Why are people spending money on wine? Defining the luxury wine market and its drivers influencing consumers’ willingness to pay.

Abstract

In this study, we aim to bring a clear definition of what defines wine as a luxury item, and the driving factors influencing consumers’ consumption and willingness to pay. The study is conducted in the Norwegian market, analyzing the wine connoisseurs' engagement in luxury consumption.

The paper is organized in two parts, where we firstly aim to fully understand which attributes make wine become a luxury product, while the second part is devoted to understand how wine knowledge and personality traits may increase willingness to pay for a bottle of wine in different contexts of consumption.

Our findings reveal that a wine must be more than just a high quality product to be considered luxurious. The uniqueness of its origin, its distinctive style, and especially its scarcity are critical components that define its luxury status and drive its premium price.

Gender plays a significant role in wine purchasing behaviors. On average, men are willing to spend three times more on a bottle of wine compared to women. However, the study also shows that women who do spend more on wine typically also know more about wine, while men’s higher spending is often driven by perceived knowledge, which may not necessarily reflect their actual expertise.

Personality traits add further depth to the understanding of luxury wine consumption. One of our main assumptions was that image-oriented consumers would also spend more on wine. However, this does not seem to be true. In fact, narcissistic traits can even lead to a significantly lower willingness to pay for wine in certain situations. Luxury wine consumption seems to be more identity driven, where desire for uniqueness and the need to stand out significantly boost consumers' willingness to pay for a bottle of wine. Overall, this thesis provides valuable insights into the luxury wine market, offering key information for wine producers and marketers on consumer segments and wine consumption behavior.