Monday, September 26, 2011

Customer Loyalty is Irrational

I was listening to NPR this evening on my way home, cause I'm a geek, and I heard a disturbing report.  A little while ago I called one of the banks that issues me a credit card, and asked them for a better rate.  I thought with interest rates going down, my credit ratings, and my payment history, there would be no problems.  But I was wrong!  They offered me only a tiny little decrease, and tonight I found out why.  The bank has created a statistic that measures my  likelyhood of shopping around for a better rate.  In other words, they are punishing me for being loyal.

But they should.  In economic terms, loyalty is irrational.  One should always be willing, for example, to abandon the mom and pop establishment in favor of a big box store that sells cheaper underwear.  Likewise if mom and pop beat the price, we should switch back.  The same is true of wines, except there it's a little harder.  Wine companies go to great lengths to convince us that their products are not interchangeable.  They also like to create exclusive clubs and allocation lists to attract our loyalty.

Times being what they are, however, I would like to give out some free advice to consumers and winemakers.  Consumers, be fickle.  Wineries, you are going to have to be very special to keep us.  Proliferation of internet tools is allowing us comparison of products more than ever before, and the economy is allowing access to "cult" wines like never before.  I can now compare prices of all the makers of Cabernet from the To-Kalon vineyard now.  I am able to order Pinot Noir from almost a dozen places that use the Shea Vineyard.  I can do searches on 90+ Parker wines below $20 on any number of online stores.  For all but the most scarce wine, this is a buyers market.

I'll pick on Araujo a little more, makers of the famed Eisele Estate Cabernet Sauvignon.  For three years, I paid $275 for 1 bottle of each vintage.  Then when they got a great vintage, they raised the minimum purchase to a level I could no longer afford.  I had thought that loyalty through more modest vintages should have meant something, but like my bank, they didn't budge.  But like my bank, they aren't the only game in town.  I can now get Araujo from other sources than their list...and cheaper too.  The winery charges its list members full retail markup on it's wine, but a trip to yields 11 stores that sell it for less.  Harlan, cheaper. Diamond Creek, cheaper.  Lokoya, you get the idea.

Wineries, you cannot charge full markup anymore.  I know that the lure of getting about four times more than a wholesaler offers is grand, but it pisses off your loyal customers.  And if a blockhead like me can abandon you, so can other irrational consumers.  And do something about those damn shipping costs!

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