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Chateau Margaux: Launching the Third Wine
Corrine Mentzelopoulos and the management team of Chateau Margaux were at cross roads in choosing the right marketing strategy in the launching of their Third Wine. The team has seen tremendous success in the introduction of the first and second wines with their strategic marketing plan and the business insight of the local merchants of Bordeaux. The Third Wine, however, tasted exquisitely, that it made them ponder on a better strategy to best introduce the produce in the market. Traditionally, Mentzelopoulos and her team are undoubtedly successful in exclusively distributing to the négociants; however it is their goal to reach out to the end consumers as closely as possible. This prompt them to organized events in main markets where they requested the attendance of journalists, wine experts and other personalities to take part in the wine tasting. With the number of distributors and retailers in the wine industry, their objective is to make the prospective consumers cognizant of the excellence of their brand (Ofek & Vogt, 2013). The launching of the Third Wine is seen as a way to deviate from distributing wine in the futures market as it re-introduce and make Chateau Margaux wine accessible to the core customers and the wine- loving markets that she objectively perceived as future wine buyers.
The Chateau Margaux management, owing simply to the scarcity and quality of their yields, customarily do not rely on heavy marketing plans for their wines. The scarcity and quality factors do much of the work, in addition to the influence of the 1855 classification that was believed to create their products’ appeal to wine connoisseurs. The 1855 classification came about when Napoleon III called a World Fair in Paris and urged the elite wine merchants of Bordeaux to send and classify the wines in order to easily identify the best products. The wine from Margaux was one of the few that are classified as first growths, adding to the magic that Margaux wine are known for. Recently, however, Mentzelpoulos was keen to note that there was a shift in the demand for their wines. Connoisseurs were the sole consumers twenty years ago, but that changed to an almost equal split with the appearance of luxury buyers primarily from China, comprising 40% of the buyers (Ofek &Vogt, 2013). Traditionally, the Bordeaux wine makers, including that of the Margaux left the distribution of their produce to the négociants. After the annual sampling rituals that are customarily attended by journalists, merchants and other personalities, critics placed their remarks on the wine samples they tasted, and the distributors would use the assessment, in addition to their evaluation of buyer tendencies and economic circumstances to set their prices. The wine producers also consider the projected demand for their wines in the future as another factor in setting their prices. It is customary for the upper 50 Chateaux to sell their wines in the futures market; futures market is a system where the négociants pay for the vintage while it is still in the barrel. The purchase is done several months before the actual delivery of the product. The merchants, after securing their wine allocations, would then turn to buyers not only locally but around the world. It is then usual for the management team of Chateau Margaux to effortlessly rely on the marketing of their third wine to particular négociants. The local wine merchants of Bordeaux have always done a good job in promoting and marketing their wines, besides, handing over the commercialization of their produce to the local merchants is the simplest option. She and her team are one in recognizing that such choice can yield them a handsome profit without as much marketing effort on their part.
But the team had wanted to achieve something more than making a profit. They have particularly noticed how the prices on their first and second wines have increased without their control and the market of their wines in retail stores and restaurants are declining largely due to prices that have escalated way too far. They have noticed how their produce have become inaccessible to markets in the United States, UK and Japan, and came to a conclusion that they should make an effort to reach out to new consumers and introduce their brands. The team further negotiated on what to do with their Third Wine, and they perceived the value of getting out directly to the end consumers. It is their goal to gain back traditional markets, as well as tap on the potential of future consumers who may want to buy their wines despite higher prices, mainly due to the unique and excellent taste that Chateau Margaux wine are known for.
The Target Segment and Corresponding Loyalty Level
There is an irregular demand for wine products in the global market, as it is attaining an increase market growth in many parts of the world. While annual wine consumption is still highest in France, Italy and Spain, markets in Australia, US and China are showing an impressive momentum. The increase wine consumption is determined by buyer behavior and influences. For instance, in France, wine is a regular part of family meals, while it is customary for the wealthy Chinese to offer a luxurious bottle of wine as gift. Initially, the fine wine consumers were classified as connoisseurs and luxury buyers. The connoisseurs are likely to have vast knowledge about wines, priding themselves of being able to distinguish quality by mere taste and familiarity with the regional cradle of wines. The luxury buyers on the other hand, buy wines with the intent of depicting affluence. They buy wines not based on the knowledge of they have about it, but with the stature that comes with being able to buy and drink the priced commodity. The luxury buyers have increased in the affluent consumers of China and Russia (Ofek & Vogt, 2013). There is also the apparent increase of premium wine markets, and experts attribute their growth to the baby boomers that are now coming of age (Pisoni &White). The changes in the market pattern and trend of wine consumption bring about the study of the buying segments according to behavior. They are classified as the Traditionalists, Enthusiasts, Image Seekers, Savvy Shoppers and Overwhelmed. The United States Wine Consumer Segments revealed the percentages of total consumers and their category of spending.
Enthusiasts. The Enthusiasts comprise 12% of consumers, and their level of spending is rated at 25 percent. This group is seen to be passionate and well-informed about wine and would open a bottle at home to enjoy with their friends. They frequently search for further knowledge and sophisticated information about wines. They hang on at the wine section to read labels and they appreciate an offer of well-known and unique wine collections.
Image Seekers. They comprise the 20% of consumers and are willing their category of spending is at 24 percent. They perceived wine as a status symbol and their buying inclinations are affected by their awareness of the most recent trends. They usually go for the more costly brands. They usually surf online to acquire information about wines, and would occasionally do this ahead of scheduled restaurant dining to impress their friends.
Savvy Shoppers. These wine consumers enjoy the sheer act of shopping and learning new brands on their own. They represent 15% of the consumers and their category of spending ranges up to 15 percent. They greatly now the advantage of using coupons and rebates and are greatly satisfied in finding best deals.
Traditionalists. These buyers go for names that they are already accustomed, and enjoy wines from well-known wine makers. They are often reluctant to try other brands, and would always go for the brands that they are used to. They represent the 16% of the consumers and their category of spending is rated at 15 percent.
Satisfied Sippers. They are the smaller percentage of consumers at 23% and their percentage of spending is only at 8 percent. They are not familiar about wine, and do not enjoy the idea of buying the product. These are the groups that are not particular about wine and food pairing.
Overwhelmed. They comprise the 23% of consumers and their category of spending is at 13 percent. Their choice of wine is dependent on the label, and if confused, they tend not to purchase anything. There are times when they opt not to order wine to avoid being caught with a product that does not suit their taste. They are open to suggestions, and gets frustrated at wine sections where assistance is not available.
Source: Mike Vesath. “What are Wine Enthusiasts Looking For”. Cited in Ofek & Vogt, 2013.
The target market of Mentzelopoulos are the end consumers, and achieving their goal to reach out to their target market means bypassing the traditional local merchants and doing the marketing themselves. Locally, they can indorse their products in trendy restaurants and wine shops with the aid of sales associates, but a large distributor is also needed for them to be able to tap into other markets abroad such as the United States.
The Business Model for the Third Wine
The business model that needs to be considered by Mentzelopoulos and her team in order to achieve their goal in the launching of the Third Wine should include such aspect as the setting of the price, target market, opportunity for global expansion and the availability of supply should their product there be a wide acceptance of their wine in the market. These all boil down to creating a valuable relationship with the customer, concentrating on how to best position the product to satisfy and retain their loyalty. What are the necessary steps to deliver the value that are promised to the customer, and how an industry can make profit while fulfilling such promise? (Day & McGraw).
The Value- Creating System
Target market. The target market of Mentzelopoulos are the fine wine end consumers: the connoisseurs, luxury buyers and the growing segment of wine consumers who are willing to spend on wines in their want to be seen as having a trendy and cool lifestyle. The problem that faced the team is how to make their wines accessible to traditional markets in the United States, UK, Japan and France, as well as to penetrate and introduce their brands to new consumers. In addition to that, the team would like to regain the patronage of buyers who knew of the excellence of their wines but were forced to change brands due to excessive pricing. The sustainability of the business is also important and they need to tap on potential generation of wine buyers. The team’s goal of reaching out to these target market means bypassing the traditional local merchants and doing the marketing themselves. Locally, they can indorse their products in trendy restaurants and wine shops with the aid of sales associates, but a large
distributor is also needed for them to be able to tap into other markets abroad such as the United States. With the changing taste in wine and the number of competitors who wanted their share in the market, the team of Mentzelopoulos is faced with a catch on how to attract and retain loyal customers. There is a distinct business strategy for each type of business, and the wine industry has a few of its own.
Performance Value Leadership. The Chateua Margaux wine can capitalize on the excellent quality of their wine. While there are many companies that fail in the market because of their inability to meet the standard of quality-first culture (Day & McGraw), the vintage of Margaux are known for their high and excellent quality. The management has always known the importance of taste and quality in wine selection, and they have endeavored to come up with wine products that speak of the quality they are known for. This value proposition plays on the factor of offering the best product. There should be persistent improvement and strategy to come up with a unique and high quality products that customers perceived to be the best available in the market.
Price. While there are connoisseurs and luxury consumers who focus more on the quality and brand name rather than the price, there are wine buyers who set the price on top in their decision to buy. The wine marketers must be able to set and define their prices well. This is in consideration to price sensitivity and behavior of the targeted segment (Day &McGraw)). Setting the price not below the trend but not above is a factor to be considered in addition to other costs. This is not a matter of setting the cheapest price, but of knowing which costs affects the customers. Pricing is guided by deep insights and are made in line with the aim of the firm for efficiency of operation. In benchmarking their Third Wine, the management should not set their price way above that of the competitor who offers the same wine quality. But while the management aims to promote the affordability of their wines, they would have to preserve the classy image of through higher pricing. The key in pricing is to supply the customers with excellent products, and position the product at the best price possible. Note that the best price is not the cheapest, but that which is reasonable. In the process of selecting the channel of distribution, they should associate with partners and distributors cautiously, and should have partnership only with those that share their objective. It is to be noted that they Margaux wines have gradually been removed from the list of well- known restaurants largely due to their increased prices as dictated by the local Bordeaux merchants.
Relational Value Leadership. “Relational value leaders use economies of scope to give their best customers exactly what they want” (Day & McGraw). The wine industry, in order to achieve success in keeping their customers must not only advocate for continuous exposure to the customers, but should also to know their customer’s needs, even going to the extent of knowing the customers’ customer (Day & McGraw)
Promotion. The team should make an effort to communicate with their customers, communicating means making the end consumers aware of the quality of their brands. Pro-active marketing can do this by organizing events where wine samples are available for tasting. It is also important to make the key decision makers feel special by knowing their ideas and suggestion. It is important to focus on the major decision makers and critics, as their voice or endorsements can influence the decision of the buying public. One thing to note is seek the commendation of sommeliers in prestigious restaurants. Recently, the Bordeaux wines were taken off the list in many high status restaurants. The reason for the criticism against the Bordeaux wines is their prices that skyrocketed way too high compared to other brands. It is suggested that in order to get back the market, the Third Wine should be introduced with a less snob charm. A reasonable price and an assurance of continuous supply can pave the way of creating valuable relationships with key restaurants and sommeliers. Handpicking selected restaurants will make them feel special, and would surely create a lasting relationship that can be passed on to other potential customers.
Satisfying the customer with an offering can go a long way for the promotion of the industry. To get the customers loyalty and gain repeat purchase, the company and its product should meet the customers’ expectations after the purchase. This is very true with the wine industry where the customer can judge the wine only after tasting it. The excellent taste that is offered before the purchase should be in terms with what is presented after the buyer paid and tasted the product. An offering that meets the customers’ expectations brings about satisfied and loyal customers. There are however two types of loyalty: the behavioral loyalty which is the frequency of customer purchase when the situation calls for it. This type of loyalty is shallow and lacks connection, resulting to an unlikely repeat of purchase. On the other hand, the attitudinal loyalty is an image of profound commitment to the company and its products. In addition to assured revenue that is generated from these customers, is their impact in spreading the “good news” about the product. Extended customer connections also mean savings in terms of customer gain as the existence of loyal customers lessens the need for expensive advertisings and ploys. There are behaviors of loyal customers that can be useful in the wine industry:
a. They give a greater share of wallet. A company may do well to improve and retain its relationship with loyal customers as these is the group that have a higher spending level in terms of the company’s products.
b. Purchase new offerings. Once customers are able to build their trust in the company, it is likely that they will openly accept other brands form the same company. The Chateau Margaux will benefit from this analysis as they annually release their wines. The trust accorded to them by the customer is an asset to bank on during the distribution of their produce.
c. Respond faster. Loyal customers are assets to the company be it in situations where the company offers a new product, a promotion or a sales call. The firm will generate a faster return of investment due to faster sales.
d. Loyal customers serve as obstacles to competition. Penetrating customers segments that are deeply committed will be difficult for competitors and they would likely to search for alternatives channels in the process. Loyal customers are not likely to respond to promotions offered by the competition. In the wine industry for example, a loyal customer would not give in to special offers from competitors, on reason such as sticking to proven brands.
e. Indorse the firm. One of the benefits of having loyal customers is the value they provide by spreading good news about the company. There are three types of advocates for such cause: these are the early adopters, opinion leaders, and mavens. The early adopters are valued for their profound familiarity about the product, and are regularly the first to try new produces. The opinion leaders, on the other hand are not knowledgeable about the product but their influence can deeply affect the buying public. The mavens are the social groups and they get fulfillment from assisting their friends in locating items in the market. These three groups can actually be compared to the consumers of wine: the connoisseurs, luxury buyers and the premium buyers respectively.
Performance Value Leadership. Initially, the management of Chateau Margaux is reluctant to explore possible option of foreign expansion and making the marketing for themselves. But with the recent changes in the economy, they are given the option to come out of the box and adopt other measures in order to expand to international markets. They should be willing to see partnership with other business outside their original scope. It should be their goal to take innovative marketing techniques to be at par with the competition. But how should the industry react to the competitors lower prices? As suggested, never should an industry lower its prices in an effort to drive away the competitor.
a. Continuous Innovation- While costs and prices should always be kept in line, the industry should be ready to innovate. In the wine industry, this could be done by continuous innovation in the product itself as well as the marketing strategy.
b. Switch to Selling Solution- The case of Bordeaux wine being scraped off the list of restaurants reflects the bored attitude of consumers. The key to this problem is to seek further marketing techniques as to make the appearance of a newly introduced product.
c. Attack with a low-cost offshoot- This strategy should utilize a different market, with a different brand name, with the intent to tell that there are few products that go with lower costs.
Treating Different Customers Differently. The targeted market segment of the Third Wine of Chateau Margaux came from different segments. While the team had wanted to regain the traditional market in the United States and other countries, they are also endeavoring to introduce their products to consumers who are new to the wine world. These bring the need to contemplate on the need to tailor the marketing strategy and pricing to suit the particular segment. Their goal to penetrate the younger market for future sustainability calls for an innovative approach of reaching out to this generation. They can do further research and aggressive marketing due to the number of competition who have gone ahead in the market.
The prestigious Chateau Margaux winery prides itself of being home to the most exquisite and high quality wines in the part of the Bordeaux region. While the owner and her management team were successful in their endeavor to produce and market their wines, they are faced with the question of what to do with the good tasting Third Wine. While it would be easy for them to seek the local merchants to buy, they have pondered on better options. The wine consumption and buying trends have significantly changed over the past several years and it is for this reason that an alternative and better way to sell their product should be explored. Other producers in the region have taken their bold steps into going into the international market, and with the help of good business acumen, coupled with the high quality of their wines, the team of Corinne Mentzelopoulos have a great chance of succeeding.
Day, N., McGraw, H., Strategy from the Outside In.
Ofek, E., Vogt, E., Chateau Margaux: Lauching the Third Wine. Harvard Business School. Retrieved from http://www.gbaldini.weebly.com
Pisoni, M., White, G., Writing a Business Plan: An Example for a Small Premium Winery. Retrieved from http://www.dyson.cornell.edu
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