Wine Pricing Consultation
There is much inefficiency in the retail prices of wine. This is evidenced by the common practice of discounting a wine’s price to sell excess inventory. Also, there are wines being sold at prices below what the market will bear vis-a-vis the quality of the wine.
To the extent consumers believe price is a signal for quality, a low price inadvertently may be dissuading purchases by consumers who would enjoy the wine if tasted. In addition, pricing a wine too low may result in reputational harm to the producer, as consumers may conclude the producer generally offers low quality wines.
For a wine priced too high, unsold inventory and/or forced price discounting will prevent revenue from being maximized. Due to lost revenue, distributors and retailers of a wine may be reluctant to purchase more of the producer’s wine. Also, if consumers of a high-priced wine are disappointed with quality relative to price of the wine, it is logical to conclude that future purchases of the wine, and perhaps purchases of other of the producer’s wines, will be restricted.
So, how does one determine the optimal retail price for a wine, avoiding the pitfalls of both underpricing and overpricing? An important and difficult first step is to identify the “market equilibrium” price for the wine (i.e., the price where all available quantity of the wine is demanded by consumers). Another piece of pertinent information is the range of prices others are charging for similar quality wines with similar taste characteristics. Insight into the wine seller’s objectives (e.g., establish market presence, drive market share, pursue a market segmentation pricing strategy, sell an inventory glut, etc.) is also a factor that should be considered. The combination of all of this information can be leveraged to effectively determine a competitive price for a particular wine.
Calldera has developed a mathematical model employing its taste-based wine categorization method and wine rating system to calculate market equilibrium retail wine prices. Calldera also collects data on the average retail prices of a multitude of wines it analyzes and rates. Employing its unique wine pricing method and collected market data, Calldera, in consultation with a seller, is able and eager to assist with competitive price setting.
Please give us a call today to explore the opportunity: 1-844-266-9463.
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