The PPQ: A Critical Yet Often Overlooked Ratio

We all know that a winery wanting to compete in today’s crowded marketplace should produce tasty wine. (And of course, do so “with passion”, make it “in the vineyard” and hopefully offer something that the critics will admire.) We also understand that packaging is an important element because many people form opinions and buy wine based on the label design. Finally, we comprehend why pricing, while tricky, should, at least in theory, reflect the quality of the wine in the bottle.

While no sane vintner would purposely make a poor quality wine with an ugly label and attempt to sell it at an astronomical price point, there are a surprising number of wines on the market that do not over-deliver on these three aspects. What a lot of brand owners fail to do, or fail to do well, is critically examine the inter-relationships between the wine’s packaging, price and quality. These interrelationships may be expressed with a simple ratio, the packaging: price: quality ratio, or the PPQ.

The PPQ is the “sweet spot” of wine positioning --the ideal intersection where all elements over-deliver on value and create delighted customers. Why is achieving a strong PPQ so important? Because creating and maintaining a strong PPQ will enhance your profitability. Satisfied customers may buy again. Delighted customers will buy again. And they will tell their friends about the great value they found!

To illustrate a PPQ example, let’s examine two hypothetical consumers shopping for a dinner party, “Mary”, the CFO, and “Jerry”, the dog walker. Mary selects a $50 of Pinot Noir with an elegant label. Jerry finds a $10 bottle of Zinfandel on deal with a fun, colorful design. Neither had tasted the wine before purchasing it, but both are influenced by packaging and price during the shopping trip. Essentially, they have the same goal: both want to bring home something that looks and tastes good given the money they have to spend.

Mary is disappointed when she opens a $50 bottle that looks like it costs $60 and tastes like $30. Next time she’ll choose a different bottle. Jerry, on the other hand, is delighted because his wine looks and drinks like a $20 bottle, but only lightened his wallet by $10! He’ll reveal this “deal” to everyone at the dinner party.

Notice that the PPQ is important at any price point, and that it doesn’t recommend an actual type of label design. Wine producers have varied inputs, strategies, outputs and goals. And different segments of wine drinkers have differing needs and desires. It’s a dynamic market, but the PPQ’s answer is the same: to be successful, your wine must over deliver on all three elements to effectively delight customers. To use the earlier example, five years later, when Jerry is the CEO of a national chain of dog walking businesses and he has $100 to spend, he’ll still want the same “deal”.

So how does a smaller wine producer effectively compete on the PPQ? First, she is aware of the importance of the inter-relationship between the three elements. Second, he evaluates his packaging and pricing decisions in the context of the actual quality in bottle. Third, he actively fights the little discussed but rampant disease plaguing the industry (house palate, or the tendency to drink only “house” wine after becoming a vintner) and visits wine shops and restaurants, tasting frequently. And finally, she seeks a qualified opinion from an industry expert trained in ideal positioning and market strategy.