Can the price be right?

Can the price be right?

In this issue we wanted to look act the effect of discounting. Who better qualified to pass comment\rthan drinkers themselves. So we put two questions to members of the forum about how they view brands that had been discounted.

People | 01 Mar 2007 | Issue 62

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Leonard Bacha Ohio, USA LB
Michael Medve California, USA MM
Sion Hannuna Bristol, USA SH
Nick Brown Isle of Lewis, UK NB
John Felber Ontario, Canada JF Q:Does discounting affect how the customer views a brand and its heritage?LB:Alot of it depends on the customer the brand is marketing to. Discounting can be used in many ways and to many people doesn’t affect the impression of quality of the brand or distillery.If the brand is trying to expand this can be a tactic to get more customers or a different group of customers. The discounting may just be the result of overproduction 10 to 15 years ago. The store that has the product may just be trying to clear the shelves and it has nothing to do with the brand.It is impossible for the consumer to know why the brand is discounted. This argument can always be countered because there are a lot of people that consider higher priced items to be a higher quality items and hence more desirable.It will be impossible to change their minds even if they try the discounted whisky and like it. These are not the people that most distilleries want as a core group because they are a very limited and select group of people and unless you focus all your marketing on them you will eventually loose your sales to another brand that does market to them.MM: In the United States, the middle class here has shown a growing interest in luxury goods for non-luxury prices. Whether it be jewellry, designer clothing, luxury cars, or premium beverages, the entry-level product is the best selling product.Upper class consumers can write off these other product lines as ‘not the real thing’. In this country, a brand’s reputation has more to do with its success than its heritage.SH: I do not really agree. I believe a brand can tolerate a low price for its entry malt so long as the next age statement is a big leap in price. Take the examples of Ardbeg, Springbank and Macallan, their mid to high level brands are very expensive, which safguards their status as sought after luxury items.NB: I think the crucial factor is the normal selling price. If a branded whisky is normally sold at a high price, many people will assume it to be high quality.If the brand is normally sold at a low price, it will be perceived by many – often unfairly – to be an inferior product. The difference in retail price for Talisker (high) and Speyburn (low) illustrates the point. Many people will never try Speyburn because they are turned off by the low price.However, an expensive whisky can be sold on a money off basis – save £5 or save 20 per cent – quite happily and people will assume they are getting a bargain on a high quality product.The trick is to get people to taste a whisky for the first time - thereafter, the whisky will stand or fall on its own merits.Q:Can a brand lose drinkers through discounting or is it a different way to attract new drinkers?LB: Yes, a brand that has marketed itself to drinkers that consider price to represent quality will loose customers if they start discounting their products because that type of consumer is going to perceive this as a sign that the quality of the product must have been lowered in some way, or they can even make the decision because they consider the prestige to be lowered.They don’t want to drink something that the masses can afford.MM:It is a bad idea to permanently discount product lines that already exist.Consumers will wonder what caused the price to drop. However, if a new, lower priced product line is created it can improve the brand’s reputation and enlarge its customer base in a profound way.The single malt Scotch whiskies that the man in the mall views as high class are the same ones you see behind every bar. In the single malt Scotch business there is a massive potential market coming in a decade or so.The college students of the new millenium are not going to be taking shots of premium tequila for the rest of their lives.LB:Of course discounting can attract new customers if a brand has a high prestige value and you lower the price, alot of people who would like to drink that brand will now be able to, so you will get them to switch to your distillery.You will also gain alot of customers that know nothing about the distillery but are shopping on price alone. If there are two whiskies to choose from and one is alittle cheaper then the sale will alot of times go to that whisky.SH:If the price of a distillery’s low end malts are reduced, they can provide a gateway to new customers. Macallan 10yo, Ardbeg 10yo and Talisker 10yo are all regularly available at supermarkets at an affordable price.At this price point, these whiskies offer excellent value for money and people will ‘take a punt’ on them.I see it all the time in the supermarket: Customer reaches for J&B Rare, customer sees Ardbeg 10 Years Old £7 off, customer pauses, picks up bottle. They like the Celtic design, the heavy glass, and it’s in the trolley.Two days later they are posting on the Whisky Magazine forum JF: There is no doubt that discounting attracts new customers. I will use an example.For a long time Mercedes-Benz and BMW were the top two German luxury sedans.They were in competition for years.Then one day BMW introduced the 3 Series as the entry level BMW. The success of the 3 Series was immense.Customers who previously had to choose between an expensive BMW or Mercedes- Benz now found a less expensive choice to consider.The 3 Series also attracted customers who never would have considered BMW as a within their price range.For a long time Mercedes-Benz refused to market a brand on par with the BMW 3 Series. They did not want to cheapen the brand image and lost business to BMW.In fact they lost so much business that Mercedes-Benz finally had to create their only rival to the 3 Series, namely the C Class.If a company wants to make as much money as they can they must attract as large a consumer base as possible.However if a company prefers exclusivity (and an undisputed prestige factor), they will certainly market goods with unreasonable profit markups to maintain afloat.In my mind the answer is basically that discounting does introduce new drinkers to a blend or single malt and will increase a company’s success in the whisky market.
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