Nudge and AI : wine, difficulty to evaluate experience good

David BECK Academic - Economics, Society and Political science - Environment and Technologies (AI, blockchain)

An experience good is a product or service with the following characteristics – quality and price – are difficult to observe in advance but can be ascertained upon consumption.

In this series of articles, I have been analyzing the relationship between wine, personalization and AI. In the first article, I have been reviewing different AI to personalize the wine experience for consumers. This is the second post. In the last article, I have been analyzing benefits of AI for winemaking.

I had the pleasure of interviewing leading players in the wine and the tech industries. For this chapter, I have discussed with (sorted by alphabetical order):
Katerina Axelsson Co-Founder & CEO at Tastry
Vijay Bhagwandas Co-Founder & CEO at Tasting Intelligence
Pam Dillon Co-Founder & CEO at Preferabli
Magalie Dubois Assistant professor at Burgundy School of Business
Julian Perry CEO at Wine-Seacher
Tristan Rousselle Founder & Deputy CEO at Aryballe
Charles Slocum Chief Business Officer at Tastry
Gérard Spatafora Managing Director at E-Studi’
Andrew Sussman Chief Technical Offer at Preferabli

I also contacted 7 wine critics. None of them replied.

Nudge marketing – a brief remind

In the seventeen years since Richard Thaler and Cass Sunstei’s book “Nudge” was published, nudges have become a widely used consumer influence strategy. Nudge marketing us the deliberately manipulation of the way choices are presented to consumers. Its goal is to influence what consumers choose, either to steer them toward options that the marketer believes are good for them or simply to stimulate purchases and increase sales.

The lack of personalization of experts is discussed in the scientific literature which concludes: ‘if you are not able to choose your wines, at least learn to choose your expert’.

Magalie Dubois, PhD Student in wine economy

For example, a supermarket places plastics mats with huge arrows marked “Follow the green arrow for your health” pointing shoppers toward the produce aisle. Within two weeks, produce purchases increase by 9%.

A restaurant lists a fish entrée at a clearly overpriced €35 on its menu. It is not interested in selling the entrée; the fish is there as a decoy to make other, more profitable items appear attractive.

Many nudges have virtuous effects, encouraging consumers to reduce their consumption of energy, and save more money. However, not everything about nudge marketing is rosy. In their enthusiasm, marketers have overlooked some fundamental concerns about using nudges.

While there are lots of reasons for this, here are the three main ones:

  • Nudge can be condescending. By their very definition, nudges are mental models that give inferior status to consumers’ motivations and abilities. Anytime a nudge is designed to promote a behavior, in effect the marketer is saying to the consumer: “you are too weak-minded and you don’t have enough self-control. You need help. Unless I nudge you, you will not do the right thing.”
  • Even when it “works”, it may not achieve the ultimate goal. The green arrows may divert shoppers toward the produce aisle and lead them to buy more fruits and vegetables, but what happens after they take the produce home? Will it be eaten or will it just sit in the refrigerator until it spoils and is thrown away? Providing consumers with the motivation and the knowledge to tackle such challenges is a harder but more effective approach to reaching such outcomes.
  • They are really, really hard to get “just right”. Even when it works, weak nudge may not produce sufficient impetus to achieve successful outcomes. The flip side is just as problematic. If a nudge is too strong or too overt, it can easily backfire, angering and disenfranchising customers.

Medals have a great influence on the sales of wine.

Gerard Spatafora, Managing Director at E-Studi’Oz

Another difficulty is that thanks to popular press coverage, many consumers now know exactly how nudge works. Take the example of overpriced decoys like the fish entrée used in restaurant menus. By now, many regular diners already know this decoy. Research shows that once consumers understand its workings, they become immune, and the effect of the nudge is blunted.

Why are consumers so intimidated when choosing wines in front shelves or in restaurant? Everyone is afraid of being misled, of been biased. An expert will always be suspected of being biased, of having taste biases specific to his or her palate, or even worse of having gaps in knowledge.

If you add a dose of “you don’t know anything in you cave, let me bring you the light of knowledge” – Allegory of the cave, Plato – you get the old recipe of nudge with marketing.

Consumers will even become more vulnerable because they are intimidated when choosing a bottle of wine (or afraid of being judged), with ready-made phrases such as “No, choose yourself, I don’t know anything about wine. Show them the status they have by consuming a certain type of product, and that’s it. It is been going on for 50 years. Everyone thinks it is normal: professionals and so far wine consumers.” – David BECK

Please read:
Gustave Le Bon, The Crowd: A Study of the Popular Mind
Etienne de la Boetie, Discourse on Voluntary Servitude

Reviewing wine – objectivity vs. subjectivity

Wine if often argued to be an experience good – which means that consumers need to purchase and consume the good first to evaluate it. This subjective nature of wine evaluation and the inability of consumers to know what is in the bottle before consuming it means that the pricing of wines according to some measure of quality may prove particularly difficult.

An experience good is a product or service with the following characteristics, quality and price, are difficult to observe in advance but these characteristics can be ascertained upon consumption. The concept is originally due to Philip Nelson, who contrasted an experience good with a search good.

Fundamentally, it is the subjective nature of wine quality assessment and the lack of quality information held by consumers which potentially drives a wedge among price, quality, and trust in experts.

Wine reviews, despite the 100-point scoring system popularized by Robert Parker, are not exactly scientific, but objective. Not that they claim to be. But a numerical scoring system certainly gives the impression of precision and consistency, if not objectively (the bump to 100 points over the British style 20-point rating system rating system reinforces that impression for many, whether the motivation was intentional or not). Questions like these are the heart of the odd relationship between science and wine.

Why is it necessary to have noted and expert reviews for the wine industry when is is not necessary the case in other sectors? Besides, why the approach is much more democratized for beer or spirits but all the other experience goods such as tea, coffee, spices, cheese… Will experience goods still exist when sensory AI is democratized?

Consumers want to enjoy. They no longer want to choose a wine at random. They want to minimize the risk of deception.

Charles Slocus, CBO of Tastry

Today, intermediary bodies are more and more likely to be suppressed. By the way, why are there intermediaries? If it is to make up for lack of skills or time of manufacturers / producers? So technology is an intermediary, isn’it. It is just a groundswell in Western societies where hierarchical systems are being fought. We can rejoice or deplore it (especially with the nihilism, coupled with the current individualism destroys everything – everything is worth: the note of an expert as the note of a consumer lambda).

This change is seen as the passage from the law of the father to the law of the brother. It is the internet that has contributed to the end of the authority of the knowers for this generation: whoever can give his opinion, the quidam is worth the expert’s. This insubordination can be linked to the decline of traditional authorities such as churches, political parties, unions and, to a lesser extent, schools.

People follow less and less the wine experts, especially the new generations. Consumers seek to rely on their community, to follow certain influencers or simply a mass of people. Consumers prefer to be in direct contact with the producers if we talk about wine.

“Even though expert wine tasters are able to provide a sensory evaluation of a wine’s characteristics, evaluation is subjective and different tasters often maintain different opinions for the sames wine.

With the emergence of technologies, I am not even talking about blockchain or metaverse that will push this even further – along with a people more and more educated, the need to have intermediaries guiding the people is less felt.” – David BECK

Which came first: the chicken or the egg?

In perfumery, they start from the customer, their emotion, and even the advertising message before creating a product.

Tristan Rousselle, Founder & CEO at Aryballe

The paradox of the chicken and the egg is a very old paradox. Applied to wine, what would it be? Is it the consumers who seek the advice of the experts? Or the experts who make the consumers feel guilty for not knowing the wine? Who decide: the wine supply or the demand?

Until now it as the winemakers that decided what the consumers should taste. But the context is changing. Overproduction (the Bordeaux vineyard is thinking about grubbing up), the costs that are slipping (dry materials, transport, bottles), the soaring energy costs, the deconsumption of wine in key markets (France, UK), are all issued that make the wine industry look for itself.

When a winemaker does something new, on the typicity of a wine or on the management of negative comments, where the expert censors him/herself, what will the AI do?

Magalie Dubois, PhD Student in wine economy

“To date there is no questions of accepting that the demand, that consumers decide. At the very least, we realize that they would like the alcohol content to be lower. At the very least, we realize that fortified wines are no longer popular (the Douro valley is thinking of producing more light wines). We realize the emergence of NOLO, the rise of beers, the cannibalization by spirits but all these considerations are too marketing oriented, not noble enough for some vineyards.

Why accept to lose control? Why let an AI show things objectively? It is more interesting to have lost consumers, which allows them to understand and learn the mysteries of wine.” – David BECK