer themselves.

Educating staff about how a wine is made and allowing them to taste it helps them promote the product with more confidence andenthusiasm and will enable them to tell the story of the wine.

In addition, staff may be offered an incentive to sell more of a particular product; for example, rewarding the member of staff sellingthe largest number of bottles of a particular brand of Champagne during the promotional period with an expenses-paid visit to theregion. These are usually funded by the producer or the relevant trade body. However, it should be noted that in some marketssuch as China, this practice is considered bribery or unfair competition and is therefore illegal.

Using staff as a promotional tool can work well where there is personal contact between the sales staff and the consumer, such asspecialist wine shops, bars and restaurants. However, it is not appropriate for larger retail outlets, such as supermarkets, wherethere is little or no interaction between staff and consumers.

Question 33

How does promotion away from the point of sale work?

Answer 33

• Advertising
• Sponsorship
• Websites
• Social Media
• Smartphone apps
• Wine Tourism
• Events and festivals
• Reviews and awards
• Public relations (PR)

Question 34

How does advertising away from the point of sale work?

Answer 34

A well-designed advertising campaign can be a very powerful tool for promoting a product to a potentially large and varied group ofconsumers. A particularly successful campaign can remain in consumers’ minds for a long time after it has been withdrawn,sometimes even for years.

Advertising campaigns can be very expensive, especially if they run on television, in cinemas or in the national press. Mostcompanies also need to employ the services of an advertising agency to design their campaign (even the biggest companies withan in-house marketing team) and this too can be very costly.

Most advertising campaigns are conducted through a combination of channels:

• Television or cinema – These can be the most powerful of advertising campaigns and can reach the largest number of people.As a result, however, they are very expensive, especially if the advert runs during a popular prime-time television programme,and so only companies with large marketing budgets can afford them. Product placement in a TV programme or a film cansometimes be used instead of advertising, often at a lower cost.
• Radio – Although usually considered slightly less effective than TV or cinema, radio adverts are less expensive and so are opento companies with more modest marketing budgets. However, the lack of images may make them much less memorable.
• Press advertising – This often takes the form of a striking full-page image with little or no text, designed to promote the brand’simage. However, for products which have a story to tell, such as wine, adverts with text can be very effective at attractingreaders and giving a much more detailed story than a thirty-second TV, cinema or radio slot, and often at a lower cost. It isimportant to place the advert in the right print media (newspapers or magazines) to reach the target consumer segment. Somelarge brands will advertise in the general, non-specialised press to reach as many people as possible. However, most winecompanies will place adverts in specialist wine or food publications as these tend to be read by high-involvement wineconsumers. Some producers also pay respected wine writers to write articles specifically about them and their wines in suchpublications (sometimes known as ‘advertorials’).
• Online – The internet and social media have become a very easy way for companies to advertise their products cheaply to alarge, global audience. This may take the form of the company’s website, an advert on another website (for example that of amagazine or a supermarket) or a YouTube video (see below for more detail on the use of social media). Aside from the costs ofcreating the advert, the company will only need to pay if the advert is on another company’s website.
• Billboards – Some companies use billboards to advertise their products. They are found in a variety of locations. They are oftenseen by the side of roads, but, as most people are unlikely to be able to look at them for very long, these must have a strikingand memorable image and a short, simple message. However, posters at railway stations and bus stops can contain a moredetailed message because people waiting for a train or bus often spend longer reading advertising posters as there is not muchelse to do.

Where a product is being marketed globally, adverts can be easily translated into other languages, although companies should ensure that there is nothing about it which might offend different cultures or get lost in translation. Sometimes specific ‘international’advertisements, delivering the global brand message, are created for use without change wherever the advertisement may beshown.

The main issue with all such advertising is that, due to the health concerns associated with alcohol, most countries have lawsrestricting the advertising of alcoholic beverages. These range from total prohibition, as in the UAE and Qatar, through very strictcontrols, such as the Loi Evin in France, to a less rigid approach, which might be based on self-regulation by the alcohol industry,as in the UK. As well as trying to discourage excessive drinking, these laws and codes of conduct also seek to limit the promotionof alcohol to younger people (even those above the legal minimum drinking age). It is essential that any advert conforms to therequirements of the country in which it is used.

Question 35

How does sponsorship away from the point of sale work?

Answer 35

Many sporting and cultural events are supported financially by sponsorship deals. Examples of wine companies which sponsorevents include Chilean wine brand Cono Sur (Tour de France), Mouton Cadet (golf’s Ryder Cup) and French champagne houseCarbon (supplier of Champagne for Formula One podium celebrations).

In some cases, the deal simply involves display of a business’s logo on billboards or participants’ clothing. Other deals give thesponsor exclusive rights to be served in the bars and hospitality venues at the event.

Some companies also sponsor television programmes. This is cheaper than producing a television advert; the product or companylogo appears briefly at the beginning and end of the sponsored programme, either as a still or, increasingly, in a short piece of film.

In most countries, sponsorship is treated as a form of advertising and is therefore subject to the same legal restrictions. It can be acontroversial topic, particularly in the sporting arena where some people question the suitability of linking alcohol with activitieswhich are intended to promote health and well-being.

Question 36

How do websites away from the point of sale work?

Answer 36

The development of the Internet has introduced a wide range of new promotional possibilities. It allows companies to communicatewith large numbers of people throughout the world, including markets in which they are not otherwise present.

A website can give consumers a great deal of information about a business, enhanced through the use of photographs and videos.A wine producer’s website can tell the story of the wine, give details of the wines produced, offer food and wine pairingsuggestions, incorporate an online shop and provide details of upcoming events. It can provide different levels of information tosatisfy different types of consumer; for example, there may be some basic details about the wines produced which will satisfy mostconsumers but perhaps a link to more technical specifications detailed enough to satisfy the most exacting of high-involvementconsumers

A website must be attractive and easy to navigate. Internet users are very demanding and will not tolerate any site that seemsbadly constructed, runs slowly or crashes. Websites have become an essential part of brand image and must be consistent withthe overall marketing strategy. Whilst there are online applications which allow companies to build their own website cheaply, thesewebsites tend to look very similar. Many companies therefore prefer to have a personalised site created for them, but employingconsultants and IT experts can be costly. However, in some cases, however, companies may be able to recoup some of thesecosts by selling advertising space on the site.

Companies want to ensure that as many people as possible find their website, which can be difficult given the vast number ofwebsites now in operation. Studies show that people searching online rarely go beyond the first couple pages (or even the firstpage) of Google search results. For this reason, companies use a variety of ‘search engine optimisation’ techniques to ensure theirwebsite features as high as possible in search results.

Another concern about websites is that they can be accessed by people below legal drinking age. Almost all websites for alcoholicdrinks will have some form of filter, asking whether the visitor is of legal drinking age in their country of residence or asking them toenter their date of birth and country of residence before they can access the site. Of course, these filters are entirely dependent onvisitors being honest.

Question 37

How does social media away from the point of sale work?

Answer 37

Social media such as Twitter, Facebook, WeChat and Sina Weibo have caused companies to review in a major way how theyrelate to the public. For the first time, it is possible to have a dialogue with consumers rather than talking to consumers as is thecase with more traditional advertising media. It is also particularly important for communicating with younger consumers.

Whilst social media can be used to share adverts, positive reviews and other promotional activity, studies suggest that non-promotional activity is equally important; indeed, it is believed that companies that only use social media for promoting themselvestend to alienate followers. Companies should therefore also use their account to share news, articles, photos, and, increasingly,videos that are likely to interest their target consumers, even if they are not directly related to wine. Producers can also postupdates, including photos and videos, of what is going on in the vineyard or winery.

It is important that a company chooses the most appropriate social media channels to communicate with its target market. Forexample, recent statistics suggest that younger people are turning away from Facebook and Twitter to more visual media such asYouTube and Instagram.

One aspect of social media which companies need to understand is that it allows people easily to share their experiences withothers. In the wine world, this means ordinary consumers (i.e. not only well-known critics) can share their thoughts on a particularwine. There are also now a number of social media sites dedicated to wine where people can share reviews and tasting notes withother users. Many wine retailers’ websites also allow customers to leave reviews. These ‘peer reviews’ have become anincreasingly important on wine purchase decisions, especially amongst millennials, many of whom trust these more than reviewsby established critics.

Whilst social media can potentially provide invaluable free promotion, it can also lead to negative publicity and reviews. Companiesneed to manage their social media presence both frequently and carefully and react to any negative content in as positive a way aspossible. There is also a danger that users may post inappropriate materials to a company’s page, which should be taken downimmediately.

Question 38

How do smart phones away from the point of sale work?

Answer 38

There is an ever-increasing range of smartphone apps that allow users to find, read about and comment on individual wines. Someare intended for high-involvement consumers who want to read reviews from other enthusiasts or professionals (to which theyalready subscribe) or to keep track of the contents of their own cellars.

Aside from the opportunities for free publicity discussed above, some wine companies are starting to engage with these apps topromote their business. For example, some shops allow their stock information to be shared through these apps so that consumerswho want to buy a particular wine can find out who stocks it, with the store then paying commission to the app operator if theconsumer clicks through to buy the wine.

Question 39

How does wine tourism away from the point of sale work?

Answer 39

Wine tourism is an increasingly important form of promotional activity. A number of studies has shown that it is particularlybeneficial for new producers and those in up-and-coming wine regions, as it provides an opportunity to engage with the public. Asexplained above, giving consumers the opportunity to taste wine can significantly increase the likelihood of sales and academicstudies have also shown that people who visit producers are more likely to become regular customers and to recommend thosewines to others.

Whilst some producers simply operate a cellar door for customers to come and buy wine (see Selling Directly to Consumers),many are offering increasingly sophisticated wine tourism experiences. These include tasting rooms, vineyard and winery tours,visitor centres, shops (often selling local produce, art and wine-related paraphernalia as well as the producer’s wine), cafés, casualdining and even fine dining restaurants and accommodation. Some offer experience packages, such as allowing visitors toparticipate in the harvest or to become a winemaker for the day. Many hire out space for events such as weddings and parties.

Whilst wine tourism can increase sales, developing the infrastructure can be very expensive. Tourists can also get in the way ofday-to-day operations in the vineyard and winery, and small wineries may simply not have the staff to deal with large numbers oftourists. Some wineries therefore only run occasional events and organised tours whilst others do not encourage visitors at all.

Many wine regions have developed successful wine tourism strategies bringing together not just producers but also other touristbusinesses (e.g. tour companies, restaurants, hotels). They have created wine trails which link up a number of producers andwhich visitors can follow; in some regions, such as Alsace, these include cycle routes. Others have created special touristattractions, such as the Napa Valley Wine Train which includes a gourmet dining experience with Napa Valley wines aboardvintage rolling stock and includes the option of winery visits.

High-involvement wine tourists are more likely to travel to wine regions to visit wineries and sample the local food. Because theyare keen to widen their wine knowledge, they enjoy tours of vineyards and wineries and like the opportunity to talk to the peopleinvolved in producing the wine. Low-involvement tourists are more likely to visit a winery because it is in the region they are visiting– for example, visitors to Barcelona might take a day trip to a Cava producer in Sant Sadurní d’Anoia. They will usually be happywith a brief tour or simply just a tasting. However, even low-involvement tourists make purchases and can recommend wines toothers and so this segment should not be ignored.

Question 40

How do events and festivals away from the point of sale work?

Answer 40

An increasing number of wine regions are organising festivals which bring together producers from that region. They often takeplace in urban areas and provide an ideal opportunity to taste a variety of producers’ wines without having to travel out to vineyardsand wineries, which tend to be in rural areas. These events are likely to attract high-involvement consumers but, because thesefestivals usually include local food and other entertainment, such as live music, they can attract a broader range of consumers thanare prepared to go to visit vineyards and can therefore be an excellent opportunity to engage with new customers.

The benefit of making sales and winning new customers has to be offset against the cost of attending these events. Producersusually have to pay to exhibit and may have to pay additional staff to run the stand; they will also have to use up stock they couldotherwise have sold as tasting samples. In addition, there is the cost of preparing the stand: these will vary in style depending onthe type of event, ranging from a simple table to a more expensive branded pop-up bar with a seating area and props.

The stand also needs to stand out to attract visitors, as an obvious disadvantage of exhibiting at events is that there are lots ofother stands and products competing for the visitors’ attention, unlike at their cellar door. All the producers will be offering tastingsand individual producers need to think about offering something distinctive, such as food pairings or a more formal tasting at whichvisitors can taste a specific range of wines, perhaps run by the winemaker.

Even at wine festivals, tastings must be carefully managed; it is not unknown for consumers who have paid to enter a fair toconsider they have the right to drink (rather than taste) as much as possible, often with regrettable results. To combat this problemsome events issue visitors with vouchers which must be handed to staff on a stand before the visitor can be given a sample.

Some producers also exhibit at events where wine is not the main focus, such as food fairs, travel shows and music festivals.These events attract an even wider range of visitors, many of them not regular wine drinkers. Again, these can be an excellentopportunity to engage with new consumers who might not otherwise try their wine; however, they are much less likely to generatesales or find new customers. In order to make exhibiting at such events worthwhile, producers will usually charge for people to try their wine or simply sell wine by the glass.

Question 41

How do reviews and awards away from the point of sale work?

Answer 41

A favourable review from a well-respected critic can significantly boost sales of a particular wine. Producers may target particularcritics and send them samples of their wine to try and, hopefully, review. However, many critics do not like this approach; forexample, Robert Parker made a virtue out of always buying his own wine to taste.

Producers may also send samples to wine competitions such as Decanter World Wine Awards or the International Wine Challenge.If the wine wins a medal, the producer can use this in their promotional material and it is also possible to purchase stickers to puton the bottle, showing at the point of sale the awards that a wine has won.

It is thought that critic scores and awards can influence the purchase decision, especially amongst lower-involvement and lessknowledgeable consumers. Many producers therefore consider the cost of entering the competition and sending the requirednumber of bottles for tasting a worthwhile expense.

Question 42

How does public relations away from the point of sale work?

Answer 42

Companies regard good PR as essential to successful promotional activity. Advertising is not the same as PR: advertising seeks todraw attention to and promote a specific product or range of products whereas the aim of PR is to give the business the mostfavourable image possible in the mind of consumers. PR activities include

• representatives of the company attending public events or appearing on TV or radio news programmes to comment on issuesrelevant to the business;
• press releases;
• newsletters;
• social media.

A strong social/corporate responsibility policy can also help create a positive image in the eyes of many consumers.

One particular form of PR used by many larger companies is the brand ambassador. Whilst they are often full-time employees ofthe company, chosen for their excellent brand knowledge and their social and presentation skills, some brands employ a celebritywho the company believe shares the values and image of their products. The celebrity brand ambassador will feature in advertisingcampaigns and/or videos posted on the brand’s website; for example, tennis player Roger Federer is a brand ambassador for Moëtet Chandon. In China in particular, key opinion leaders (KOLs: a person, community or organisation that creates high qualitycontent on social media and has a large group of loyal followers, ranging from thousands to millions) may be hired by winecompanies to create social media content about the company’s brands that is then shared by the key opinion leader with their hugenumbers of followers. If the key opinion leader has a genuine interest in and knowledge of the product, this option can be verypowerful in markets where ‘word-of-mouth’ and peer recommendation is highly valued.

Question 43

How do you implement and monitor the marketing strategy?

Answer 43

Once the strategy has been drawn up, it can be put into practice. However, marketing is a dynamic process and the strategy needsto be kept under constant review to check that it is working as intended. If necessary, the company should consider makingchanges to the strategy or even the objectives. Ultimately, the decision may have to be taken to abandon the marketing processand withdraw a product from sale if it is considered that the objectives will never be met.

There are many ways to measure the success of a marketing strategy. This could be as simple as looking at sales figures, profitsor the number of hits on a website. However, it could entail more detailed research (often called ‘marketing research’ to distinguishit from ‘market research’) to understand how consumers are reacting to the strategy. The simplest form of this is to ask consumersdirectly for feedback, either individually or through a focus group. If one of the objectives of the marketing strategy is to improve thebrand image, consumers could be asked how they perceive this to see if there has been any improvement.

More complex processes include eye-tracking to analyse how consumers look at websites, store layouts and adverts, and viralmarketing research, which estimates the probability that specific communications will be transmitted throughout an individual’ssocial network (the ‘Social Networking Potential’).

Question 44

What are the marketing options? How can a company carry out their marketing?

Answer 44

There are several different ways in which companies can carry out marketing.

Companies with sufficient resources can employ an in-house marketing team who will help create and drive the marketing strategy.Some of the largest companies with a global presence will have teams in all their key markets to ensure that they fully understandthe market and identify any new trends.

Many smaller companies cannot afford a marketing team and may outsource some or all of the marketing function to a PRcompany or advertising agency. Although this will cost money, it will be cheaper than employing skilled marketing staff.

Some smaller companies do not carry out enough marketing to justify paying external advisors and do the work themselves.However, this may be one person or part of one person’s job role, and, in this case, marketing activity is likely to be relativelylimited. This can take up valuable time, particularly if that person has limited marketing knowledge, this can take up time that theywould rather be spending on another aspect of the business.

In some parts of the world, wine producers can become members of an industry association (such as a consorzio in Italy or theVDP in Germany), a generic trade body (such as Wines of Australia or Wines of South Africa) or an informal trade grouping (suchas VIGNO, the Vignadores de Carignan in Chile). One of the main aims of all of these organisations is to help promote theirmembers’ products. They may have a marketing team but, if not, the groups can benefit from the combined knowledge andexperience of their members. Although a membership fee will be payable, it will be considerably cheaper for individual producersthan employing their own marketing expert and they will benefit from the increased exposure of being marketed as part of a largerportfolio of wines.