peergynt323 wrote:In business class they always tell you the story of the tourist shop where the owner takes the day off and tells the worker to halve the prices of the Native American jewelry items that aren't selling very well. The worker misreads it and accidentally doubles the prices and the items sell out.
Wine works the same way. You can even find websites that say a $30+ bottle of wine has potential for long-term aging while a <$30 bottle should be drunk now.
Why wouldn't SMSW work the same way?
That is a bit too simplistic....
There usually is a reason why some whiskies are more expensive/cheaper than others. That is usually down to
1. Quality of the product (i.e. how good is the product)
2. Market placement (i.e. how good is it's public image)
3. Market Demand (i.e. how much do customers value the products, desirablity)
In Economics there is a basic premise ....
That in a competitive free market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic equilibrium. SO basically any whisky will have a fairly predictable market share in ratio to the market conditions of the time. i.e. Laphroaig will always have a very large share in contrast to Balblair who will have a very small share. (Unless so super marketing guru turns it into the next thing but these success stories are few and far between)
In relation to ...
(also called prestige pricing) is the strategy of pricing at, or near, the high end of the possible price range. People will buy a premium priced product because:
1.They believe the high price is an indication of good quality;
2.They believe it to be a sign of self worth - "They are worth it" - It authenticates their success and status - It is a signal to others that they are a member of an exclusive group.
3.They require optimun quality for the high cost - The need to buy nothing but the best
Now my problem here is number 3. There seems to be a lot of single malts out their trying to punch above their weight in terms of price and more and more are jumping on the band wagon. Once people realise that this is the case it could well spell disaster for these distilleries.
The price/quality relationship
refers to the perception by most consumers that a relatively high price is a sign of good quality. The belief in this relationship is most important with complex products that are hard to test, and experiential products that cannot be tested until used (such as most services). The greater the uncertainty surrounding a product, the more consumers depend on the price/quality hypothesis and the more of a premium they are prepared to pay. The classic example of this is the pricing of the snack cake Twinkies, which were perceived as low quality when the price was lowered. Note, however, that excessive reliance on the price/quantity relationship by consumers may lead to the raising of prices on all products and services, even those of low quality, which in turn causes the price/quality relationship to no longer apply.
This I believe is happening at the moment and can very easily have a negative effect of demand of the so called lesser distilleries in the long run.
Lastly whisky is a non essiential luxury item. Therefore if there is a major recession in the world economy (like so many analysts predict) then it's these very whisky companies that will suffer first.
Economies always work in cycles. Ups and Downs.