Revealed preference analysis of red wine attributes using polarisation

Abstract

Purpose The usual method of analysis of product attributes in marketing is to fit a multinomial logit model within a stated choice experiment, to determine the impact of attributes on the choice probability, which is equivalent to market share. The market share is intuitive and is based on each single choice in the study. However, revealed preference allows for a study into repeat purchase and loyalty, which can also be rich constructs for determining consumer preference. Design/methodology/approach The authors introduce a loyalty measure, polarisation, and show results based on a wine data set of revealed preference. Polarisation is a function of the beta binomial distribution (BBD) and can also be a function of the Dirichlet multinomial distribution (DMD). The DMD provides a standardised or average loyalty effect for each attribute (such as wine variety), and the BBD an individual effect for each attribute level (such as cabernet) within the attribute. While the DMD results provide a rich “first‐pass” of the data, it is the individual results which can classify levels as reinforcing, niche, or change‐of‐pace in nature, with subsequent different marketing implications. These implications are drawn out in this study. Findings Specifically, the DMD results show higher loyalty towards price and variety rather than to region and brand. The BBD results show that segmented preferences in the wine market are influenced more by the price attribute levels and that the two key single varietals in the red wine category tend to behave as reinforcing attribute levels with important marketing implications for small and large wine brands. Originality/value The authors extend the work of stated choice experiments into the realm of actual consumer purchase behaviour for wine. They also find that consumers’ repeat purchasing is based on attributes other than brand. This provides a useful platform for both researchers to further investigate loyalty/repurchasing using attributes as well as for marketing practitioners to better position their products to consumers.

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