I was recently involved with organizing some tastings over a couple of evenings for a retailer, putting together wine lists and sale pricing, plus customer handouts, etc. There were two tastings over two nights, with the same wines, for the same type of customers.
As organized as I try to be with my spreadsheets, sometimes mistakes happen.
This mistake proved to be an excellent opportunity for an experiment.
In the first night’s tasting, there were two wines from the same producer, one a Brut and one a Rosato. Their costs were the same. The producer was the same. The quality was the same. The labels were the same, outside of one being white and one being pink. It was very obvious they were fraternal twins.
I messed up on the pricing. Both should have been sold for $15.99 a bottle, but I accidentally listed the Brut for $10.99 and the Rosato at the correct $15.99. My bad. Anyone buying that Brut was going to get an incredible bargain.
I caught the mistake after the first evening but noticed something curious with the orders turned in: the more expensive wine outsold the less expensive wine by a factor of 5 to 1. It was pretty startling.
So, for the second tasting, I switched the mistake. I priced the Brut Rosato at $10.99 and the Brut at $15.99.
You can guess what happened. The more expensive wine outsold the less expensive wine by the same 5 to 1 ratio.
Pricing is a story. It’s a story that wineries tell themselves, retailers and restaurants tell themselves, and most importantly, consumers tell themselves.
It’s not always the bargain or the lower price that customers seek out. And if it’s a wine they have never had before, the price is the main guide to the expectation of quality. If that expectation gets met or is exceeded, you have a happy customer regardless of the markup.
Buying decisions often have little to do with quality and everything to do with the story.
There are many restaurants with Caymus Cabernet available on the list, marked up far more than all the other wines. Yet particular consumers keep buying it, even at $250 a bottle, an insane 5x markup from the lowest retail pricing. The story they tell themselves sell that wine … how else can you explain it?
To paraphrase Seth Godin: “People like us buy wines like this.”