Friday, March 04, 2011

Aged Bourbon: A Scarcity Strategy

Fortune has an article in the current issue about Old Rip Van Winkle Distillery. The small company makes fine aged bourbon. It only sells 7,000 cases per year. Demand appears to be much higher than that, and people are willing to pay a premium price for the product. The firm raises annually. In fact, some stores hold the bottles under the counter for particular customers, and they sell it at much higher than the usual retail price.

What's the key to this type of scarcity strategy? As the article points out, two factors must be kept in mind. First, you must resist the temptation to increase production dramatically, because you might dilute the brand. Second, you must have a strategy for promoting your product that is fairly inexpensive. After all, the small size of the firm makes it difficult to justify a large advertising and promotion budget.

Interestingly, social media has raised the possibility of creating a profitable small firm with such a scarcity strategy. Social media provides a way to raise product awareness very inexpensively. Exclusive in-person events, such as distillery tours and workshops, also provide a way to educate buyers about the value of your product. Finally, small firms can partner with related complementary products that also have an air of exclusivity and a high quality image.

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