Positioning fast moving luxury goods in a discount environment: How cue effects explain South African whisky prices

Abstract

Purpose

This paper aims to understand how a fast moving luxury good like whisky is typically positioned within South Africa’s discounted retail environment and how this positioning could be improved. So doing this paper introduces an econometric valuation model to establish the relative efficacy of contending extrinsic cues in the explanation of whisky prices.

Design/methodology/approach

An ordinary least squares regression model is developed from a data set of 122 whiskies drawn from the 2014 festive-season catalogues of two large South African discount retailers. In estimating the whisky pricing function, the hedonic contribution of the following input variables is estimated: age in respect of blended whiskies and single premium malts, in-store supply, claims of retail exclusivity, branding, country-of-origin and packaging formats.

Findings

Age effects as they relate to single malts, and mass produced grain whiskies offer the greatest explanation of price, while scarcity effects are observed, along with claims of retail exclusivity which are found to reduce product value significantly. Country-of-origin and packaging however have low to negligible effects.

Originality/value

To producers and marketers of whisky, these findings offer insight as to which extrinsic factors could be better amplified, modified or excised if the product is to be optimally positioned. Implications are explored.

Citation

Priilaid, D. (2016), "Positioning fast moving luxury goods in a discount environment: How cue effects explain South African whisky prices", International Journal of Wine Business Research, Vol. 28 No. 1, pp. 22-42. https://doi.org/10.1108/IJWBR-05-2015-0016