THE EFFECTS OF REGION OF ORIGIN ON CONSUMER CHOICE BEHAVIOUR

Transcription

1 THE EFFECTS OF REGION OF ORIGIN ON CONSUMER CHOICE BEHAVIOUR by Michelle Karen Rasmussen Bachelor of Business (Marketing) University of South Australia School of Marketing Wine Marketing Research Group Supervisor: Associate Professor Lawrence Lockshin Associate Supervisor: Anthony Spawton Submission Date: 29 June 2001 Submission of thesis for: Master of Business (Research) Sii? (JAR Otilt6tV

2 For Jeremy Acknowledgments: I owe thanks to the following people and organisations: Larry Lockshin and Anthony Spawton for supervising this Masters. Thanks for your time, patience and comments. Thanks to my colleagues at the Wine Marketing Research Group for their support and friendship. Cam Rungie for his advice on methodologies and statistical interpretation. Anne Sharp for being there to answer my questions and clear my thoughts. And to my family for their encouragement and understanding.

3 I declare that this thesis does not incorporate without acknowledgment any material submitted for a degree or diploma in any university; and that to the best of knowledge it does not contain any material previously published or written by another person except where reference is made in the text.

4 THE EFFECTS OF REGION OF ORIGIN ON CONSUMER CHOICE BEHAVIOUR Abstract The primary objective of this thesis is to determine the effect of region of origin on consumer choice behaviour in the context of the product category wine. Three attributes were studied, region of origin, price and company brand, and the main and interaction effect on consumer choice behaviour was determined. Further, it was determined that a consumer's level of product involvement influences their choice behaviour. Preliminary research, consisting of 20 focussed individual interviews, was conducted in retail liquor stores in metropolitan Adelaide, South Australia, to aid in the formation of the research questions. A quantitative questionnaire was developed using a Choice Based Conjoint Analysis software package to analyse consumer choice behaviour. The attributes and levels that were researched included two levels for the attributes region of origin and company brand and three levels for the price attribute. The company brand and region of origin levels used in the questionnaire were real, but due to commercial reasons, they cannot be disclosed. Two product involvement scales were used to determine consumer's product involvement level. Factor analysis was used to verify the reliability of the product involvement scales included in the quantitative questionaries. The sample for this research was three hundred wine consumers who were interviewed in six different retail liquor outlets throughout metropolitan Adelaide. The CBCA results revealed that all three attributes, region of origin, company brand and price, affected consumer choice behaviour. The attribute levels generating the largest utility were established region, $11.99 and The only interaction effect that was found to be significant, according to the multinomial logit estimation, was that between region of origin and price. Results from the CBCA also revealed that respondents with different levels of product involvement differ in their choice behaviour. The attribute levels generating the largest utility were iv

5 for the low product involved consumer group were $11.99, established region and well known company brand. For the high product involved consumer group the attribute levels generating the largest utility were established region, $16.99 and less well known company brand. The research has extended and supported knowledge in the area of branding, product involvement and consumer choice behaviour. In particular, it has highlighted that the brand element, region of origin, may have greater ability to contribute to brand awareness and association than other brand elements, such as company brand.

6 Table of Contents Chapter 1 Introduction Introduction Background Research Objectives and Research Questions Justification of the research Research Methodology Preliminary Research Quantitative Research Outline of the thesis Conclusion 9 Chapter 2 Branding Theory Introduction The definition of a brand A brand is a statement of the marketing mix A brand is a short cut device for consumers A brand is a differentiation device A brand is a layer of associations Brands in the wine industry The nature of the product Brand Hierarchies Brand Element Region of Origin Region of origin in the Australian wine industry History of Geographical Indicators How Geographical Indicators are defined Conclusion 23

7 Chapter 3 - Product Involvement Introduction Implication of Product Involvement Involvement and Wine Choice Behaviour Product Involvement Measurement Scale Conclusion 32 Chapter 4 Preliminary Research Introduction Methodology Results from Preliminary Research Level of Purchase Attributes mentioned in the choice decision Product Involvement Enjoyment Time spent in retail liquor outlet Information sources on wine Occasion of consumption Perceived Knowledge Recall of Australian wine regions Level of wine knowledge Summary of Qualitative Research Conclusion 45 Chapter 5 Methodology Introduction Research Questions Justification of the paradigm and methodology 48' 5.4 Choice Based Conjoint Analysis Design Specifying Attributes and Levels Number of Choice Tasks per respondent "None" Option Random or Fixed Design Sample Size 55 vli

8 5.4.6 Presentation Method Research Procedures Pretesting the questionnaire Administering the questionnaire Conclusion 60 Chapter 6 Results Introduction Sample Description Demographics Purchase Behaviour Attribute importance Choice Based Conjoint Analysis Choice Counts Main Effects Choice Counts Interaction Effects Choice Counts Choice Based Conjoint Analysis Multinomial Logit Estimation Likelihood Ratio Test for the Constrained Model and Unconstrained Model Product Involvement and Choice Behaviour Choice Based Conjoint Analysis for two levels of product involvement Main Effects Choice Counts for two levels of product involvement Interaction Effects Choice Counts for two levels of product involvement Multinomial Logit Estimation for two levels of product involvement Likelihood Ratio Test for the Constrained Model and Unconstrained Model for the Low Product Involved Group Likelihood Ratio Test for the Constrained Model and Unconstrained Model for the High Product Involved Group The Utility Worth and Dollar Values of Attribute Levels Conclusion 105 Chapter 7 Findings and Conclusions Introduction 106 viii

9 7.2 Discussion of results Research Question Research Question Research Question Research Question Research Question Managerial Implications Predicted Probabilities Established Region Newly Established Region The Utility Worth and Dollar Values of Attribute Levels Ranked order of attributes by product involved groups Limitation of the research Contribution of the research Future research 123 Appendix A 124 Appendix B 125 Bibliography 132 ix

10 List of Figures Figure: 5.3.1: Example of Choice Task : Interaction Effects Choice Counts for Region of Origin and Price Attributes 72

11 List of Tables Table: : Number of Attributes Listed by Respondents : Attributes Mentioned by Respondents Number of Regions Recalled by Respondents : Attributes and Levels used in the Choice Based Conjoint Analysis : Attributes and Levels used in the Choice Based Conjoint Analysis : Age Group of Sample and Entire Population : Average Household Income of Respondents : ABS Average Yearly Household Income of Respondents that Drank Wine in the Last 7 Days : Wine Purchased by Respondents over a One Month Period : Average Price Range a Respondent Pays for a Bottle of Wine : The Importance of Attributes in the Respondent's Choice Process : Main Effects Choice Counts for Company Brand Attribute : Main Effects Choice Counts for Region of Origin Attribute : Main Effects Choice Counts for Price Attribute : Interaction Effects Choice Counts for Company Brand and Region of Origin Attributes : Interaction Effects Choice Counts for Company Brand and Price Attributes : Interaction Effects Choice Counts for Region of Origin and Price Attributes : Main Effects for Multinomial Logit Estimations : Interaction Effects for Multinomial Logit Estimation : Likelihood Ratio Test for the Null Model and Main Effects Model : Likelihood Ratio Test for the Null Model and Interaction Effects Model : Likelihood Ratio Test for the Main Effects Model and Interaction Effects Model : Factor Analysis 1 Total Variance Explained : Factor Analysis 1 Component Matrix : Factor Analysis 2 Total Variance Explained : Factor Analysis 2 Component Matrix : Number of Respondents in Product Involved Groups 81 xi

12 6.5.6: Age Group of Respondents in each Product Involved Group : Average Annual Household Income Group for each of the Product Involved Groups : Wine Purchased over a One Month Period for each of the Product Involved Groups : Average Price Range a Respondent Pays for a Bottle of Wine for each of the Product Involved Groups : The Importance of Attributes in the Respondent's Choice Process for the Low Product Involved Group : The Importance of Attributes in the Respondent's Choice Process for the High Product Involved Group : Main Effects Choice Counts for Company Brand Attribute for Product Involved Groups : Main Effects Choice Counts for Region of Origin Attribute for Product Involved Groups : Main Effects Choice Counts for Price Attribute for Product Involved Groups : Interaction Effects Choice Counts for Company Brand and Region of Origin Attributes for Product Involved Groups : Interaction Effects Choice Counts for Company Brand and Price Attributes for Product Involved Groups : Interaction Effects Choice Counts for Region of Origin and Price Attributes for Product Involved Groups : Main Effects for Multinomial Logit Estimations for the Low Product Involved Group : Interaction Effects for Multinomial Logit Estimation for the Low Product Involved Group : Likelihood Ratio Test for the Null Model and Main Effects Model for the Low Product Involved Group : Likelihood Ratio Test for the Null Model and Interaction Effects Model for the Low Product Involved Group : Likelihood Ratio Test for the Main Effects Model and Interaction Effects Model for the Low Product Involved Group : Main Effects for Multinomial Logit Estimations for the High Product Involved Group 99 xii

13 6.7.4: Interaction Effects for Multinomial Logit Estimation for the High Product Involved Group : Likelihood Ratio Test for the Null Model and Main Effects Model for the High Product Involved Group : Likelihood Ratio Test for the Null Model and Interaction Effects Model for the High Product Involved Group : Likelihood Ratio Test for the Main Effects Model and Interaction Effects Model for the High Product Involved Group 102

14 Chapter 1 - Introduction 1.1 Introduction This chapter contains a brief overview of the thesis topic, the research conducted, and the structure and organisation of the thesis. The objectives of this chapter are to outline the background and justification for the thesis topic, to discuss the formulation of the research questions and briefly describe the methodologies employed to answer the research questions. 1.2 Background Branding, and the use of various elements of a brand have been a major marketing tool used by marketing professionals to differentiate one product from another for the last century (Doyle 1990). The continual use of branding has lead to a large amount of market research being conducted into both branding and its impact on consumer choice behaviour. Market research specifically in branding has typically focused on fast moving consumer goods (FMCGs) such as breakfast cereal and toothpaste. In many cases the product categories that were investigated had a small number of competing brands (less than one hundred alternatives), and the consumer's purchase decision was simple and almost predetermined as they chose from a small set (3 or 4 brands) of brands within the category (Ehrenberg 1988). Research highlighted that in a number of these product categories alternative brands competed through a small number of tangible and intangible attributes (Kapferer 1995). By contrast, this thesis investigates the use of branding and brand elements in a more complex product category, with a large number of competing of brands. In partiailar, this research investigates the effect that three specific brand elements, region of origin, company brand and price, have on consumer choice behaviour.

15 Wine was the product category chosen to conduct this research. The Australian wine market has over one thousand wine companies which produce over wine brands (Spawton 1998), quite different than the markets for FMCG's which have historically been the focus of branding research. Previous marketing research conducted on the product category, wine, has highlighted that the number of competing brands creates in a complex and difficult environment for a consumer to make a choice decision (Greatorex and Mitchell 1988). Results of research into the product involvement levels of wine consumers in Australia have also highlighted that a consumer's level of product involvement can affect their choice process (Lockshin, Spawton and Macintosh, 1996 and Quester and Smart 1998). One of the major brand elements researched in this thesis is region of origin. Region of origin is a relatively old concept; the French wine industry has placed the region of origin, known as appellation, on their wine bottles since the 1600s (Faith 1992). In the Australian wine industry, the brand region of origin was originally added to wine labels by the winemaker to denote the origin of the grapes used to make a particular wine. However, in the last decade wine marketing practitioners have used region of origin as a form of brand differentiation. Wine marketers have taken the opportunity to build brand associations between the company brand and the region of origin. Many academics, industry leaders and associations within the Australian wine sector (Lockshin 1997) encouraged the rise of region of origin as a branding tool. Also, provisions made for Geographical Indications (GIs), zones, regions and subregions, in the Australian Wine and Brandy Corporation Act (Mackley 1998) added the legal incentive to branding wine products by their region of origin. Over the last decade many wine companies have recognised that the unique styles and qualities of wine associated with specific regions (White, 1995). In order, to benefit from these quality associations, wine companies have gone to great expense to have GIs defined and have region of origin placed on wine labels (Wiley 1994). It remains to been seen however, whether branding a wine product using its region of origin has any impact on consumer choice behaviour. 2

16 1.3 Research Objectives and Research Questions Australian wine companies have invested both time and money into creating and promoting regions (Wiley 1994 and Winestate 1992). This has been done with little research into the effects this might have on consumer choice behaviour or on possible relationships between region of origin and other important attributes such as company brand and price. The few papers sourced (Areni, Duhan and Kiecker 1999, Aurifeille, Quester, Hall and Lockshin 1999 and Batt and Dean 1986) suggest that consumers consider region of origin to be important, but not as important as other factors such as previous usage, or price. Thus, there appears to be little empirical support for the notion that region of origin influences consumer choice. The primary objective of this thesis is to determine whether a specific brand element, region of origin, affects choice behaviour in a product category with thousands of alternative brands. As a secondary objective this thesis will investigate the relationships between region of origin and two other attributes, company brand and price. The research questions were constructed using a two step approach. First, preliminary research was undertaken to establish key constructs that may effect wine choice behaviour and to highlight any significant relationships between these key constructs. The results of the preliminary research highlighted that 'previously tasted the wine', 'price', 'region of origin' and 'company brand' where key construct used by consumers to chose wine. These results also indicated that involvement in the product may vary the constructs used in the choice decision. The second step in constructing the research questions was reviewing literature specific to the constructs chosen in the preliminary research. This review highlighted a theoretical basis for the relationship between company brand and region of origin. A literature review (Flynn and Goldsmith, 1993; Kapferer and Laurent, 1993, 1985; Lockshin, Spawton and Macintosh, 1996; Mittal and Lee, 1989; Slama and Tashchian, 1985) revealed that in a number of product categories, such as wine, product involvement levels impacted on consumer behaviour. 3

17 Based on the outcomes of this two step process the following research questions were formulated: Do region of origin, company brand and/or price effect consumer choice? Is there a relationship/interaction effect between region of origin and price? Is there a relationship/interaction effect between region of origin and company brand? Is there a relationship/interaction effect between company brand and price? Do low product involved consumers differ in their wine choice behaviour compared to high product involved consumer? 1.4 Justification of the research As discussed in 1.2, a large amount of marketing research has been undertaken to understand consumer choice behaviour of FMCGs where the number of alternative brands has been less than one hundred. However, there has been little research into consumer choice behaviour for complex product categories, where various brand elements can be used in the choice decision. Due to the lack of research in this area, this thesis investigates the choice behaviour of wine consumers, and the brand elements, which are used to differentiate one wine brand from another. 4

18 In the past, marketing researchers have used consumer attitudes and purchase probabilities as constructs to measure consumer purchase behaviour. However, several leading academics (East 1997 and Fishbein & Ajzen 1975) have shown that there is a poor correlation between attitude and purchase behaviour. Other academics have found that attitudes are only weakly correlated to actual purchase behaviour (Kraus 1995). Another major problem with using attitudes as a predictive measure is that they are unstable at the individual level because individual's attitudes are continually changing. Purchase probability scales have been shown to predict purchase more successfully than attitude research (Day, et al. 1991). However, those used (Juster 1966) often over predict and vary in accuracy across different product categories (Day, Gan, Gendall and Esslemont 1991 and Riebe 2000). To avoid these problems, and ensure that the findings of this research best predict choice behaviour, Choice Based Conjoint Analysis was used. The major brand element investigated in this thesis is region of origin. Over the last decade a number of product categories including ground coffee, salmon and olive oil have been differentiated according to the product's region of origin (Belk King 1997). Although there is a body of literature on country of origin and its impact on consumer behaviour, only a few studies have been conducted into the impact of region of origin on consumer behaviour. By determining whether region of origin does have an effect on consumer choice, a company can better determine whether to commit resources to promoting its region of origin instead of other brand elements such as company brand. As more regions develop in Australia and wine companies invest substantial resources to secure a favourable determination or boundary of their region, one should question the benefit and opportunity cost of region of origin development. 5

19 1.5 Research Methodology Preliminary Research The preliminary research conducted took the form of 20 focussed individual interviews. The respondents were wine consumers shopping at a number of retail liquor outlets in the Adelaide metropolitan area of South Australia over the month of September Respondents were asked about the amount of wine they purchased over a given time, their perceived knowledge of and involvement with wine, and what attributes they used to determine their choice of wine product. Standard interview methodology was used. A specific list of questions (see Appendix A) was developed to elicit information from respondents. Interviews were concluded when no new information was elicited. The main objective of the preliminary research was to determine which attributes are used in consumer choice and whether these attributes varied with consumer's product involvement. As the author was particularly interested in eliciting all information related to the question, not only top of the mind responses, respondents were prompted and probed to obtain all information relevant to a question. The focussed individual interview research method was chosen to ensure a respondent could freely express their own opinions about how much they purchased and explain their purchase criteria and choice behaviour without any undue pressure. Contrary to focus group discussions, another widely used qualitative method, focused individual interviews allow for a higher level of trust and rapport to be developed between the respondent and interviewer. Focus group discussion also encourages respondents to share their thoughts and react to each other's comments. For this preliminary research it was necessary to avoid elements of focus group discussion. The reason for this was that consumers of an image product, such as wine (Polhemus 1988), often want to appear knowledgeable about the product, particularly in a group environment. Thus, if respondents were involved in a focus group discussion certain respondents may feel compelled to conform to the views of those respondents' who have greater knowledge or experience of wine (DiIlion 1993). 6

20 The output of the focussed individual interviews was analysed to develop parameters to construct a quantitative instrument. This is especially important when using such techniques as conjoint analysis, where realistic levels of each attribute must be established Quantitative Research After investigating a number of alternative methodologies it was decided that the most suitable methodology was conjoint analysis, in particular Choice Based Conjoint Analysis (CBCA). Conjoint analysis is a multivariate technique used specifically to understand how respondents make choices when purchasing products. It is based on the premise that consumers evaluate the value of a product (real or hypothetical) by combining the separate amounts of value provided by each attribute being researched. "Conjoint Analysis is any decompositional method that estimates the structure of a consumers preference, given his or her overall evaluation of a set of alternatives that are prespecified in terms of levels and attributes" (Green and Srinivasan, 1990, p4). The conceptual basis for measuring value in conjoint analysis is utility. Utility is a subjective judgement of preferences unique to each respondent. It encompasses all product features, both tangible and intangible, and is a measure of overall preference. An essential difference between CBCA and other multivariate techniques is that the researcher specifies both the independent variables (attributes) and their values (levels). Thus, the only information provided by the respondent is the dependent measure (choice). The levels specified by the researcher are used to decompose the respondent's choice into effects for each of the levels and attributes. This is similar to regression analysis where the effect for each independent variable is determined (Hair, 1998). As stated earlier, the particular form of conjoint analysis chosen for this thesis is CBCA. CBCA is an alternative conjoint methodology, which has direct links to random utility theory. This form of conjoint analysis is much more representative of the actual choice process, than other conjoint methods, as it requires respondents to choose one product from a set of competing products. Most important to this thesis though is the ability of CBCA to effectively calculate and report interaction effects or relationships between attributes and levels. 7

21 1.6 Outline of the thesis This thesis is presented in seven chapters. The first chapter outlines the background of the thesis topic, the research objectives, the research questions, the methodologies employed and justification of the research. Chapter 2 reviews the literature on branding with some attention to both wine branding and branding theory for consumer goods. It then applies this theory to look at different types of wine branding frameworks to describe various brand elements. Chapter 2 then examines region of origin's place in the wine brand framework and its importance in consumer choice behaviour. A literature review on product involvement and the likely implications of product involvement on choice behaviour is presented in Chapter 3. This chapter then considers the impact product involvement has on consumer choice behaviour and explains the scales that will be used to measure product involvement in this research. Chapter 4 describes and discusses the outcomes of the preliminary research and how these outcomes helped shape the final research questions. The research questions, justification of the statistical method employed and the design steps involved in the chosen statistical method is discussed in Chapter 5. Chapter 6 presents the analysis of data collected from respondents who completed the quantitative questionnaire. In Chapter 6, the sample is firstly described in terms of its demographic layout, purchase behaviour and choice behaviour. Secondly, the choice count and multinomial logit (MNL) estimations for the total sample are analysed. Finally, the choice count results and MNL estimations for the low product involved group and the high product involved group are analysed separately. Chapter 7 contains an evaluation and discussion of the results, managerial implications of the research, limitations of the research and possibilities for future research. 8

22 1.7 Conclusion The chapter briefly explained the thesis topic, the research questions and the research conducted to answer those questions. It also outlined the background of the thesis topic and justification the research into the topic. Methodologies used in this thesis and the research question formulated were presented. Finally, this chapter gave an outline of this thesis. Chapter 2 reviews the literature on branding theory for both wine brands and fast moving consumer goods. It examines the different forms of brand hierarchies and the various brand elements that form a brand hierarchy. Finally, this chapter postulates region of origin's place in the brand hierarchy and its importance to consumer choice behaviour.

23 Chapter 2 Branding Theory* 2.1 Introduction Brands have existed for millennia. Ancient Egyptian brick makers proudly branded their bricks with personal symbols to allow users to recognise their products. Hieroglyphics found in Egyptian pyramids show the vinification of wine and describe single vineyards. In Greece and Rome, vineyards reputed to make the best wine marked their amphorae with the name of the maker (Unwin 1996). These markings later developed into an appellation system, specifying the origins of wine in Europe and were carried to many New World wine growing areas. Today, a proliferation of methods for identifying wines occurs, broadly ranging from country to region to vineyard, as well as by company, variety, and even winemaker. The purpose of this chapter is to explore branding theory and branding in the wine industry. This chapter will also discuss various frameworks that explain the elements of a wine brand. This chapter will first review the literature on branding with some attention to both wine branding and branding theory for consumer goods. This theory will then be applied to look at different types of wine branding and the frameworks that help explain the complexity of a wine brand. Finally, region of origin's place in the wine brand framework is examined and its importance to consumer choice behaviour discussed. 2.2 The definition of a brand One of the earliest written references to branding theory came from Ogilvy (1951) who stated that: "a brand is a consumer's Oea of a product". This acknowledges that one role of a brand is to assist a consumer in identifying a product. *This chapter formed part of the publication: Lockshin, Rasmussen, and Cleary (2000). 10

24 An examination of the branding literature concludes that there is no agreed modem definition of a brand. Doyle (1989) highlights this situation by stating that: "if you asked ten different marketing directors for their (brand) definitions, you are likely to get ten different answers" (Doyle 1989 p26). A review of the branding literature has highlighted that most branding definitions roughly fall into four broad categories: A brand is a statement of the marketing mix A brand is a short cut device for consumers A brand is a differentiation device A brand is a layer of associations A brand is a statement of the marketing mix. Murphy (1988) states that: The ingredients of a brand are the product itself, the packaging, the brand name, the promotion, the advertising and the overall presentation. (Murphy 1988, p4) This definition suggests that a brand is the accumulation of all aspects of the marketing mix: in effect, what marketing practitioners do with their product. What it does not consider, however, is how consumers will interpret and assess that accumulated information. What marketing practitioner's project via the marketing mix may be perceived differently by different consumers. This difference in consumer perception can alter the effectiveness of a brand for various segments in the marketplace despite marketing practitioners' best intentions A brand is a short cut device for consumers. Consumer behaviour literature states that consumers use only a small amount of the available information to make a purchase decision (Olshavshy and Granbois 1979). This is due to consumers having a limited cognitive capacity and being unwilling to expend mental effort in what they consider to be a relatively trivial decision (Krugman 1975). 11

25 To overcome this limited capacity, consumers concentrate their attention on those attributes they consider important. A considerable body of literature (Jacoby et al., 1971, 1977; Kendal and Fenwick, 1979; Park and Winter, 1979 for example) regards brand name as the most important attribute because it acts as a surrogate for a number of other attributes or qualities. de Chematony and McWilliam (1989) support this view, and propose that consumers use a brand name as a way of 'chunking' together information about the brand. Through the use of the brand name, the consumer is able to reveal numerous attributes by interrogating his/her memory (eg. quality, availability, guarantee, advertising support). (de Chernatony and McWilliam 1989, p 160) A brand is a differentiation device. In 1987, the American Marketing Association defined a brand as: A name, term, sign, symbol or design, or a combination of them which is intended to identify the goods and services of one seller or group of sellers and differentiate them from those of competitors. (McCarthy & Perreault 1987) Doyle (1990) proposes a slightly different definition. He states that: A successful brand is a name, symbol, design, or some combination, which identifies the product of a particular organisation as having a sustainable differential advantage. (Doyle 1990, p6) Doyle's (1990) definition differs from that of the American Marketing Association only through its inclusion of the term "sustainable advantage". "Sustainable" means an advantage that is not easily copied by competitors, for example, an outstanding reputation for quality or image such as that enjoyed by Nike, Coca-Cola, or BMW. Kapferer (1992) supports Doyle's (1990) definition, and suggests that brands gain credibility through endurance and reputation, which form a kind of 'contract' between the producer and the consumer. This 'contract' demonstrates a commitment by the producer to making a consistent, quality product. It is important to recognise that both of these definitions identify a brand as a name, term, symbol, or the like. However, these definitions do not consider that a brand, such as Nike, can be more than just a name for a pair of sneakers. A consumer may associate Nike with status, fitness, or high performance, none of which is considered in the above definitions of a brand. 12

26 This view is supported by de Chernatony and McWilliam (1989) who propose that the American Marketing Association definition of a brand: fails to recognise the contribution of other marketing resources and is of limited strategic value since evidence shows (King 1984) that a brand will fail to survive if the organisation concentrated primarily on developing a symbol or a name as a differentiation device. (de Chernatony and McWilliams 1989, p160) A brand is a layer of associations. The seminal paper on branding theory written by Gardner and Levy (1955) highlights the differences in this area of brand definitions. Gardner and Levy (1955) state that a brand is:...more than a label employed to differentiate among manufacturers of a product. It is a complex symbol that represents a variety of ideas and attributes. It tells the consumer many things, not only by the way it sounds (and its literal meaning if it has one) but, more important, via the body of associations it has built up and acquired as a public object over a period of time. (Gardner and Levy 1955, p35) In essence, this definition recognises a more complex relationship between consumers and their purchases. Rather than accepting that a consumer responds only to the marketing mix when making a purchase decision, the suggestion is that a consumer's impetus to purchase is predicated upon brand associations built up in the consumer's mind over time. However, Ehrenberg (1988) refutes the pre-eminence of specific brand attributes in determining brand success, suggesting that there is good evidence that for FMCGs what really matters is the size or market share of a brand. On its face, this appears an unanswerable 'chicken or the egg' scenario, i.e.: is a brand big because of the popularity of its specific attributes, or do a big brand's attributes enjoy popularity merely because it is big? However, Ehrenberg (1988) contends consumers mainly choose randomly from a group or repertoire of brands. In Ehrenberg's view, market share of a brand is simply predictive of how often that brand will be chosen compared to its competitors. Accordingly, small brands are chosen less often because they are less available and less recognised by consumers. By contrast, big brands are chosen more often because they are big, widely available, and consumers are more aware of them. The result of this situation is that marketing strategies are focused on growing brands to become big, and thus successful. 13

27 Although there is strong evidence to support this argument for other FMCGs, the wine sector may be different, at least for smaller brands. No wine brands enjoy the same magnitude of success (market share) as do leading breakfast cereals, instant coffees, washing powders and the like. By contrast to Ehrenberg's 'success breeds success' argument, some wine consumers actually seek out small, unknown brands to try. In doing so, the consumer may use attributes that make up part of the brand salience or meaning, such as region of origin, vintage, country, and winemaker. 2.3 Brands in the wine industry In seeking to define wine brands, Spawton (1998) adapts King's (1973) original definition of a brand, embracing the definitions above: "A wine product is something that is made in a winery: a brand is something that is bought by the consumer. A wine can be copied by a competitor: a brand is unique. A wine can be quickly outdated: a successful brand is timeless." (Spawton, 1998, p 418) Spawton's (1998) definition helps, subtly, to distinguish the qualities of wine and wine marketing deserving of special consideration. The main areas of difference between wine brands and other FMCG brands are in the nature of the product The Nature of the Product The agricultural nature and complex production requirements of wine make it a different market proposition than many other manufactured consumer goods. The annual production cycle is much longer than that for most other FMCGs and, like all agricultural products, nature determines the final quantity and often quality. Once vintage is fixed, there is a 12 month wait until the next vintage. Increasing the supply to meet extra demand requires both foresight and long term planning. Quality vineyards take at least three to five years to start producing premium fruit after which the product itself may require storage for anything up to five or six years, even longer for fortified wines. Even if the appropriate supply of grapes is secured, wine manufacturers need 14

28 to ensure they have significant winemaking and storage facilities available. The complex and variable nature of production leads to greater difficulty for consumers choosing a product. This high level of complexity extends from production to marketing through to retail. Not only must marketing practitioners predict what types of wine consumers will demand in five or ten years time, they must also predict how much they will demand. This degree of complexity in ordering and stocking is beyond that found in most FMCG categories. Because wine can be made only once per year during harvest, it is more difficult to match supply and demand. Stock-outs and over stocks are likely. (Lockshin et al 1999, p95) In addition to the agricultural nature of wine, there is a heavy focus on the specific geographic origin of wine (compared to other consumer goods) which leads to a plethora of product variants and types. Due to this focus on geographical origin of wine, it is postulated that wine from a well established region should benefit from greater consumer awareness and acceptance that wine from a newly established region. 2.4 Brand Hierarchies Wine is not a simple product. As noted above, wine historically has been identified by country and/or region of origin as well as by the producer. Spawton (1999) supports a multi-faceted view of a wine brand including: Country of Origin Region/Appellation Domain/Bodega/Estate Producer Label (s) and also Negotiant (Distributor Labels) Retailer Labels. 15

29 In many countries including Australia, the variety of grape from which wine is made is an important attribute of that wine. Additionally, in countries where wine is marketed using varietal descriptions (USA, UK, Australia, New Zealand, Canada, Chile and increasingly in Old World wine producing countries), these varieties are gaining 'generic brand status' (Spawton 1998). The question is which are elements of the wine brand and which are not? We turn to the concept of brand hierarchy for a conceptual framework. Keller (1998) defines brand hierarchy as: an explicit ordering of brand elements by displaying the number and nature of common and distinctive brand elements across the firm's products. (Keller 1998, p410) Keller (1998) refers to potential levels of brand elements as: Corporate (or company) brand Family brand Individual brand Modifier (sub-brand designating item or model) Aaker (1996 p243) extends the hierarchy by suggesting that after the modifier (sub-brand) the brand can be further delineated by the branding of product features or of services associated with the product. For example in the case of a bottle of Penfold's Grange, the hierarchy would become: Corporate - Southcorp Family brand - Penfold's Individual brand - Grange Modifier - the vintage, eg Branded feature/component/service McLaren Vale & Coonawarra etc. Country: Australia and Regions: Barossa Valley, 16

30 Aaker (1996) believes the brand elements at each level of the hierarchy may contribute to brand equity through their ability to create awareness and foster strong, unique and favourable brand associations. It must be noted that the hierarchy does not necessarily represent the most important to least important brand element in the minds of consumers. In many cases consumers would not know or care that Jacobs Creek is produced by a company, Orlando- Wyndham, or that Penfold's Grange is produced by Southcorp Wines. In fact, previous research places taste and the family name of the brand foremost, but the order of the elements can change depending on the consumption situation (Hall and Lockshin 1998). Therefore, a brand hierarchy is to be viewed as descriptive tools, which help managers understand the complexity of a brand. It is essential for a wine marketing practitioner to know which elements of the brand cluster are important when determining brand positioning and strategy. 2.5 Brand Element - Region of Origin This thesis is particularly interested in the brand element, region of origin, and its effect on consumer choice behaviour. It is postulated that a well established region, which has produced many vintages, and which is associated with a distinctive style should enjoy greater consumer awareness and acceptance than a newly established region. If this postulation is correct, it is expected that a well established region could benefit from stronger brand associations and choice than a newly established region. Similarly, it is also postulated that there is an interdependability between brand elements. Specifically, it is postulated that region of origin and company brand interact in their effect on consumer choice behaviour. For example, an established region which is well known, and a well known brand name may have additional synergy compared to either one alone. In order to investigate these postulations, it is necessary first to explain the history, status and legislation defining a region of origin. 17

31 2.5.1 Region of origin in the Australian wine industry In the early 1990's the Mudgee wine region of New South Wales was the first Australian wine region to market itself in the United Kingdom using its region of origin as a branding tool (The Australian Grape Grower & Winemaker 1994). Today, many Australian wine companies have placed region of origin on their wine labels, denoting distinct areas of origin (Lockshin 1997: Winestate 1992). Academics (Farmer 1994, Lockshin 1997) and industry commentators have recommended that, in order to ensure the long-term competitiveness of the Australian wine industry, wine companies must differentiate their products by using branding tools such as region of origin. Strategy 2025 for the Australian Wine Industry (Winemakers' Federation of Australia, 1996) supports this recommendation by emphasising the value of wine regions, as defined by Geographical Indications (GIs), as a brand marketing opportunity. By comparison, the French wine industry has used region of origin as a marketing tool since its inception, for example using named appellations such as Bordeaux, Burgundy and Chablis (Faith 1992). Similarly, the Ancient Greeks and Romans were reputed to market their best wine through the name of the maker. This tradition later developed into an appellation system for specifying the origins of wine in Europe (Unwin 1996). The American wine industry has recently been applauded for its use of region of origin, known there as appellation designation, as a marketing tool. By successfully marketing appellations, such as the Napa and Sonoma Valley, wine products from these areas have benefited from added differentiation (Sawyer and Hammett 1998). It must be remembered that each wine region has different flavours and styles arising from its climate, soil type and viticulture practices. Therefore, each individual region of origin denotes the unique quality and type of wine from that specific region Oland and Gago 1997). For example, the Coonawar'ra region in South Australia is renowned for producing Cabernet Sauvignon, a red varietal, with certain features such as, a huge palate and rich earthy tones, which results from the terra rossa soil in that area. Regional quality and style associations have increased the use of region of origin as a branding tool and, in turn, create a need for regions to be protected, such as by intellectual property (trademark) laws (Willis 1993). However, before regions such as Coonawarra, Barossa Valley and the Hunter Valley can be protected they must firstly be defined via the correct channels (White 1995). 18

32 2.5.2 History of Geographical Indications In 1993, the Australian Government amended the Australian Wine & Brandy Corporation Act (AWBC Act) to include provisions for geographical indications (GIs). These amendments were enacted to provide a framework for trade negotiations with the European Community (EC), which resulted in the signing of the EC/Australia Wine Agreement (Ryan 1994). The main objective of this agreement was to facilitate the entry of Australian wine into EC markets (Willis 1993) which has become the major destination for Australian wine exports over the last decade. The four major benefits to Australian wine exports that arose from this agreement, were: A reduced number of analyses required for Australian wine exports entering the EC; European acceptance of Australian winemaking practices; Australian wine exports to the EC were allowed to be labelled with up to 3 GIs and up to 5 varieties; and Protection of Australian traditional expressions and GIs by the EC Historically, Australia's wine industry has produced wine using a blend of wine from different regions. For example, Penfold's Grange Hermitage, one of Australia's most highly regarded and commercially successful wines, is a blend of red wine from various wine regions in Australia. Due to the history and success of blended wines, little benefit was perceived in introducing appellation controlled production for the Australian wine industry. The appendix to the EC/Australia Wine Agreement contains protected names of all signatory nations, including appellations of origin, geographical indications and traditional expressions. In the case of Australia, the protected names were generally recognised, albeit undefined, wine regions, for example, the Barossa Valley and the Hunter Valley. 19

33 The EC/Australia Wine Agreement provide protection for traditionally recognised Australian wine growing areas, until GIs are specified and defined, at which time the protection shifts to those GIs. Australia advises the EC of any modifications or terms on which official recognition of the GIs are made. In summary, as far as GIs are concerned, the newly signed EC/Australia Wine Agreement placed two obligations on Australia (Ryan 1994): To define the GIs of Australia; and To provide a system of protecting, not only Australian GIs, but also those of all countries party to the Agreement How Geographical Indicators are defined In accordance with the EC/Australia Wine Agreement, the Geographical Indications Committee (GIC) was established by the AWBC to determine the GIs of Australia. The committee comprises of a chairman appointed by the AWBC, and two persons nominated by the national winemakers organisation and winegrape growers organisation (Mackley 1998). In determining GI's the GIC must consider qualification parameters, history (general, grapegrowing and wine producing), climate, harvest dates, geology, elevation, vineyard practices, and typical and traditional use of the area and name. Applications for determinations of GIs are made primarily through state and federal winemakers and grape growers associations; however individual winemakers and growers can make an application, as can the GIC (Ryan 1994). Applications can be made to the GIC for an area to be determined as a "zone", "region" or a "subregion". "'zone' means an area of land that may comprise one or more regions or which reasonably be regarded as a zone. 20

34 'region' means an area of land that: (a) (b) may be comprise one or more subregions; and is a single tract of land that is discrete and homogeneous in its grape growing attributes to a degree that: is measurable; and is less substantial than in a subregion; and (c) (d) usually produces at least 500 tonnes of wine grapes in a year; and comprises at 5 wine grape vineyards of at least 5 hectares each that do not have any common ownership, whether or not it also comprises 1 or more vineyards of less than 5 hectares; and (e) may reasonably be regarded as a region. 'subregion' means an area of land that: is part of a region; and is a single tract of land that is discrete and homogeneous in its grape growing attributes to a degree that is substantial; and usually produces at least 500 tonnes of wine grapes in a year; and comprises of at least 5 wine grape vineyards of at least 5 hectare each that do not have any common ownership, whether or not it also comprises 1 or more vineyards of less than 5 hectares; and may reasonably be regarded as a subregion" (1994 No. 338 Australian Wine and Brandy Corporation Regulations (Amendment) Act Reg 3) There are ten specific stages in processing an application for Australian Gl. They include: An official written application form sent to the GIC Evaluation by the GIC and informal consultation with the applicant and other organisations or persons it thinks appropriate Consultation between the GIC and declared winegrape growers and winemakers organisations regarding the application. Formal consideration of application by the GIC 21