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Creating Brand Equity in the Wine Industry

Creating Brand Equity in the Wine Industry

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Published by Keith Voges

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Published by: Keith Voges on Aug 22, 2010
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Wowing the millennials: creating brand equityin the wine industry
Linda Nowak, Liz Thach and Janeen E. Olsen
School of Business and Economics, Sonoma State University, Rohnert Park, California, USA
Abstract
Purpose
The purpose of the study is to examine the attitudes of millennial wine consumers and determine if positive affect in tasting room situationsleads to higher levels of brand equity for the winery.
Design/methodology/approach
– A survey was developed to evaluate winery tasting room experiences based on standardized brand measurementscales. In total 80 millennials visited tasting rooms and then completed the survey to evaluate their experience.
Findings
– The results of this research empirically support the anecdotal evidence that, through positive emotions associated with the tasting roomexperiences, wineries can cultivate relationships with millennial customers that may lead to long-term, profitable relationships through continuedpatronage and brand loyalty.
Originality/value
– Practical application of this study suggests that carefully orchestrating a tasting room experience to create a positive experiencefor the millennial customer appears to be a critical component of post-purchase attitudes and building brand equity. In addition, customer commitment,product quality, service quality, and fair pricing are also significant predictors of brand equity.
Keywords
Brand equity, Wines, Customer service management, Youth, Individual psychology, United States of America
Paper type
Case study
An executive summary for managers and executivereaders can be found at the end of this article.
Introduction
How does a winery successfully build its customer base? Onemethod may be to start cultivating relationships with themillennial generation – potentially 76 million new customers.The millennials were born between 1977 and 1999 and arethe children of the baby boomers (Lancaster and Stillman,2002). They are considered to be the largest consumer groupin the history of the USA with annual incomes currentlytotaling $211 billion (Harris Interactive, 2001).Two important keys to building a relationship with thisgeneration is understanding and responding to their wishesand needs. This research focuses on the tasting roomexperience with the millennial generation; on building loyalmillennial wine drinkers that will continue to purchase thewinery’s brand after the tasting room experience is over. Bygetting to know the millennial wine consumer, wineries canlearn how to meet the customers’ expectations for the type of tasting room experience that will lead to positive word of mouth, wine club memberships, and repeat purchases.Previous research has shown that perceived wine qualityalong with consumer perceptions of fair pricing relative toquality are two critical success factors for building brandequity (Nowak and Washburn, 2002). But what else can thewinery do to create loyal millennial customers? Perhaps oneway is to build strong emotional connections. Therefore, thepurpose of this study is to examine the attitudes of millennialwine consumers and determine if positive affect, incombination with factors such as service quality, productquality, fair pricing, feelings of commitment towards thewinery, and customer satisfaction with the tasting roomexperience lead to higher levels of brand equity for the wineryin this particular segment of the wine market.
Theoretical background and development of research questions
About the millennial consumer segment
The millennial market segment in the USA is estimated to becurrently between the ages of 7 and 29 (Lancaster andStillman, 2002), but is being heralded by most majorconsumer product companies as a generation with very highbuying power (Harris Interactive, 2001; KeyFindings, 2004).They are also referred to as the Y Generation, Nexters, andEcho Boomers – the later title a tribute to the claim that theyare primarily the children of the baby boomers. According toLancaster and Stillman (2002), they are approximately 76million in size.Not only is the millennial generation much larger than theirprevious generation, the gen Xers, at 46 million; they are alsoreported to be very market savvy when it comes to consumerpurchases. Even at their current young age, they are attributedto have annual incomes totaling $211 billion; spendapproximately $172 billion per year and save $39 billion peryear (Harris Interactive, 2003). According to Fernandez-Cruz(2003, p. 1), “quickly surpassing its parent generation,Generation Y has grown up in a media-saturated, brand-conscious world, and is keeping advertisers on their toes.They not only have a lot of their own money, but theyinfluence family purchases. Many have been given parentco-signed credit cards at a young age, and perform the groceryshopping for their families (Neuborne, 1999). Research showsthat they are savvy when it comes to brands (Moriarty, 2004),
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
 Journal of Product & Brand Management15/5 (2006) 316–323
q
Emerald Group Publishing Limited [ISSN 1061-0421][DOI 10.1108/10610420610685712]
316
 
and value quality products when sold at a fair price (KeyFindings, 2004).The reason they are of interest to the wine industry, isbecause those that are between the ages of 21 and 29 havebegun to adopt wine in increasing numbers. According to theWine Market Council (2003), millennials are alreadyconsuming larger quantities of wine than the previousgeneration of Gen Xers. Furthermore, a recent Gallup Poll(Seed, 2005) identified millennials as part of the reason forthe increased popularity of wine in the USA.The millennial generation is known for certain traits andbehaviors which may influence their purchasing decisions. Aprimary trait is that they are very technology savvy. Most havegrown-up with the Internet and are adept at using it forproduct research and purchasing. According to Moriarty(2004), the Internet is their primary source of informationand they trust it. A second trait is their concern for theenvironment and social responsibility issues. They have beenknown to boycott brands which they perceive to be violatingthese values (BusinessWire, 2004; Neuborne, 1999). Relatedto this is a concern for diversity. Not only have they grown upin an age in which diversity was taught in school, but one-third of the millennial generation is non Caucasian (KeyFindings, 2004). Therefore, they look for, and expect to see,advertising that includes diversity of race and gender.Other traits and behaviors that distinguish this generationinclude their very optimistic nature and belief that they canmake a difference in the world (Lancaster and Stillman,2002). This is balanced by a strong practical streak. They arereputed to be financially savvy, and don’t like owing money.Because of this, they often seek brands which provide quality,but at a fair price, and prefer advertising that is “disarminglydirect” (Neuborne, 1999). A final characteristic is their belief in work/life balance. Millennials tend to believe that lifeshould be fun and enjoyable, but at the same time they dowant responsibility and challenge on the job. According toHarris Interactive (2001, p. 1), millennials exhibit “a well-balanced mixture of mind and heart.”Examining the characteristics and traits of the millennialgeneration is useful for marketers, as it suggests newmarketing strategies to reach this large and affluentsegment. Indeed, according to Neubourne (1999, p. 4),“marketers who don’t bother to learn the interests andobsessions of Gen Yare apt to run up against a brick wall of distrust and cynicism.
Building emotional brands to increase market share
If any business is successful at forming a positive emotionalbond with the consumer, it has a competitive advantage.Some marketers refer to this as “share of heart”. Day (1989)describes how important it is to appeal to the consumer on apersonal and emotional level. She talks about creatingproducts and then ad campaigns that will “win the hearts”of the customer. Share of heart leads to market share. Butother factors contribute to market share also. For example,new buyers can be attracted to a wine simply through specialpromotions (e.g. price discounts, coupons), but marketerswarn that often these special promotions do not create brandloyalty (Schultz and Robinson, 1986). Deal-prone consumerscan comprise a significant portion of a firm’s market share,but how long will they be there? Building share of heart is agood defense against aggressive promotional efforts (e.g. pricedeductions) by other wineries.Emotion marketing is neither quick nor easy to employ, butthe results can be measured in loyal customers who spendmore and stick with the brand longer (Robinette
et al.
, 2002).Loyal customers make a difference in the bottom line.Forming an emotional bond with a customer involves showingthem that the winery truly cares about their customers aspeople. Product quality and fair pricing still form thefoundation for a successful brand, but the emotionalcomponents of a brand can be effective in differentiating awine from its competitors. Emotional marketing whichincorporates lifestyle-based persuasive communicationtargeting selected audiences, such as the millennialgeneration, may have a positive impact on brand equity(Orth
et al.
, 2005).Emotion marketing is not just a heart-tugging advertisingcampaign that is eventually forgotten. It is a total companyeffort by employees, events, and communications (e.g. events,phone calls, e-mails, and newsletters) to give the customer atremendous sense of belonging and camaraderie. The tastingroom experience is a perfect place to start building thisrelationship with younger wine consumers. Consumers areemotional beings and they strive to meet their higher-levelneeds in every aspect of their lives (Robinette
et al.
, 2002). Wesee consumers trying to meet their emotional needs throughtheir consumption choices, through where they dine out, whatthey wear, what they drive, and of course, their alcoholicbeverage choices. This is especially true in the case of themillennial generation in regards to wine adoption (Olsen
et al.
,2006).Oliver
et al.
(1997) found that positive emotion (positiveaffect) had a direct and significant effect on customersatisfaction which then leads to purchase intention. Researchhas shown that other factors also contribute to repurchase orfuture purchase intentions. A strong emotional marketingcampaign can not make up for poor quality, lousy service, ortoo high of a price (Robinette
et al.
, 2002). Excellentcustomer service becomes a key factor in pleasing customersand gaining a share of their heart. Charters and O’Neill(2001) found that dealing with customers in a speedy,sensitive, and sympathetic manner is more important than thefacilities, the decor, or the wine offered for tasting.Customer satisfaction has a significant and positive effecton the profitability of a firm (Yeung
et al.
, 2002). Satisfiedcustomers return to the winery, bring their friends, and spendmore on both wine and wine accessories than typical first timevisitors (Dodd, 1999). Yu and Dean (2001) found that theaffective (emotional) component of customer satisfaction wasa better predictor of customer loyalty than the cognitive (priceand quality) component. In their study, positive emotionswere the best predictor of overall loyalty and positive word of mouth. Building loyalty for a brand is one way to build brandequity. Therefore, positive affect as a means of building loyalwine consumers is an important topic for the wine industry.
Brand equity
All wineries strive to build brand equity. It is the incrementalvalue added to a product because of its brand name(Farquhar, 1994). This value can be reflected in the pricepremiums that customers are willing to pay for a particularwine brand or this value can be a loyalty or commitmenttoward a brand that is difficult to articulate in measurableterms. According to Aaker (1991, 1996) brand equity is amultidimensional concept that consists of brand loyalty,
Brand equity in the wine industry
Linda Nowak, Liz Thach and Janeen E. Olsen
Journal of Product & Brand Management
Volume 15 · Number 5 · 2006 · 316–323
317
 
brand awareness, perceived quality, brand associations, andother proprietary brand assets. As a measurable asset, brandequity may increase cash flow to the firm (Simon andSullivan, 1993) and competitive advantages based onnonprice competition (Aaker, 1991).A consumer’s attitude towards a wine brand is also a keycomponent of brand equity. Often, brand attitude reflects theextent to which a firm has been able to create close emotionalbonds with the customer (Lemon
et al.
, 2001). In the wineindustry, loyalty programs such as wine clubs, specialrecognition or treatment such as invitations to member-onlyfunctions, community-building programs such as support of local schools or events, and knowledge-building programssuch as food pairing classes can build strong emotional bonds.If a winery is able to help a customer feel a strong sense of belonging and makes them feel like part of the family, then afeeling of commitment towards the relationship with thewinery starts to be cultivated. Commitment is defined as aconsumer’s belief that an ongoing relationship is worthinvesting time, energy, and money in (Sharma and Patterson,2000). Hirschmann and Holbrook (1982) proposed thatextremely positive, consumption-related emotions are likely tolead to very high levels of commitment.The wine’s image is another component of brand equityand can be critical when the customer’s use of the product ishighly visible to others (Lemon
et al.
, 2001). The brandbecomes an extension of the individual, a statement theindividual can make to the world about himself or herself.Everything a winery does that the public sees can affect thebrand’s image: label design, price, ratings, advertising,customer service, community service, environmental issues,which restaurants serve it, and which celebrity drinks it.Brand equity for a winery is a competitive asset that isdeveloped over time. It is what may prompt a consumer topurchase one wine with similar attributes and price overanother. It is a combination of factors such as brand loyalty,brand awareness, perceived quality, brand image, andattitudes toward the company and its wine (Orth
et al.
,2005). Positive customer experiences should contribute topositive attitudes towards the brand and thus contributetoward building brand equity for the winery.
Customer satisfaction
All businesses understand that satisfying customers isimportant for positive word-of-mouth, repeat business, andprofitability. However, researchers and practitioners alike havebeen proposing that merely “satisfying” customers is notenough anymore (Keiningham
et al.
, 1999). In fact, Yeung
et al.
(2002) analyzed customer satisfaction data and financialperformance data from approximately 100 firms over a fiveyear period and found that there is a direct linear relationshipbetween customer satisfaction and profitability. In otherwords, with increased satisfaction came increased profits.Anderson
et al.
(1994) found that “high” levels of customersatisfaction are correlated with superior economic returns.Some researchers and practitioners call extremely satisfiedcustomers “delighted” customers (Keiningham
et al.
, 1999).It has been proposed that customers have a range of satisfaction, referred to as the “tolerance zone” and withinthis range of satisfaction differences between firms does notproduce much change in customer behavior, and thereforeprofitability. However, it is believed that moving satisfactionscores beyond the upper threshold of this zone of tolerancecreates exceptional results. For managers, this level of customer satisfaction is commonly referred to as “customerdelight” (Keiningham
et al.
, 1999). Schlossberg (1990) alsoproposed that merely satisfying customers is not enough, thatyou really need to delight them in order to build loyalty andloyalty-driven profits. Whittaker (1991) proposed the sameconcept when he said “although the elimination of defects iscritical to continuing customer satisfaction, increasedproductivity, and decreased costs, it is customer delight thatis the key to survival in today’s markets”. Jones and Sasser(1995) found that Xerox Corporation’s “totally satisfied”customers were six times more likely to repurchase thecompany’s products over the following 18 months thancustomers who rated themselves as merely “satisfied”.Roche Diagnostics Systems, a division of F. Hoffman-LaRoche Ltd health care, had rarely met its profit objectives fornearly 20 years (Keiningham
et al.
, 1999). Roche conductedfocus groups with its customers to determine their weaknessesin the areas of product quality and customer service. It thenadopted a strategy focused on moving customers’ reportedlevels of satisfaction beyond “satisfied” to the “very satisfied”level by making improvements in those areas. Roche foundthat by improving the quality of customer interactions withtheir business (e.g. toll-free telephone support and orderingassistance) that the number of “very satisfied” customersincreased, as did sales and profits (Keiningham
et al.
, 1999).
Positive affect
Richins (1997) determined that there were over 17consumption-related emotion sets. They are anger,discontent, worry, sadness, fear, shame, envy, loneliness,romantic love, love, peacefulness, contentment, optimism,joy, excitement, surprise, guilt, and pride. He developed theconsumption emotion set (CES), which identifies emotionsthat are relevant to consumers. Delight is considered to be adescriptor of the “joycluster. Therefore, the twoconsumption-related emotion sets that may be appropriatefor a study relating to wine consumption are “joy”, which iscomprised of the descriptors of happy, pleased, and joyful and“excitement” which is described as excited, thrilled, andenthusiastic. These descriptors could easily be included insurvey questions. Other feelings that may lead to positiveemotions and which may be associated with “share of heart”are “sense of belonging”, “sense of being appreciated as acustomer”, “sense of being like family”.The customer interface during the tasting room experienceis an area in which a winery can differentiate itself from thecompetition. Successful firms “realize that every interactionwith the customer can make or break the relationship”(Brown, 2003). Customer contact employees need tounderstand that often they are the key to delighting thecustomer and creating lasting, positive memories. Tastingroom staff can never have a “bad day” or appear snooty. Notenough staff to handle a surge of customers in the tastingroom can be the kiss of death, leaving the customer with afeeling of “just being one of the crowd” and not “appreciated”by the winery. Helping a visitor feel special during the tastingroom visit may help the consumer develop a specialattachment to that particular winery (Olsen and Thach,2006). Hirschmann and Holbrook (1982) proposed thatextremely positive, consumption-related emotions are likely tolead to high levels of repurchase intentions.
Brand equity in the wine industry
Linda Nowak, Liz Thach and Janeen E. Olsen
Journal of Product & Brand Management
Volume 15 · Number 5 · 2006 · 316–323
318

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