Perceived risk, risk-reduction strategies (RRS) and

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Perceived risk, risk-reduction strategies (RRS) and consumption occasions Roles in the wine consumer’s purchase decision Johan Bruwer School of Marketing, University of South Australia, Adelaide, Australia

Miranda Fong

Perceived risk, RRS and consumption 369 Received 1 June 2012 Revised 12 August 2012 4 November 2012 26 February 2013 Accepted 11 March 2013

School of Agriculture, Food and Wine, The University of Adelaide, Adelaide, Australia, and

Anthony Saliba School of Psychology, Charles Sturt University, Wagga Wagga, Australia Abstract Purpose – This exploratory study aimed to examine the relationship between perceived risk, risk-reduction strategies (RRS), and the occasion-based purchase of wine, a product widely regarded as representing a complex buying situation for consumers in a retail setting. Design/methodology/approach – Data was collected in a specialty wine store in Adelaide, Australia using a self-administered questionnaire. A 22-item Perceived Risk Scale (PRS) was developed and operationalised in this study returning a Cronbach alpha coefficient of 0.717. Findings – The highest perceived risk dimension, namely financial risk, did not differ between risk segments, while the high perceived risk segment observed more social risk than the low perceived risk segment. The high-perceived risk segment also observed more psychological risk. Information seeking was the most important RRS used across seven different wine consumption occasions. The decreasing order of importance in consumption occasions had an inverse relationship to the closeness of the relationship the wine consumers had with those with whom they may consume the wine they had purchased. Research limitations/implications – Marketers and managers have the opportunity to target consumers mindful of their specific perceived risks, and help reduce these uncertainties through the use of individualised RRS management focused on consumers’ occasion-based wine purchases. Originality/value – This study is of value to academic researchers and wine industry practitioners alike. It contributes to the knowledge base by developing a new Perceived Risk Scale (PRS) to investigate the relationship perceived risk has on the types of RRS wine consumers use when purchasing wine for various consumption occasions. Keywords Perceived risk, Risk-reduction strategy, RRS, Risk scale, Consumption occasion, Segmentation, Wines, Consumers, Consumption Paper type Research paper

1. Introduction The steady growth of the Australian population has significant benefits to its alcoholic beverage industry. Data shows that of the population of 22.7 million, 17.0 million or The authors would like to thank Dr Elton Li for the valuable advice provided by him to this research study.

Asia Pacific Journal of Marketing and Logistics Vol. 25 No. 3, 2013 pp. 369-390 q Emerald Group Publishing Limited 1355-5855 DOI 10.1108/APJML-06-2012-0048

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75 percent of Australians are of the legal drinking age of 18 years (Euromonitor, 2012). The Australian wine market has reached maturity in terms of consumption, with a per capita consumption of 31.3 litres of wine in 2011 (Wine Australia, 2011). The volume sales of wine in Australia are heavily dominated by the off-trade consisting of 81 percent leaving the on-trade to contribute 19 percent in 2011, whereas the value sales of wine in the Australian off-trade was 54 percent with 46 percent sold in the on-trade (Euromonitor, 2012). Australians thus demonstrate a high degree of familiarity with purchasing of wine in the off-trade sector. A closer look at the purchase process in the off-trade reveals that consumers may feel some degree of anxiety when purchasing wine (Bruwer and Buller, 2012). Roselius (1971) recognized the hesitation and frustration that consumers feel when trying to purchase a wanted product, often abandoning the purchase process for fear of incurring some form of loss. Similarly, Bloch et al. (1986) noted that individuals typically increase their involvement with the purchase decision if they perceive risk in financial, functional or social forms. Wine as a product is associated with a high degree of perceived risk in the purchase situation due to the plethora of brand choices confronting the consumer and is viewed as a “complex” product category and the employment of risk-reduction strategies (RRS) by consumers is quite common (Bruwer and Johnson, 2010; McCutcheon et al., 2009; Johnson and Bruwer, 2007). RRS are actions that consumers take to protect themselves against the adverse consequences of taking a specific risk. The nature of wine as a product thus carries several forms of risk, particularly in all three of the forms outlined by Bloch et al. (1986). For example, the price of wine varies considerably across brands and styles, the functional component of taste often dictates which wine styles consumers prefer, and in some social situations, diners often fear the opinions fellow group members may have of their wine choice (Hall and Winchester, 2000). Olsen et al. (2003) described three significant consumption occasions that wine consumers typically purchase wine for. Consumption occasions such as business dinners, gift-giving and at-home consumption vary in the degree of willingness that consumers have for trying new brands, and therefore affect the types of RRS that are pursued during the purchase decision (Bruwer et al., 2012a; Olsen et al., 2003). Hall and Lockshin (2000) describe social occasions consisting of components of value (i.e. well respected), consequence (i.e. impressing others) and attributes (i.e. price). Consumers may therefore enter wine consumption occasions with assumed consequences in mind regarding their wine choices. 2. Literature review The concept of perceived risk was first introduced in the literature by Bauer (1960), while further research of the concept extended to food products (Brooker, 1984), clothing (Asembri, 1986), and the service industry (Mitchell and Greatorex, 1993). Literature however, shows little exploration into the concept of consumer-focused risk perception, particularly within a domain-specific context such as wine purchasing. Schiffman et al. (2011, p. 160) define perceived risk as “the uncertainty that consumers face when they cannot foresee the consequences of their purchase decisions”. This is an all-encompassing definition of perceived risk that can be applicable in several disciplines. Stone and Mason (1995, p. 150) refer to risk simply as a “loss-based construct”. However, variance of perceived risk can depend on several aspects such as product-specific factors

(Dowling, 1999), lifestyle segmentation (Bruwer and Li, 2007; Johnson and Bruwer, 2004; Johnson and Bruwer, 2003; Bruwer et al., 2002), consumer’s self-confidence (Olsen et al., 2003; Locander and Hermann, 1979), wine involvement (Bruwer and Huang, 2012; Lockshin et al., 1997), occasion-based purchasing and varying consumption situations (Ritchie, 2007, 2006; Hall et al., 2001; Quester and Smart, 1998). For example, an extension of the generic definition of perceived risk was created by Dowling (1999, p. 420), that includes a product-specific element by describing perceived risk as “the uncertainty of the possible adverse consequences which a person thinks will attach to buying or using a product”. 2.1 Models of perceived risk The lack of exploration into perceived risk is noted by Stone and Winter (1985) as a difficulty due to the varying conceptualizations of risk by different researchers. For that reason, several basic (Peter and Ryan, 1976; Lanzetta and Driscoll, 1968; Cunningham, 1967), complex (Dowling and Staelin, 1994), and multi-attribute models (Pras and Summers, 1978; Zikmund and Scott, 1977) of risk measurement have been created. Cunningham (1967) was the first to introduce a basic model to measure risk by suggesting a linear correlation of uncertainty and dangerousness of consequences. Literature shows several basic risk models that followed, namely Stone and Winter (1985) who view risk as an expectation of loss, noting that the higher the expectation and probability for loss, the greater the risk thought to be perceived by the individual. More recent advancements in complex risk models have been added to literature by Dowling and Staelin (1994) with the creation of a complex risk model that encompasses three components of risk: inherent risk, handled risk and acceptable risk. Their research was the first to assess the acceptance level of risk that consumers were willing to absorb during a purchase decision, indicating that there may be a varying acceptance of risk across different product attributes. The multi-attribute model created by Zikmund and Scott (1977) divided risk into interpersonal components and performance-related components. This risk model demonstrated the importance of product attributes as a separate contributor of overall risk. It is clear that no all-inclusive risk measurement scale used by researchers exists today (Quintal and Polczynski, 2010). One of the most comprehensive risk models to date was produced by Dowling and Staelin (1994), however the complexity thereof has limited its use by researchers. The complexity and multiple dimensions of perceived risk, thus limit the creation of one model that accurately describes a consumer’s overall perceived risk. Mitchell (1998) concludes that the current system of risk models requires much more development before an explanation of perceived risk measurement could be put to rest. 2.2 Types of perceived risk Schiffman et al. (2011) identify six generic risk types that are commonly used today to describe the varying dimensions of perceived risk: (1) functional; (2) physical; (3) financial; (4) social; (5) psychological; and (6) time.

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The first recognition of risk as a factor in the wine purchase process was introduced by Gluckman (1986) when he outlined the extrinsic and intrinsic considerations that consumers used to aid their wine purchase decisions. Mitchell and Greatorex (1989) extended Gluckman’s (1986) concept resulting in findings that consumers were seen to perceive risk in measurable orders of hierarchical importance during the wine purchase process. Mitchell and Greatorex (1989) denoted four risk types, namely functional (i.e. taste), social (i.e. family and friends), financial (i.e. price) and physical (i.e. hangover). For the purposes of this study, the six more contemporary generic risk types identified by Schiffman et al. (2011) were used as basis for the development of a risk perception measurement scale. 2.3 RRS of wine consumers Mitchell and Greatorex (1989) explored the various RRS that consumers used in the purchase of wine in the UK. The results became what is now a widespread acceptance of six types of RRS used by wine buyers in decreasing order of importance through the wine purchase process: (1) consumers seek information; (2) brand loyalty; (3) store image; (4) well-known brands; (5) price; and (6) reassurance. The work of Mitchell and Greatorex (1989) brought about further research on the role RRS have in relation to wine-related lifestyle (WRL) segments, and retail variables that can be manipulated to create a risk-reduction marketing mix for consumers (Bruwer and Li, 2007; Johnson and Bruwer, 2004). RRS have been used in several studies of the dimensions of perceived risk. Lockshin et al. (1997) emphasize the importance of using RRS to build relationships with retailers since they are often a major source of information and what is regarded as the most important RRS. There is a general increase in consumers seeking information when experiencing greater purchase uncertainty (Shiu et al., 2011; Smith and Bristor, 1994). Locander and Hermann (1979) also investigated the uses of RRS as a method consumers use to build self-confidence and past experiences in order to reduce their anxiety levels. For the purposes of this study, the six generic RRS outlined by Mitchell and Greatorex (1989) will be utilized with the addition of bring-your-own bottle (BYOB) as a form of RRS. This form of RRS is unique only to the wine industry and has demonstrated a growing importance to the retail of on-trade wines, particularly in Australia (Bruwer and Huang, 2012; Bruwer and Hwa-Nam, 2010; Bruwer and Rawbone-Viljoen, 2013). 2.4 Self-confidence in the purchase decision of consumers Taylor (1974) was the first to introduce three forms of self-confidence that contributed to how consumers handle risk. He also noted the lack of knowledge of the relationship between generalized self-confidence (GSC), specific self-confidence (SSC) and anxiety on the effect of risk-handling strategies (Taylor, 1974). GSC is described as the amount of self-esteem an individual possesses, and is seen as a personalized attribute that only

affects SSC within a purchase decision (Locander and Hermann, 1979). SSC relates directly to anxiety towards a specific purchase decision, and resultant information seeking behaviour as a form of risk-reduction. Locander and Hermann’s (1979) study revealed an inverse correlation between SSC and perceived risk until a finite point at which perceived risk leveled off. This finding meant that consumers sense a minimum amount of risk in terms of store choice regardless of their previous knowledge. The concept of self-confidence and its relationship to brand purchase behaviour has been explored by Olsen et al. (2003). Their study found that individuals with low self-confidence tend to purchase brands they know and recognize, although it did not reveal a relationship between high self-confidence and willingness to try new brands. Dowling (1984) pointed out that most research on risk perception did not investigate the level of risk that attaches to the actual product (brand) choice process. As a RRS, a consumer’s brand loyalty may play an important factor in the purchase of wine for various consumption occasions. Not only is brand loyalty a way for the consumer to reduce their time risk and increase self-confidence, but it may also be a way to reduce social or psychological risks (Pettigrew and Charters, 2010) when consumed with individuals who also display loyalty to the same chosen brands. 2.5 The role of consumption occasions in the wine purchase decision Sandell (1968) was the first to investigate how an occasion affects a consumer’s purchasing and choice behaviour with similar findings following by Green and Rao (1972). Belk (1974) found that different consumers displayed different product preferences for different consumption occasions. Dubow (1992) extended the literature with a study that compared occasion-based as well as user-based segmentation in the US wine market. Findings revealed that occasion-based segmentation offered a greater prediction of consumer purchasing behaviour when compared to user-based segmentation. This is maybe due to the high degree of symbolism and rituals associated with wine consumption that helps dictate what to expect (Aurifeille, 2000; Hall and Lockshin, 2000; Dubow, 1992). Olsen et al. (2003) studied the relationship between self-confidence and occasion-based segmentation. Gift giving occasions showed no relationship between self-confidence of an individual and his/her likelihood to try new brands (Jin et al., 2006). However, wine purchased for at-home consumption indicated that highly self-confident individuals displayed a high willingness to try new brands. Three distinct wine consumption occasions were identified by Quester and Smart (1998), namely wine purchased at a restaurant, wine purchased as a gift, and wine purchased for consumption at home. All three occasions can produce different stresses on the purchaser. For example, in an on-trade consumption occasion such as a business dinner, individuals may feel anxiety choosing a wine for fellow diners, especially if they feel that others may be more knowledgeable about wine (Otnes et al., 1993). For similar reasons, many consumers exhibit a tendency to choose brands in known choice sets for business dining occasions, with a higher likelihood of deviating to new brands when the wine is intended for a gift or for home consumption (Olsen et al., 2003). Although useful, the three consumption occasions noted by Quester and Smart (1998) are limited and do not offer a complete view of the other wine consumption occasions. Hall et al. (2001) used five dining occasions that wine was consumed into determine the values and consequences associated with various social situations. These include intimate dinner, dinner with friends, dinner with family, business-related, and party/celebration


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(Hall et al., 2001). However, wine is not always consumed in a dining situation. A combination of both Quester and Smart (1998) and Hall et al. (2001) will therefore be used to create a more widely representative combination of wine consumption occasions. Notable changes will include the separation of “gift-giving” and “celebration” into two distinct consumption occasions, as well as the addition of “at-home” as a consumption occasion: . intimate occasion (i.e. a date); . occasion with friends; . occasion with family; . business-related occasion; . gift-giving occasion; . celebration occasion; and . at-home consumption. The abundance of dimensions that contribute to perceived risk also contribute to the complexity of the concept and difficulty of its measurement. For this reason, there seems to be a void in terms of measuring perceived risk as a whole. Rather risk is measured more accurately when research is conducted to further learn about the connections between perceived risk and individual risk dimensions (Stone and Mason, 1995). However, a scale is yet to be developed that measures risk perceived by wine consumers while categorizing their risk level as either high or low. Research has examined the different RRS that consumers use to purchase wine for different occasions (Ritchie, 2006, 2007; Hall and Lockshin, 2001; Quester and Smart, 1998). However, exactly how these RRS relate to the degrees of risk perceived by individual wine consumers has not yet been investigated and linked. Our study’s main contribution is the development of a new perceived risk scale (PRS) for wine to measure risk level and subsequently examine relationships between the RRS that wine consumers use when purchasing wine for various consumption occasions, the latter which is a first in the field. The research extends the knowledge of consumption occasions by further investigating several more occasions than previous studies had explored. The findings also provide a better overall understanding of the role that perceived risk has in driving wine purchase decisions in the off-trade. 3. Research parameters and methodology The overall purpose of this study is to build further on the knowledge previously developed on consumer RRS and risk perception used for various wine consumption occasions. During the operationalization process of the research a 22-item multi-dimensional scale was designed for measuring consumers’ risk perception level, which is a first of its kind in that it combines attempts at measuring the risk construct by several researchers and extends these by adding some new scale items. Scale pretesting was conducted on ten people who had an interest in wine and assisted in determining that there were no unclear or confusing statements. Finally, another operational process element outcome of this study is to determine a quantitative method of segmenting high and low perceived risk consumers. Five research hypotheses to direct the research were formulated based on the reviewed literature and purpose of the study:

H1.

The level of perceived risk of low and high risk wine consumers differs significantly on the most important dimension of perceived risk.

H2.

High perceived risk wine consumers observe more social risk than low perceived risk wine consumers.

H3.

High perceived risk wine consumers observe more psychological risk than low perceived risk wine consumers.

H4.

The level of perceived risk of low and high risk wine consumers differs significantly on the most important form of RRS.

H5.

Information seeking is the most important RRS used by consumers across wine consumption occasions.

The sample population comprised male and female consumers visiting a specialty wine store in the Adelaide CBD in Australia during the survey period, who were at least 18 years of age and had both consumed and purchased wine within the previous one-month period. The sample frame consisted of consumers visiting the store during a three-week period and who were approached shortly after their arrival, and asked whether they were willing to complete a self-administered questionnaire which took 8-10 min to complete during their visit. The sample had the property of randomness as all visitors to the store had an equal opportunity to be selected to complete the questionnaire after complying with initial screening questions to assess their eligibility (legal drinking age, consumption frequency, and main buyer of wine for their household). Respondents were given a brief introduction to the main purpose the survey was addressing. A highly structured quantitatively directed questionnaire was designed to test the research hypotheses and measure risk perception level. Questions about perceived risk, RRS and occasion-based wine purchasing were followed by the more sensitive socio-demographic questions to encourage respondents to complete the questionnaire after first becoming relaxed with the research environment. The researchers were located in the store at an observational distance at all times. Reasonable privacy, albeit within proximity, was given to respondents to promote completion of the questionnaire, as well as to provide clarification on any queries to ensure that data collected was comprehensive with minimal errors. A total of 111 questionnaires were administered with six questionnaires insufficiently completed. A final sample size of 105 was deemed adequate for the purposes of this exploratory study. The study’s overall response rate was 75 percent in terms of the number of completions vs the number of people approached and requested to participate. Following the survey period, the collected data was entered into the statistical software package PASW 19.0 for further analysis, manipulation and interpretation. 4. Perceived risk scale The Appendix shows the full details of the PRS developed in the operationalization of this research study. The scale consists of 22 items distributed to assess the six generic types of risk described by Schiffman et al. (2011). Questions were adapted from the sources listed in the Appendix to create statements to address components of each perceived risk dimension. Statements 4 and 9 were newly created due to the lack of availability in the literature. Each risk dimension was measured using four statements with the exception of physical and financial risk, which were measured with three statements. In order


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to ensure equal weighting of each risk dimension, the means of each risk dimension were calculated to generate an overall mean deemed the overall perceived risk index. The level of agreement with the statements was measured using a seven-point Likert scale with 1 – strongly disagree, and 7 – strongly agree. 4.1 Reliability of PRS Table I shows the reliability of the PRS that is outlined in the Appendix. The reliability measure was based on a Cronbach’s a co-efficient with a minimum value of 0.70 (Lacey et al., 2009) considered as reliable given the sample size of this exploratory study. A Cronbach’s a co-efficient of 0.717 was calculated using all 22 scale items. Of the 105 usable questionnaires that were collected, only the 101 valid cases were used in the measurement of the reliability of the PRS. This is due to some missing responses in one or more of the 22 scale items addressing perceived risk contained in four of the questionnaires. The 101 valid cases remained at a level that met the minimum requirements for statistical significance for an exploratory study of this nature. In terms of testing the scale’s sensitivity, by deleting statement 16 as shown in Table II, the a value could have been raised to 0.751. However, after careful consideration, this scale item remained in the PRS because the statement had been previously validated as an important aspect of psychological risk by Olsen et al. (2003). 5. Research findings 5.1 Socio-demographics and wine consumption characteristics 5.1.1 Socio-demographic characteristics. The sampled population was weighted towards males, highly educated with a high household income level. Males dominated particularly in age groups above 40 years of age, in disposable income segments above AU$50,000 as well as in postsecondary education levels attained. A total of 83 percent of the sample population held at minimum a Bachelor’s degree as their highest level of education attained, as compared to the national average of 23 percent (Australian Bureau of Statistics, 2010). In addition, at least 67 percent of the sample population had an annual household income above the national average of AU$42,172 (Australian Bureau of Statistics, 2010). 92 percent of the sample population was either married, co-habiting or single. The results of these findings may largely be attributed to the premium nature of the wine retail outlet. Major proportions of the sample population was either aged below 35 years of age (millennial generation) or over 45 years of age (Baby Boomer and traditionalist generations) with 53 and 28 percent representation, respectively. Table III outlines the socio-demographic characteristics of the respondents. 5.1.2 Wine consumption characteristics. Table IV summarizes the wine consumption characteristics of respondents. Males tended to consume more wine, spend more on it per month, and drink more red wine than females, confirming the research findings of studies of Bruwer et al. (2011, 2012b). Males were also the more likely group to be regular wine drinkers and they frequented specialty wine stores and winery tasting rooms more than females.

Cronbach’s a Table I. Reliability of the PRS

0.717

Number of items

Valid cases

Excluded cases

Total cases

22

101

4

105

Time

Psychological

Social

Financial

Physical

Functional

1. I consider whether the wine I purchase will not taste good 2. I purchase wine to complement my food 3. I consider the type of wine when I make a purchase (i.e. Shiraz, Sauvignon Blanc) 4. I consider whether the wine I purchase will be off (i.e. contain a fault or taint) 5. I am concerned about the amount of alcohol in a wine 6. I consider the chance of a hangover when purchasing wine 7. When purchasing wine, I consider whether I may have an allergic reaction to it 8. The price of wine is an important factor in my purchase decision 9. The price of the wine I buy depends on the occasion I am purchasing for 10. I try to get value for money when I purchase wine 11. I buy wine to socialize with others 12. I am most likely used as a source of wine information in my circle of friends 13. I worry that others will not enjoy the wine that I purchase 14. I often seek approval from friends and/or family regarding my wine choice 15. Others are impressed with my ability to make good wine selections 16. I often have doubts about wine purchase decisions I make 17. The possibility of a negative impression affects the wine that I purchase 18. Shopping for wine is a fun and exciting activity 19. Shopping for wine is time consuming 20. I know where to look to find wine-related information 21. I pay a lot of attention to the wine I buy 22. I frequently agonize over which wine to buy

Risk dimension Statement 0.174 0.514 0.509 0.325 0.232 0.085 0.042 0.013 0.492 0.169 0.076 0.499 0.387 0.293 0.443 20.236 0.199 0.306 0.239 0.418 0.641 0.337

0.716 0.687 0.695 0.703 0.712 0.724 0.725 0.725 0.692 0.715 0.722 0.684 0.697 0.706 0.693 0.751 0.714 0.705 0.710 0.695 0.680 0.702

Item-total correlation Cronbach’s a if item deleted


Table II. Measurement of the reliability of PRS items

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Table III. Socio-demographic characteristics of respondents

Socio-demographic variable Gender Age group 18-24 years 25-28 years 29-34 years 35-40 years 41-45 years 46-54 years 55-65 years 65 þ years Gross household income a # $25,000 $25,001-$50,000 $50,001-$75,000 $75,001-$100,000 $100,001-$150,000 $150,001-$200,000 $200,000 þ Educational status (highest level) Up to high school certificate College (TAFE) certificate/diploma Bachelor’s degree Graduate/postgraduate diploma Masters degree Doctorate degree Marital status Single Married or co-habiting Divorced Separated Widowed

Female (%)

Male (%)

Total (%)

35.2

64.8

100.0

24.3 29.8 16.2 2.7 2.7 8.1 16.2 –

16.2 16.2 11.8 7.4 2.9 11.8 17.5 16.2

19.0 21.0 13.3 5.7 2.9 10.5 17.1 10.5

27.0 29.8 5.4 13.5 2.7 13.5 8.1

7.6 12.1 24.3 13.6 18.2 12.1 12.1

14.6 18.4 17.5 13.6 12.6 12.6 10.7

8.1 2.7 21.7 18.9 45.9 2.7

5.9 14.7 36.7 14.7 22.1 5.9

6.7 10.5 31.3 16.2 30.5 4.8

64.9 24.3 5.4 5.4 –

43.3 50.7 4.5 – 1.5

51.0 41.3 4.8 1.9 1.0

Note: aAustralian dollars

Females on the other hand, drank noticeably more sparkling and rose´ wine than males and were more likely to frequent restaurants and large national liquor stores to buy their wines at. On average, respondents consumed nearly six bottles of their household’s total consumption of 10.6 bottles per month with an average monthly household expenditure of approximately AU$189 on wine. With the assumption that a majority of households consist of two or more persons (Bruwer and Johnson, 2005), the average per bottle price paid is within the AU$15-$20 super-premium price range. 5.2 Perceived risk level of wine consumers 5.2.1 Effect of perceived risk on the wine purchase decision. Table V displays the mean values of the six generic perceived risk dimensions previously exposited in the PRS results in Table II. Of the four risk dimensions studied by Mitchell and Greatorex (1989), the most significant in order of importance were functional, social, financial and physical risk. Table V indicates that respondents perceived financial risk as their highest perceived

Wine consumption variable Total consumption (monthly bottles) #5 bottles 6-10 bottles 11-20 bottles 20 þ bottles Number of bottles per person (mean) Household’s total spend on wine (monthly) #$20 $21-$50 $51-$100 $101-$200 $201-$500 $500 þ Monthly spend on wine per household (mean) wine consumption frequency Daily A few times a week Once a week Once a fortnight Once a month Once every two months Once every three months Less often than once every three months Wine type/style (previous 12 months) Red wine White wine Sparkling Rose´ Fortified Wine purchase channel (previous 12 months) Large national general liquor store retailers Independently owned specialty wine shops Tasting rooms at wineries Restaurants Bars or pubs Other mailorder/wine club Internet direct

Perceived risk dimension levels Financial risk Functional risk Time risk Social risk Psychological risk Physical risk Overall perceived risk level index

Female (%)

Male (%)

78.4 13.5 8.1

52.9 28.0 16.2 2.9 7.27 bottles

– 3.71 bottles

Total (%)/means 61.9 22.9 13.3 1.9 6.02 bottles

16.2 24.3 19.0 21.6 16.2 2.7 $143.05

4.4 17.7 17.6 26.5 27.9 5.9 $213.97

8.6 20.0 18.1 24.7 23.8 4.8 $188.98

26.9 30.6 53.3 41.7 50.0 0.0 0.0 1.0

73.1 69.4 46.7 58.3 50.0 0.0 0.0 0.0

24.8 46.7 14.3 11.4 1.9 0.0 0.0 1.0

41.1 29.1 20.7 6.5 2.6

55.9 29.3 8.4 2.8 3.6

50.7 29.2 12.7 4.1 3.3

45.7 18.5 8.2 15.7 7.0 2.7 2.2

38.4 30.8 13.2 8.5 4.6 2.9 1.6

41.0 26.4 11.4 11.1 5.5 2.8 1.8


Table IV. Wine consumption characteristics of respondents

Mean 5.75 5.39 4.71 4.43 4.27 2.60 4.56

Note: Perceived risk level measured using a seven-point Likert scale (1 – strongly disagree, [. . .] , 7 – strongly agree)

Table V. Mean values of perceived risk dimension levels in the PRS

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risk dimension with a mean value of 5.75. Functional risk was the second highest perceived risk dimension and its mean value of 5.39 indicated that it was also a high perceived type of risk which is in congruence with Mitchell and Greatorex’s (1989) study. Taste, type and style of wine are hence clearly elements of respondents’ perceived risk. Although the time and psychological risk dimensions have not been included in previous studies (i.e. Mitchell and Greatorex, 1989), their importance to respondents cannot be ignored. Time risk was the third highest perceived risk type by respondents with a mean of 4.71. Perhaps a greater amount of time is taken to purchase wine in a specialty retail store, rather than at larger national liquor store retailers, albeit that 41 percent of their purchases were made from the latter by the respondents. The psychological risk mean was closely connected to the overall social risk mean with a dimension mean of 4.27. Psychological risk elements such as self-confidence, the possibility of a negative impression, and enjoyment of the wine purchase process are highly linked to the social nature of wine consumption. Physical risk was the only dimension with a mean below 4.0. The relatively low physical risk mean of 2.60 indicates that respondents did not feel that elements such as hangovers, allergic reactions or high alcohol percentage posed particularly high risk during their wine purchase decision. In short, they did not regard drinking wine as constituting a high health risk. 5.2.2 Segmentation basis: perceived risk level. An operational element of this study was to determine a quantitative method of segmenting high and low perceived risk consumers. As a first step, in order to generate an overall perceived risk index, it was assumed that all six generic risk dimensions were of equal weight. An overall perceived risk index was calculated by averaging the means across all six generic risk dimensions. As respondents’ overall perceived risk means ranged from 2.45 to 5.77, it was decided the most logical form of segmentation was to calculate the median of all respondents’ overall perceived risk indices. By analyzing the frequencies of the overall perceived risk of respondents, a median of 4.56 (Table V) was used as cutoff point to segment respondents as perceiving either high or low risk. 5.2.3 Risk differences of high and low perceived risk wine consumers. Table VI displays a one-way ANOVA analysis of the means of the six risk dimensions between high and low perceived risk consumer segments. Results indicate a high degree of statistically significant differences between all risk dimensions for both consumer risk segments. All risk dimensions were significant at the 0.01 level with the only exception being physical risk which differed significantly at the 0.05 level. These findings

Perceived risk dimension

Table VI. Importance of risk dimensions for high and low perceived risk segments

Financial risk Functional risk Time risk Social risk Psychological risk Physical risk

Perceived risk dimension means High risk Rank Low risk Rank 6.03 5.92 5.29 4.94 4.63 2.82

1 2 3 4 5 6

5.41 4.82 4.14 3.88 3.89 2.25

1 2 3 5 4 6

ANOVA significance (two-tailed) 0.000 * * 0.000 * * 0.000 * * 0.000 * * 0.000 * * 0.014 *

Notes: Significant at: *0.05 level (two-tailed) with a 95 percent confidence level; * *0.01 level (two-tailed) with a 99 percent confidence level

suggest that there may be behavioural differences between wine consumers in each risk group when purchasing wines. Further analysis of risk dimensions, RRS and their relationship to occasion-based wine purchases may also help to find support for the perceived risk differences of these risk groups (segments). Table VI shows that financial risk proved to be the highest form of perceived risk across both risk segments with means of 6.03 and 5.41, respectively. A significant statistical difference exists between the level of perceived financial risk (the highest risk dimension) of the two segments and H1 is therefore accepted. H2 predicted that high perceived risk wine consumers observe more social risk than low perceived risk wine consumers. Table VI shows that social risk of the high and low perceived risk segments had means of 4.94 and 3.88, respectively. Once again, the relative rankings of social risk differed in each risk group, as the mean of high perceived risk individuals was higher than that of low perceived risk individuals and the difference statistically different and hence H2 is accepted. The psychological component of the high and low perceived risk segments had means of 4.63 and 3.89, respectively, and was statistically significantly different. H3 is accepted in that high perceived risk individuals observe more psychological risk than low perceived risk individuals.


5.3 Use of RRS by wine consumers To test the importance of the RRS employed by wine consumers the six generic RRS as per the work of Mitchell and Greatorex (1989) were used plus an additional dimension of BYOB due to its frequency of use in the Australian market (Bruwer and Huang, 2012; Bruwer and Hwa-Nam, 2010; Bruwer and Rawbone-Viljoen, 2013). Table VII displays the overall mean values of the seven RRS with the level of importance assigned by the respondents. To generate an overall RRS index, it was again assumed that all seven RRS dimensions were of equal weight. An overall RRS index of 4.74 was calculated by averaging the means across the seven RRS dimensions. This indicated that wine consumers considered the use of the seven RRS as neither important nor unimportant. Table VII shows the RRS means and subsequent rankings calculated after respondents were segmented as either high or low risk individuals. A one-way ANOVA analysis

Risk-reduction strategy (RRS) Seek information Reassurance Price Brand loyalty BYOB Well-known brands Store image Overall RRS index

Overall mean 5.21 5.04 4.82 4.78 4.75 4.34 4.26 4.74

High perceived risk Mean Rank 5.41 5.20 4.97 4.73 4.66 4.36 4.62 4.85

1 2 3 4 5 6 7 –

Low perceived risk Mean Rank 5.01 4.84 4.58 4.84 4.13 4.21 3.89 4.50

1 2 4 2 6 5 7 –

One-way ANOVA two-tailed 0.042 * 0.153 0.141 0.644 0.105 0.635 0.052 –

Notes: Significant at: *0.05 level; risk-reduction strategy (RRS) importance measured using a sevenpoint Likert scale: (1 – strongly disagree, [. . .] , 7 – strongly agree)

Table VII. Importance of RRS for high and low perceived risk segments

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was conducted to assess if there was a statistical significance in terms of the RRS used between high and low perceived risk segments. Of the seven RRS analyzed, only information seeking had a statistically significant difference between high and low perceived risk individuals at the 0.05 level with a significance of 0.042. With the exception of “brand loyalty” all RRS means of high perceived risk individuals measured higher than those of low perceived risk individuals, suggesting that they do place greater importance on each of these RRS. Clearly, low perceived risk individuals place more importance on brand loyalty and well-known brands of RRS when purchasing wines. BYOB was the fifth most important RRS used by respondents. This may be attributed to the high incidence of BYOB use in Australia (Bruwer and Hwa-Nam, 2010; Bruwer and Rawbone-Viljoen, 2013). H4 predicted the perceived risk level of low and high risk wine consumers differs significantly on the most important form of RRS. Table VII shows that information seeking is the RRS ranked first in terms of importance for both high and low perceived risk consumers, with means of 5.41 and 5.01, respectively. There is a statistical difference in the perceived risk of both risk groups, thus both groups are uniquely identify seeking information as their most important form of RRS while purchasing wine. H4 is therefore accepted, as the two segments of perceived risk level differ significantly on the most important form of RRS (information seeking). 5.4 Effect of consumption occasion on the wine purchase decision 5.4.1 Importance of consumption occasion to wine consumers. To test the overall importance of consumption occasion on the purchase decision, seven different consumption occasions were measured. Table VIII displays the mean values of the consumption occasions measured within the context of their importance in relation to the individual RRS shown in Table VII. To elicit the answers in Table VIII, respondents were given each RRS in turn and asked how important that strategy was for each consumption occasion. Once again, in order to generate an overall consumption occasion index, it was assumed that all seven consumption occasions were of equal weight. An overall consumption occasion index was calculated by averaging the means across the seven consumption occasions. The overall RRS index of 4.72 signifies that wine consumers

Consumption occasion

Table VIII. Importance of consumption occasions for high and low perceived risk segments

Gifting occasion Celebration occasion Business-related occasion Intimate occasion Occasion with friends Occasion with family At-home consumption Overall consumption occasion index

Low High perceived perceived risk risk Perceived risk overall Mean Mean Rank Mean Rank two-tailed 5.14 4.90 4.82 4.71 4.61 4.56 4.27 4.72

5.29 5.09 5.00 4.80 4.78 4.74 4.37 4.87

1 2 3 4 5 6 7 –

4.92 4.62 4.58 4.56 4.41 4.36 4.17 4.52

1 2 3 4 5 6 7 –

0.052 0.056 0.059 0.206 0.038 * 0.034 * 0.348 –

Notes: Significant at: *0.05 level; consumption occasion importance measured using seven-point Likert scale (1 – strongly disagree, [. . .] , 7 – strongly agree)

considered the seven consumption occasions as neither important nor unimportant in terms of their RRS use. This may be due to the low perceived risk environment which the retail outlet was representing. From Table VIII it follows that gifting was the most important occasion respondents considered when making a purchase. This in essence means that gifting is the most important occasion when there is perceived risk in making a purchase, which is almost always the case, to a lesser or greater extent. Not surprisingly, celebrations which can often involve the gifting of wine, were seen as the second most important form of occasion. The importance of business-related occasions was demonstrated in it being the third most important occasion to respondents. At-home consumption showed the least importance to respondents in terms of risk perception. All means were no lower than 4.27, indicating that no single consumption occasion had what can be regarded as a level of unimportance to respondents. Most notable is the fact that the decreasing order of importance in consumption occasions appears to have an inverse relationship to the closeness of the relationship the wine consumers have with those with whom they may consume the wine. For example, in terms of gifting and celebrations, the wine purchaser may not have the opportunity to consume the wine at all. In terms of a business-related occasion, the social distance with colleagues and clients may increase the importance of a wine purchase. As social relationships strengthen from friends to family, there is a decreasing order of importance in consumption occasion on the wine purchase process, with the least important occasion being at-home consumption in which the wine purchaser may well consume the wine alone. The increase in personal relationship strength and familiarity may reduce the social and psychological risks thereby decreasing their importance to the wine consumer. Both high and low perceived risk individuals ranked the importance of each consumption occasion from more to less risky in exactly the same order as shown by the overall consumption occasion means in Table VIII. Moreover, high perceived risk individuals rated every occasion as more risky than did low risk individuals. This indicates they placed more importance on these consumption occasions during the wine purchase decision, and may be a contributing factor to their higher risk perception. Once again, the narrow range of overall perceived risk means of respondents may contribute to the similar importance placed on all wine consumption occasions by both risk groups. With a wider range of overall perceived risk means, there may exist greater discrepancies in the level of importance that each group places on different wine consumption occasions. A one-way ANOVA analysis was conducted to assess if there was any statistical significance in the importance of consumption occasion placed by high and low perceived risk individuals. Of the seven consumption occasions analyzed, only two showed a statistical significance between these two risk groups, namely occasions with friends and occasions with family. Although these consumption occasions were ranked fifth and sixth in terms of importance for both risk groups, respectively, their significance levels indicate that their importance in the wine purchase decision differs between high and low perceived risk individuals. It is also important to note, that intimate and at-home occasions showed strong incongruence indicating that these consumption occasions had very little difference in importance between high and low perceived risk segments. 5.4.2 Importance of RRS for occasion-based wine purchases. Table IX shows the means of seven RRS used by respondents in relation to their level of importance for seven different wine consumption occasions. These means were calculated through


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Consumption occasion

Seek info

Gifting Celebration Business Intimate Friends Family At-home

5.207 5.224 5.216 5.224 5.224 5.218 5.207

Reassurance Price 5.037 5.030 5.069 5.030 5.030 5.029 5.037

4.816 4.811 4.849 4.811 4.811 4.811 4.816

RRS means Brand loyalty

BYOB

Well-known brands

Store image

4.784 4.781 4.781 4.781 4.781 4.776 4.784

– 4.452 4.485 4.452 4.452 4.447 –

4.344 4.339 4.372 4.339 4.339 4.362 4.344

4.259 4.271 4.302 4.271 4.271 4.269 4.259

Notes: RRS means calculated using cross-tabulation seven-point Likert scale used to calculate original means (1 – strongly disagree, [. . .] , 7 – strongly agree); unavailable due to item non-response in questionnaire

cross-tabulation of the previously calculated values exposited in Tables VII and VIII. The RRS means across consumption occasions indicated a decreasing order of importance, which supported the findings in Table VII. The means for BYOB in gifting and at-home consumption could not be calculated, as these consumption occasions were not included for this form of RRS to be used. Seeking information was the most important RRS used for all consumption occasions, when risk was perceived, followed by seeking reassurance. Information seeking was seen as most important to respondents when purchasing wines for celebrations, intimate occasions and occasions with friends. The personal nature of these occasions may well be a contributing factor to the increased importance in information seeking by respondents. Reassurance and price were the most important to respondents when purchasing wines for business occasions. The ability to try a wine prior to the business-related consumption occasion may be a RRS that respondents use to reduce this social risk. In addition, the perception that price equals quality may be heavily utilised in this situation, since price is seen as an important RRS for business occasions. Brand loyalty was most important when purchasing wines for gifting and at-home consumption. This RRS has the ability to reduce all six perceived risk dimensions, and may be an inherent “backup” RRS strategy when the consumer is unsure during the purchase process. BYOB was deemed the most important form of RRS for business occasions. Well-known brands showed the highest importance for wine purchases for business-related occasions. In fact, of the seven RRS measured in Table IX, five were seen as most important for business-related occasions. Clearly, this consumption occasion has significant effects on the behaviour of wine consumers and the RRS that they use to minimize their perceived risk. Table IX shows that information seeking was indeed the most important form of RRS used by respondents in the context of all seven consumption occasions and H5 is therefore accepted. 6. Conclusions, implications and future research directions 6.1 Conclusions This study contributes the development of a new PRS for wine to measure risk level, which in turn enables the subsequent segmentation of consumers and examination of

relationships between the specific RRS that wine consumers use when purchasing wine for various consumption occasions and are new to the knowledge base. Both high and low risk segments similarly perceived financial risk as their highest risk dimension. The largest differences between the two risk groups were in the perceived social and psychological risks with high perceived risk individuals perceiving more social risk than low perceived risk individuals. The opposite was true for psychological risk. Overall, high risk wine consumers perceived significantly more risk in each individual risk dimension than their low risk counterparts. The specialty wine store environment is one of low perceived risk. Overall, high risk wine consumers placed more importance on each individual RRS than low perceived risk individuals. Information seeking was the most important form of RRS used by both high and low perceived risk individuals while purchasing wine. Differences existed between risk groups in the second most important RRS they used. High perceived risk individuals prefer reassurance from trying a wine prior to purchase to be of high importance, whereas low perceived risk individuals relied on their brand loyalty as an RRS to reduce their overall perceived risk during the purchase decision. Respondents placed the greatest importance on wine purchasing for gifting occasions with both risk groups placing consumption occasions in the same decreasing order of importance. The importance of consumption occasions force wine consumers to rely on various combinations of RRS to compensate for the differences in perceived risk they have for different consumption occasions. The decreasing order of importance in consumption occasions had an inverse relationship to the closeness of the relationship the wine consumers had with those with whom they may consume the wine. 6.2 Managerial implications The ability to understand the risk environment that wine consumers are exposed to can have major advantages for marketers, managers and retail companies. Through the process of understanding which risks are highly perceived by consumers when purchasing their occasion-based wine, marketers and retail managers can take the initiative to pre-empt and provide support for the RRS that they know consumers are likely to employ for these purchases. For example, one of the occasions that witnessed the highest perceived psychological risk, includes celebrations. Findings reveal that consumers purchasing wine for this consumption occasion place the greatest importance on information seeking as a RRS to reduce their overall perceived risk. This RRS can thus be leveraged by ensuring that information sources are accurate, available and comprehensive. Retail assistants should be knowledgeable and helpful, information about the product widely available, events such as tutored tastings should be considered, and customer and after-sales service should be accessible to help reduce the psychological and overall perceived risk. Results can benefit both the consumer and retailer as the wine consumer reduces their overall perceived risk, while the retailer can potentially increase profits while building customer loyalty and repeat purchase behaviour. Asking the question “are you purchasing wine for a particular occasion?” provides opportunities that marketers and managers can use to leverage the understanding of which risks are perceived, as well as the different RRS that are used to reduced perceived risk for the purchase of occasion-based wine.


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6.3 Limitations and directions for future research This study was subject to several limitations that researchers should be aware of when conducting future research in this field. The study’s sample population and exploratory nature produced a narrow range of overall perceived risk that may have affected the behavioural findings of the different consumer risk groups. Future research should be conducted using several retail channels to ensure an accurate representation sample. In addition, this research should extend to other country environments to explore whether findings can be expanded to include wine consumers on a more global scale. Follow up on this research offers interesting opportunities in wine markets where the concept of social risk holds a high importance, such as in business-related occasions in China (Li et al., 2011). The concept of “saving face” and reducing social risk in a market such as China (Somogyi et al., 2011) will have a large impact on how and which wines could be sold in this wine market. The analysis of factors influencing the purchase situation should be expanded with particular reference to the characteristics of the product such as grape variety and specific designation of region of origin (ROO), especially in the case of research in different countries. Although the findings of our study were not directional per se to suggest that grape variety and ROO should be investigated, deductively it does make sense to do so. Also, by using attribution theory (Stoddard and Fern, 1999) to investigate risk perception behavioural differences between males and females. The non-existence of a PRS in the literature necessitated the creation of one for the purposes of this study. Future research should aim to increase the reliability of this scale to ensuring more accurate measurement to further enhance findings from this study. BYOB as a RRS is a relatively new concept without enough understanding about its use by consumers to accurately measure its use in an exploratory study of this size. Future research should look to explore this RRS both in the on-trade and off-trade to gain a more complete understanding of the use of BYOB as a driver of wine purchasing in the off-trade through to on-trade consumption and in the different consumption occasions. References Asembri, C.A. (1986), “The effect of consumers’ planned products holding time on risk perception and acceptability”, unpublished PhD thesis, City University of New York, New York, NY. Aurifeille, J.-M. (2000), “A bio-mimetic approach to market segmentation: principles and comparative analysis”, European Journal of Economic and Social Systems, Vol. 14 No. 1, pp. 93-108. Aurifeille, J.-M., Quester, P.G., Lockshin, L. and Spawton, T. (2001), “Global vs international involvement-based segmentation – a cross-national exploratory study”, International Marketing Review, Vol. 19 No. 4, pp. 369-386. Australian Bureau of Statistics (2010), “Education and work, Australia”, Cat. No. 6227.0, Research Report, Canberra, May. Bauer, R.A. (1960), “Consumer behavior as risk taking”, in Hancock, R.S. (Ed.), Dynamic Marketing for a Changing World, American Marketing Association, Chicago, IL, pp. 389-398. Belk, R.W. (1974), “An exploratory assessment of situational effects in buyer behaviour”, Journal of Marketing Research, Vol. 11 No. 2, pp. 156-163. Bloch, P.H., Sherrell, D.L. and Ridgeway, N.M. (1986), “Consumer search: an extended framework”, Journal of Consumer Research, Vol. 13 No. 1, pp. 119-126.

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Hall et al. (2001)a Aurifeille et al. (2001)a; and Lacey et al. (2009)a Olsen et al. (2003) Aurifeille et al. (2001) Olsen et al. (2003)

Olsen et al. (2003) Hall et al. (2001)a; and Olsen et al. (2003)

Olsen et al. (2003)

Lacey et al. (2009)a Mitchell and Greatorex (1989)a

Aurifeille et al. (2001)a and Lacey et al. (2009)a Hall et al. (2001)a Chaney (2001)

New

Lacey et al. (2009)a Mitchell and Greatorex (1989)a and Hall et al. (2001)a Mitchell and Greatorex (1989)a and Johnson and Bruwer (2004)a Mitchell and Greatorex (1989)a

Notes: aThese sources provided insight into statement development, but are not verbatim from author and were adapted from the author(S) for the purposes of this study; seven-point Likert scale used: 1 – strongly disagree, [. . .] , 7 – strongly agree

Time

Psychological

Social

Financial

Physical

New

Mitchell and Greatorex (1989) * and Lacey et al. (2009)a Lacey et al. (2009)a and Hall et al. (2001)a Hall et al. (2001)a

1. I consider whether the wine I purchase will not taste good 2. I purchase wine to complement my food 3. I consider the type of wine when I make a purchase (i.e. Shiraz, Sauvignon Blanc) 4. I consider whether the wine I purchase will be off (i.e.. contain a fault or taint) 5. I am concerned about the amount of alcohol in a wine 6. I consider the chance of a hangover when purchasing wine 7. When purchasing wine, I consider whether I may have an allergic reaction to it 8. The price of wine is an important factor in my purchase decision 9. The price of the wine I buy depends on the occasion I am purchasing it for 10. I try to get value for money when I purchase wine 11. I buy wine to socialize with others 12. I am most likely used as a source of wine information in my circle of friends 13. I worry that others will not enjoy the wine that I purchase 14. I often seek approval from friends and/or family regarding my wine choice 15. Others are impressed with my ability to make good wine selections 16. I often have doubts about wine purchase decisions I make 17. The possibility of a negative impression affects the wine that I purchase 18. Shopping for wine is a fun and exciting activity 19. Shopping for wines is time consuming 20. I know where to look to find wine-related information 21. I pay a lot of attention to the wine I buy 22. I frequently agonize over which wine to buy

Functional

Table AI. PRS – dimensions, scale items and sources Source

390

Risk dimension Scale item (questionnaire statement)

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