The most unique thing about wine from the competition perspective is the sheer number of the small brands found in the market place. In essence, are there certain small brands or are they in fact niche brands? All brands as well cannot be niche brands. This paper is therefore concerned with analyzing the transactional data on the purchases by consumers of some brands in the Australian wine market over a period of time. In particular, it sheds light on whether there is any evidence of niche or change-of-pace brands in the Australian wine market. As well, it strives to highlight the market implications of the data. It gives provides value insights for both small and large wineries into the structure of the market.
It is worth understanding the fundamentals of the market place before any evidence of niche or change-of-pace brands in the Australian wine market is identified. In essence, the sales volume of any brand is generated by finding the product of the number of costumers that purchase the product, i.e. the penetration, and the amount of products that those customers purchase, i.e. the purchase frequency (Casini, Corsi & Rungie, 2008). In fact, a brand has expected purchase frequencies and customer penetration in line with that of the given market share as the brand increases in market share.
Usually, the greater increase in market share is achieved only through penetration and not through the purchase frequency (Casini, Corsi & Rungie, 2008). Based on the transactional data, it is evident that small brands have standard purchase frequencies and penetrations. The results obtained from the transactional data show that both niche and change-of-pace positions are prevailing in the Australian wine market. The small wineries within a direct marketing channel approach should thus target higher price points with branded wines but also lower price point products as well.
In particular, there is an evidence of niche brand from the transactional data obtained from Australian wine market. A niche brand is one which has a higher frequency of purchase as opposed to rate of penetration (Casini, Corsi & Rungie, 2008). This is evidenced from the transactional data. It is evidenced that there are certain wine brands, like Las Noches, that are represented with higher frequency of purchase relative to the rate of penetration.
However, most of the brands have higher penetrations as opposed to the purchase frequencies. This implies that the brands find it difficult to create a niche brand, i.e. a brand that has relatively smaller numbers of buyers but whose users have a higher purchase frequency. Basically, the Australian wine market relatively has a few niche brands that for sure have higher market share.
Similarly, it shows to some extent a degree of change-of-pace brands. Change-of-pace brands are those brands with lower purchase frequencies relative to their rate of penetrations. It refers to those brands that register low purchase frequencies but on the contrary have higher penetration (Kahn et al. 1988). This is clearly evidenced in the Australian wine market where brands like Lost heart have higher penetrations of 57.52% with only a purchase frequency of 5.46. This implies that a good number of wine customers in the Australian market constantly seek for variety in their wine consumption.
The market implications that come to mind as a result of observing the transactional data is first of all the precarious situation for winery to have a change-of-pace brands in the market. A double jeopardy situation is likely to be experienced in the market by certain winery companies. A good number of wineries change-of-pace brands. This means that the majority of small winery brands maybe very unsustainable. They may only be sustainable on condition that they have commercial wine within their brand offering (Kahn et al. 1988).
However, small winery companies may find themselves in a situation of double jeopardy. Based on the transactional data, many wine small brands have higher penetrations than the purchase frequencies. As well, some of the brands seem to lose on both the penetration and frequency of purchase. The double jeopardy effect is defined as a situation where small brands in actual fact lose out in both of the penetration and purchase frequency. Nevertheless, a brand can only achieve greater increase in market share through penetration as opposed to through the purchase frequency (Kahn et al. 1988). The market share only increases if there is an increase in both the elements, and not only one as the case of Australian wine market. In essence, more of the market share growth is attributed to penetration, i.e. it comes as a result of selling to more people and not selling the product to the same people overtime (Ehrenberg et al. 2004).
Another market implication of the transactional data is that there is likelihood of many brands failing to become niche brands in the Australian wine market. This is due to the double jeopardy effect. Small brands significantly lose of both purchase frequency and penetration (Ehrenberg et al. 2004). In fact, small brands sit on this line with negligible standard penetrations and purchase frequencies. In other words, it will be extremely difficult for the brands to become niche brand, i.e. a brand with relatively low penetration and high purchase frequency (Ehrenberg et al. 2004).
Therefore, the small winery brands needs to understand that the growth in market share significantly depends on the size of the customer base of the brand. In particular, companies which have a smaller share of the market should not be worried of the metrics of lower consumer loyalty. As well, it is needless for them to build brand’s customer loyalty without significantly increasing the market penetration of the brand (Ehrenberg et al. 2004).
Also, there is likelihood of the double jeopardy pattern in rate of customer loyalty. There is a larger propensity of customers who are likely to buy various wine brands but a range of brands from which they purchase will considerably vary between individuals.
The results generally imply that attribute levels which are change-of-pace are basically not sustainable for small brands. Only large brands with extensive marketing resources can undertake such attribute level (Jarvis & Goodman, 2005). It is also a fact that small winery brands should only focus those attribute levels that have surplus loyalty. Conversely, larger brands are able to absorb without any problem change-of-pace attribute level.
Also, based on the absolute number of winery brands and the investment decisions, larger funding is needed for financing the research on consumer purchase behaviour and perceptions of the smaller and medium firms wine brands. In fact, it signals the occurrence of renationalization in the market place. Rationalization is investable because of the consumer behaviour and the market demand (Jarvis & Goodman, 2005).
Equally, because of availability of niche wine brands in the Australian wine market, brand innovation in the market is paramount. More often than not, niche brands have unique features. Usually, as opposed to brand image, it is related to innovative product design. The niche wine brand marketers must thus combine a strong brand with an innovative product design. Small winery brands must besides combine very high quality wine, upper of the market, make product exclusive and have consistent brand associations.
Reference
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