Issue link: http://read.dmtmag.com/i/561374
8 2 w w w. v w m m e d i a . c o m hile the prospects of "big data" and the "Internet of things" are intriguing, most insights into consumer behav- ior come from existing pur- chase data. The starting point in understanding consumer behavior is price – in particular, understand- ing how much consumers are will- ing to pay for a wine and how they will respond to price changes. These would appear to be fun- damental considerations for every winery, but in reality, they seldom are. For the most part, wine is priced based on the cost of pro- duction by simply adding up the component costs such as grapes, winemaking, packaging, adminis- tration, taxes, marketing and other selling costs such as the markup to BY STEVEN S. CUELLAR, PH.D. + The starting point in under- standing wine consumers' behavior is how much they are willing to pay for a wine and how they will respond to price changes. + These would appear to be fundamental considerations for every winery, but in real- ity, they seldom are. + While most wineries remain mired in cost-based pricing, value-based pricing is prac- ticed by producers in other industries. + Armed with a model built on actual consumer behavior, wineries can then price their wines based on what consumers are willing to pay, rather than cost. AT A GLANCE Cost-Based Value-Based Wine Pricing Rethinking the standard wine-industry method vs. Soft drink companies are experimenting with vend- ing machines that change drink prices based on the ambient temperature. Photo: Thinkstock