Market Information and Analysis - Assignment Example

?Market Information and Analysis – Assignment Table of Contents 2 Question One 3 Question Two 5 Question Three 8 References 13 . Question One According to the assumptions of Mr. Skinner, average price points are generally influenced by the formats, the regions as well as the grape varieties. He states that there is a close and direct relation among price with formats, price with regions and price with grape varieties. It has been noted that the Australian wine industry has faced major challenges over few years. In conjunction with it, there has been rise in competition from other wine preparing nations. For the identification of the position held by Australia in the global context, understanding of the ways in which consumers perceive the wines produced in the nation is quite significant in order to determine the growth opportunities. In order to comprehend the relation in between the price and the format, the principle of data reduction can be applied. In this context, Pearson’s correlation has been calculated based on the data provided in data set 1 related to wine sales in Australia and a correlation of 0.9 has been obtained. It can be stated that association among the price and the format exists with high correlation. . In order to determine the association between price and region, it would be prudent to conduct literature review and identify what the literatures decipher. Literature depicts that greater quality effect upon the price of wine is identified for the climate region that is warm. If the wine belonging to the warm region is correlated with superior quality then in such context increase in price of wine is quite evident. However, on the other hand, even if the quality of the wine is improved to a significant degree in cold region, it is quite likely that the price of the wine would not increase as much as that of the price in the warm region. The main reason behind this is that the Australian consumers might favor to consume wines from warmer regions. It may also be because of the fact that warmer regions were planted quite earlier and consumers tend to posses greater knowledge regarding them and are ready to pay greater price for their wines (Ling & Lockshin, 2003). Although there is downward trend of prices of grapes since past few years, there has been alteration in the varieties. It can be mentioned that the average price related to shiraz grapes has been the greatest of the top red wine grape varieties. The price of cabernet sauvignon grapes has been declined by about 9 percent. The recent financial crisis all over the world has sternly affected the demand for wine, placing greater stress upon price of wine grapes all over the world. With the anticipated world economic recovery, it has been expected that the demand for wine is likely to strengthen over the short or medium term. However, with the greater supply of wine in the world along with the rising amount of bulk shipments of wine globally, it may not lead to increase in the global prices of wine. Given these conditions, the price of wine in Australia is anticipated to remain subdued in the coming few years prior to the slower recovery towards the end of the projected year. It was noted that during the year 2008-2009, due to considerable supply of the wine grapes, most of the wine companies offered fruits at relatively low prices. It was further noted that numerous growers were informed that their contract for wine grapes is not likely to be refurbished once they expire. If no contract is made then in such cases the farmers need to supply grapes in the spot market, which could potentially expose them to relatively lower price. It has further been found that there are generally two formats of imported wines such as specialty “vintages” format serving to the adherents as well as core consumers possessing extended tastes along with regular liquor stores holding mainly greater volume, moderately-priced products with quite restricted selections (Gunning-Trant & Kwan, 2012). Hence, from the data that has been presented above, it is apparent that it tends to support Mr. Skinner proposition. Question Two It is worth mentioning that all the businesses possess three types of physical data situated within their numerous information systems. These types of data are featured by their data types as well as their objectives within a particular organization. The three types of data are transactional data, analytical data as well as master data. It is identified that the transactional data endorses the regular functioning of the organization and they are further comprised of in the application systems that automate the key business methods. It might further comprise areas such as sales, manufacturing, billing, account receivable, order management, service and accounts payable. Generally, transactional data implies the data that is generated and rationalized within the operational systems. Instances of transactional data include time, price, discount and payment methods among others which can be effectively utilized at the time of sale. Transactional data is generally stored within the normalized table within Online Transaction Processing systems and are created for integrity. Instead of being the objects of the transaction taking place such as customer or product, transactional data instead aims at describing the data comprising time as well as numeric values. Transaction in the context of the business generally falls into three main categories such as financial dealings, work transactions as well as logistics transactions. Financial transaction data includes orders, invoices orders, payments and invoices. Work transaction data comprises plans and work records. Logical data comprises deliveries and travel records. It can be mentioned that record management is the art of keeping records of the transactions. Transaction data is generally retained in a safe place that can ensure they are not lost for a specified time known as retention period. After the successful completion of the retention period, the transaction data is either removed or archived (Das & et. al., 2012). One of the most unique concepts related to wine from the competitive sense is that there are various small brands in the market. Any sort of firms including the wine brands tend to possess four options in the market such as to become a big brand, to become a small brand, to become a niche brand and to become a change-of-pace brand. In order to properly comprehend these terms, it is quite significant to understand the basics of the marketplace. The sales of a particular brand are generated by the total number of customers making the product multiplied by the amount of product bought by these customers. According to the empirical consumer research, it has been identified that there lies a standard structure between these two components. With the rise in the market share of the brand, they have expected increase in the customer. These brands have further expected purchase occurrences aligned with their market share. Brands do not deviate from this line. Instead, they demonstrate standard diffusions as well as purchase frequencies in line with their market shares. In order to increase the value of wine brand, it is essential to escalate the customer base. Quite a few wine companies generally possess the capability to become comparatively large wine brands with market share of more than 5% (Jarvis & Goodman, 2005). A brand is most likely to attain high market share via penetration than via purchase occurrence. It generally tends to escalate in both of these elements however the fact is that more of the growth generally takes place from penetration which further implies that greater growth arises from selling to increase number of people. Niche brands have greater purchase frequency in comparison to its penetration (Jarvis & Goodman, 2005). The opposite of niching is change-of-pace brands. Change–of-pace brands are the brands that tend to possess quite small purchase occurrences in comparison to their penetration. In such cases, the customers are generally found to look for varieties instead of being loyal to one particular brand. Change-of-pace brand is most likely to take hold of limited share of the market but it is also cost-ineffective since it is required to reach huge number of customers via advertising as well as large distribution channel. According to the present circumstances of the Australian wine industry, the small-to-medium enterprises winery brands may actually be change-of-pace brands rather than being small commercial brands. Hypothetically, this is most likely to demonstrate the fact that most of the individual Small and medium enterprise (SME) brands are not sustainable if not they possess a marketable wine among the brand possessions. With the total number of new SME brands along with the investments decisions related to small and medium enterprise wineries coming up with new products this tend to have connotations for the overall wine industry. In order to research for finding what the consumers think regarding a particular brand along with the purchase activities of SME winery brands there is a need for huge funding. If the change-of-pace scenario is apparent, in such circumstances it is likely to offer a distinctive strategic direction required for the success of the industry faced with staged rationalization over the coming five years. A niche channel takes hold of the customers who desire to be loyal and hence prepares strategies for the purpose of keeping them loyal. A niche channel mandates the marketer to move to customer relationship management (Kahn & et. al., 1988). Data set 2 offers the name of 9 different brands such as Lost Heart, Little Barrel, Dawson’s Creek, High Peak, Moreti Wines, Red Pig, English Spoon, Kilov Wines and Las Noches. Furthermore, the data set offers the preference of nearly 5000 shoppers for the above mentioned brands. In order to identify if the niche or change-of-pace brands exists or not, it would be imperative to identify the preference of the customers for a particular brand. The table representing 1 demonstrates preference for a particular brand, while 0 depicts non-preference. The literature above demonstrates that the small brands that might have high purchase frequencies would be categorized as niche brands while on the other hand the brands having low purchase frequencies might be known as change-of-pace brands. The table (data set 1) depicts that Lost Heart brand has high purchase frequency i.e. 15700 and hence it is niche brand and Las Noches has small purchase frequency i.e. 1825 and hence it is a change-of-pace brand. Thus, the empirical results demonstrate the fact that both niche as well as change-of-pace positions are present in the wine market of Australia and small wineries in a direct marketing channel method are required to take into account greater price points with branded wines. They are further required to target lower price points as well. It has further been found from the results that attribute levels that generally tend to be change-of-pace are indefensible for small brands and can hence be commenced by large brands with the adequate marketing resources. It can be recommended that small brands are required to focus their attention upon attribute levels possessing greater loyalty. On the other hand, it can be mentioned that the large brands are most likely to absorb attribute levels that are change-of-pace. Question Three Discrete choice experiments (DCE) tend to permit methodical evaluation of the preferences by requesting the respondents to select between the scenarios. The method of discrete choice experiment is originated from mathematical psychology. The main reason behind the implementation of the DCE by the companies is to explore the relative significance of their products that impacts the consumers’ demand. The results obtained can be quite significant to identify the optimal strategies for enhancement of the products and therefore to improve the sales. In the context of discrete choice experiments, the individuals tend to possess numerous choice sets. The individuals are further asked to choose from among each of the choice sets between two or more alternatives. The technique related to DCE comprises factor-based measures related to belief depending upon the supposition that substitutes can be identified by their features popularly known as attributes. The second assumption of DCE is that the individual’s valuation is normally dependent upon the degrees of these attributes. It can be mentioned that the responses gained from the DCE are represented within a benefit function that offers information related to the fact whether the given attributes are significant or not, the relative significance of the attributes and the degree at which the individuals are wanting to trade between attributes along with the total benefit scores for substitutes. It has been observed that the DCE approach combines random utility theory along with the consumer theory, econometric analysis and experimental design theory. Major developments are occurring in numerous areas of economics which generally focuses upon the experimental design as well as methods of analysis (Mangham & et. al., 2008). It has been noted that as opposed to the traditional conjoint analysis that generally depends upon the choice modeling (CM) and is not a behavioral theory, discrete choice experiments are dependent upon a long-standing along with well-evaluated theory of choice behavior that might also consider the inter-connected behaviors. This theory of discrete choice experiments has been based developed by Thurstone and is referred to as random utility theory. Present works in the discrete choice experiment theory along with methods rely upon the work conducted by McFadden who has further worked upon the Thurstone’s original theory related to paired comparison to multiple comparisons. Although discrete choice model is quite complex to implement, it has found its way in numerous contexts. Automobile manufacturers are capable of making use of the discrete choice modeling (DCM) to anticipate demands for new models along with alternative-fuelled vehicles. Telephone companies make use of DCM to arrange for new products, bundle and create rate structures for the communication services. Wall Street companies make use of DCE in order to assist arrange financial package. The government of Australia has made use of the DCE in order to anticipate attendance at large-scale sports as well as cultural events (World Health Organisation, 2010). Human behavior is generally complex to understand and at times it is impossible to comprehend what lies behind the individuals’ purchase decision. Though it is impossible to demonstrate what one person is likely to do, one can identify the trend of choices made by the group of people. By viewing the numerous consumer choices, one can infer the likelihood of buying a given product viewing the features of the product, pricing as well as other features of the consumers. There are various steps that need to be taken in the DCM projects is to conduct focus groups to recognize the products’ key buying factors. It is the focus group that investigates the consumer motivation in details and assists in preparing hypothesis regarding the ways in which the consumers need to choose one product over the other product. These hypotheses are further increased and tested during the quantitative phases of the study. Along with it, the focus group permits to hear customer impression of products, programs, institutions as well as other items of interest. It is via such impressions which can be used for recommending ways to communicate the gains from products or generate creative product concepts. The other significant step comprises testing hypothesis from the focus groups in an experimental setting which presents the individual with two options that involve surveys. A set of choice experiments are identified and the consumer preference for particular product is determined (Statwizard, 2012). It has been observed in data set 3 that there are three attributes such as grape variety, location as well as price with two levels such as A and B. For first attribute i.e. grape variety the two levels are (A=Shiraz and B= Sangiovese). For location, there are two levels such as (A=Barossa Valley and B=Adelaide Hills). For price, there are two levels such as (A=$15.99 and B=$19.99). Likert scaling has been used in order to identify the consumers’ choice for a particular attribute. Likert scaling has been presented below. This assignment makes use of 1-8 rating scale. Low Moderate High The table below demonstrates the preferences of the customers for three different attributes such as grape variety, location and price. Grape Variety Location Price Respondents Rating scale Respondents Rating scale Respondents Rating scale 600 1 0 1 0 1 100 2 200 2 0 2 500 3 200 3 0 3 100 4 400 4 100 4 100 5 400 5 200 5 0 6 200 6 400 6 0 7 0 7 0 7 0 8 0 8 700 8 It has been observed from the table above that most of the consumers have rated quite low to grape variety. 600 respondents rated the combination of grape variety i.e. Shiraz and Sangiovese to be very low preferred among them. 100 respondents rated the combination to be low preferred and greater number of respondents rated them to be between very low and moderate. Therefore, it can be mentioned that the combination of particular grape variety is not a preferred choice among the customers of Australia. On the other hand, greater number of respondents has revealed that their preference for location is moderate. An interesting result has been identified from the survey which reveals that 700 respondents rated that they highly prefer price as one of the criteria when making purchase decisions. Consequently, from the choices made by the respondents it can be revealed that 248 respondents stated that they prefer grape variety when making purchase decision of wine, on the other hand 393 respondents stated that they prefer location when making purchase decisions while 759 respondents revealed that they prefer price when making purchase decisions. Therefore, owing to the fact that respondents have rated grape variety as low preferred when making wine choices, it can be stated that Mr. Skinner’s decision to sell Sangiovese vineyards in Barossa Valley is quite logical. However, Mr. Skinner needs to take into consideration the price factor when making the decision to sell the vineyard. Contextually, the literatures suggest that there are disparities in wine consumption behavior along with sensory fondness of males as well as females. It has been recognized that females prefer to consume less wine in comparison to males and pay out less money as a result. However, they tend to compensate this by purchasing higher priced wine per bottle that generally demonstrates a task-reduction strategy. Females tend to consume white wine more in comparison to males demonstrating likeness for sweeter wine at young age. Australian girls also demonstrated their preference for medium body style wines over light as well as full-bodied wines (Barth & Salazar, 2011). Wine tourism can be observed as a type of recreational activity undertaken by wine lovers and those consumers interested in wine regions by travelling to numerous destinations. Wine tourism can be identified as a travel made by the tourists for experiencing wineries. They are also found exploring wine producing regions along with their links to lifestyles. Wine knowledge is also considered to be a significant factor affecting purchase decision of a particular wine. The people with wine tasting expertise possess advanced discriminative as well as explanatory capabilities in relation to wine. Most of the manufacturers of the wine tend to sell wine via three main marketing channels such as wholesale, retail sales as well as directly to the consumers. It can be stated that there are numerous features that tend to impact consumer decision to purchase wine. It has been found that a few of the choosy buyers who were more brand as well as product conscious demonstrated their likelihood to purchase wine at specialty stores as well as wine shops. On the other hand, the lazy involved shoppers bought cheap wines and wines in greater quantities casks at discount shops. Price is also considered to be one of the most important factors within the purchase decision making process. It is because of the fact that consumers use it as an indicator to minimize the risks within the buying decision and hence as a product indication which is similar to the brand. One of the most significant decision making reasons for choosing wine in various retail formats is previous experience in tasting the wine. People generally prefer taking recommendations from their friends as well as someone else in the store which is further followed by variety, origin as well as brand. Wines are generated from various countries such as Argentina, Chile, Australia, the USA and New Zealand. It can be observed that these countries are pioneers at making expensive as well as inexpensive wines, young wines which can be consumed as soon as they are made as well as wines whose taste improves even after decades of preserving, wines that are prepared from different combinations as well as ratios of grape varieties. In order to forecast the demand for wine by grape region as well as variety, there might be need for rigorous economic modeling. It has been identified that less informed along with informed wine drinkers demonstrated a significant fondness towards the parameters that are used by them to choose a particular wine (Barth & Salazar, 2011). Hence, it is apparent from the literature as well as findings that price is considered to be one of the most significant factors when making purchase decision. References Barth, S. & Salazar, J., 2011. “Wine Tourism and Consumer Behaviors Related to Wine Purchases”, Journal of Tourism Insights. Vol: 1, Iss: 1, pp: 1-45. Das, S. & et. al., 2012. ElasTraS: An Elastic Transactional Data Store in the Cloud. Abstract. [Online] Available at: http://static.usenix.org/event/hotcloud09/tech/full_papers/das.pdf [Accessed October 01, 2012]. Gunning-Trant, C. & Kwan, G., 2012. Wine And Wine Grapes. Abstract. [Online] Available at: http://www.daff.gov.au/__data/assets/pdf_file/0009/1894122/wine_gunning-trant.pdf [Accessed October 01, 2012]. Jarvis, W. & Goodman, S., 2005. “Effective Marketing Of Small Brands: Niche Positions, Attribute Loyalty And Direct Marketing”, Journal of Product & Brand Management. Vol: 14 Iss: 5, pp.292 – 299. Kahn, B. E. & et. al., 1988. “Niche Versus Change-of-pace brands: Using Purchase Frequencies and Penetration Rates to Infer Brand Positioning”, Journal of Marketing Research. Vol: 21, pp: 384-390. Ling, B. & Lockshin, L., 2003. Components of Wine Prices for Australian Wine: How Winery Reputation, Wine Quality, Region, Vintage, and Winery Size Contribute to the Price of Varietal Wines. Abstract. [Online] Available at: http://wwwdocs.fce.unsw.edu.au/marketing/amj_11_03_ling.pdf [Accessed October 01, 2012]. Mangham, L. J. & et. al., 2008. “How to do (or not to do) … Designing A Discrete Choice Experiment For Application In A Low-Income Country”, Oxford Journals. Vol: 24, Iss: 2, pp: 151-158. StatWizard, 2012. Discrete Choice Models. Who Uses DCM. [Online] Available at: http://www.statwizards.com/ProductInfo/WhitePaper/DiscreteChoiceModels.pdf [Accessed October 03, 2012]. World Health Organisation, 2010. Discrete Choice Experiment (DCE): A Methodology For Eliciting Health Workers Preferences. Abstract. [Online] Available at: http://www.who.int/hrh/migration/hmr_expert_meeting_lemiere.pdf [Accessed October 03, 2012]. Read More