What determines the price of wine?
Not necessarily taste or quality, according to the Journal of Wine Economics. A summary in The Economist notes:
The relationship between the price of a bottle of wine and its taste is weak, according to two studies in the inaugural issue of the Journal of Wine Economics. Using a price equation to compare more than 1,000 bottles of Bordeaux and Burgundy wines tasted blindly by experts, Sébastien Lecocq and Michael Visser, of the French National Institute for Agricultural Research (INRA), find that the price of wine is largely determined by objective standards such as colour, ranking and vintage, rather than simply by taste and smell.
Similar results were found by Pierre Combris and Sylvie Issanchou, of INRA, and Christine Lange, of France’s National Centre for Scientific Research, who observed how 120 people bid on non-vintage champagne after tasting it blind, after inspecting only the bottle, and after tasting it while seeing the bottle. The bidding was 33% higher when tasters could only see the bottle than it was with blind tasting, implying that the champagne’s taste detracted from its perceived value.
Wine valuation is a great example of people not really knowing what something is worth, or even why. In many cases, we do not buy a product, we buy an experience. This is why companies like Apple design not only their products, but the packaging and advertising to align with the product. Lawyers, accountants, doctors, and consultants dress a certain way, use fancy jargon, and professional-looking documents to enhance their clients’ experience. Vendors spend money to print color invoices. Some auto repair shops offer free shuttle service. And vintners put fancy labels on their bottles.
The problem with all these ancilliary attributes is that most companies have no idea which ones are actually valuable to which customers. Not the case with the vintners– they’ve known for a long time that what’s on the outside of the bottle can be as or more important than what’s on the inside.
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