Consider which of the following descriptions would you most like to see applied to your product or service?
Cheap?
Good value?
Expensive?
Expensive but worth it?
Unless you are a no-frills airline or a low-price producer who’d be happy to have their product in a money-off bin at a local discount retailer, I’m betting that you didn’t choose 1).
If you are in the luxury sector, you may have found 3) acceptable but, again, I’m guessing you’d prefer 4).
Given these options, however, most people in the wine industry will almost certainly have gone for 2) "good value" – especially when considering its alternative; no one wants to be seen as overpriced.
As a wine critic for many years writing in a British national newspaper whose editors regularly put a cap on the price of the wines that could be recommended in its pages, value was the key criterion for the bottles I wrote about. A wine that tasted better and cost less than others on the shelf: what was there not to like?
A wine that tasted better and cost less than others on the shelf: what was there not to like?
The alarm bells first began to ring for me one autumn when visiting a family-run Côtes du Rhône Villages estate whose attractively-priced wines I really liked. How were things going? I asked. Well, came the answer, it’s been quite tough. Last year’s harvest was small and the one before that wasn’t great, and the economy is challenging. Thank goodness we’ve had the rooms to rent out to holidaymakers. Otherwise, we might not have survived.
What lies behind many a 'good value' price tag?
Okay, so this wasn’t remotely like discovering that your favourite brand of t-shirt is being made by small children in a Mumbai sweatshop, but it did raise questions about what lies behind many a ‘good value’ price tag.
Deciding the price
How, I asked, had they chosen the prices they were charging? There was, I was told, a ‘going rate’ for their appellation and, give or take a few euros, that was what they and most of their neighbours asked. Of course, some of those neighbours had larger estates or lower overheads and were financially a bit more or even less secure, but the prices were all fairly similar.
Asking more – without the help of a 95+ point score or two – would, they explained, be tough. The market is used to their – and their neighbours’ – prices. So, they soldiered on in the hope of better harvests, holiday cottages full of paying guests, and critics like me recommending their wine for the great value it offered.
Being described as ‘good value’ while being unable to afford to promote your wine properly may work for efficient, high-volume producers with secure distribution, but it’s not a great place for anybody else. It’s the equivalent of being a loyal, underpaid, long-serving employee who’s been maintaining an aristocratic household for decades: always heavily depended-upon but never truly appreciated.
To be blunt, like the salary a human being can command, the amount of cash a customer is prepared to pay for a product is ultimately the best indication of how much value they really place upon it.
Usually, the upper limit they will spend is set by each individual’s personal notion of the particular category – and nowadays this can vary. For some, no pair of trainers, for example – or what Anglo Saxons used to call ‘gym shoes’ - should ever cost more than $50 or $60. Others – admittedly a very small number – see no problem in collectors paying $50,000 for second-hand pairs of Nike Air MAGs.
Learn from Nike
What Nike did was to transcend their category, just as Reuben Mattus and his wife Rose did nearly three decades earlier when they launched a pricy ‘everyday luxury’ ice cream with the odd mock-Danish name of Häagen Dasz. The UK entrepreneur James Dyson pulled off the same trick twice, with a revolutionary vacuum cleaner in 1991 and subsequently with a $400 hair dryer.
In wine, there have success stories such as Angelo Gaja with his Barbarescos, Sacha Lichine with Whispering Angel in Provence and, perhaps most dramatically, by Lalou Bize Leroy with her $300 Bourgogne Aligoté.
When I lived in Burgundy in the early 1980s, Aligoté was cheap, usually acidic, white whose role was generally as a partner for cassis liqueur in the local Kir cocktail. The idea of a bottle costing five or even ten times as much as a Meursault would have been as unthinkable as anyone paying thousands of dollars for a pair of gym shoes. The Leroy brand, however, has been powerful enough to make its target customers understand that a Leroy Aligoté is not comparable to almost any other bottle with that grape variety on its label.
Category transcendence is far from simple, especially in a sector like wine where everybody has been taught to think in terms of appellations and grape varieties.
When you are in the fight for a value for money award, you’re ultimately competing against whatever a discount supermarket chooses to sell under its own label. And that’s a fight you are never likely to win.
A role model in the Rhône
For Rhône producers to stop basing their price on their neighbours and the expectations of their customers, takes ambition, imagination, vision, courage and, above all, commitment. But it can be done.
Not far down the road from their vineyards is le Chêne Bleu, an estate that had been abandoned when it was bought by Nicole Rolet and her husband Xavier in the early 1990s. Today, admittedly after a lot of work and investment, the Rolets are producing IGP de Vaucluse wines – supposedly two steps lower on the quality hierarchy than a Côtes du Rhône Villages – that sell in the US and UK for $80 a bottle.
Whether the people paying these prices would describe them as ‘value for money’ is uncertain, but they clearly believe the wines to be worth what they cost, and therein lies the crucial difference. The Rolets also offer the chance to stay in a converted medieval priory on the estate, but I've never felt that they relied too heavily on this particular revenue stream.
When you are in the fight for a value for money award, you’re ultimately competing against whatever a discount supermarket chooses to sell under its own label. And that’s a fight you are never likely to win.
Ultimately, whatever the price tag, whether you’re selling footwear, ice cream or hair dryers what matters is not standing up to comparison with similar alternatives. It’s making a product that is valued – sufficiently – on its own terms by the person at whom it is targeted.
And that decision, especially when the product is wine or clothes, is often arrived at subjectively, emotionally and irrationally.
