Status Consumption as a Factor in Product Demand - Research Paper Example

Due Conspicuous/Status Consumption as a Factor in Product Demand Introduction Status Consumption, as originally defined by Thorstein Veblen in his “Theory of the Leisure Class,” refers to purchasing and the subsequent displays of unnecessary, expensive items in a manner that suggest or rather attract attention to an individuals wealth (39). Even though Veblen did use the term “conspicuous consumption” then, the idea of inspirational consumption as a means of outward demonstration of wealth has been a hot topic examined not only in the wider field of Economics but also in a range of other discipline including psychology, sociology, marketing, to name but a few. Indeed, status consumption has permeated the modern setting, especially in the western world, where spending is not only a way of determining the amount of wealth owned by an individual but a unique way of trying to fit within a given social class. According to the theory of consumption, consumers buy products given the intrinsic utility-value placed on them, which in effect should exceed the price attached to the product (Pepall, Richards and Norman 24). However, this description fell short of accounting for the wider consumer view of product-ownership or rather the status that the product may hitherto confer to the consumer. Behavioral consumption is a much more complex concept influenced by a myriad of factors than originally thought of in terms of utility maximization alone. This paper examines Status Consumption as a factor that drives product demand within specific social groupings. Background Evolutionary economists contend that the current status of economic systems has been largely driven by growth of knowledge over time (Loasby 135). Choice, which has been a factor in retail economics, is therefore not so much about preference, but a function of knowledge and rules controlling the knowledge itself. As such, preferences are just but a subset of the knowledge-controlled rules. Noteworthy, rules and knowledge in consumer consumption, unlike the conventional idea of preferences, are imperfect. Thus, the consumers are ever in a decisional trap of “knowledge of what to want”; a trap that often leads to coerced consumption (Earl and Potts 626). Generally, there are two preconditions that must hold for consumption to be considered status consumption. First, there must be a sense of belonging, often referred to as “degree of commonality” concerning relative desirability of association with certain products or brands. Secondly, consumption of such products or association with such brands must be socially visible, that is, openly displayed (Deaton 34). In other words, status consumption follows “demonstration effects." Social visibility is particularly essential because of the moral hazard effect related to socially non-visible commodities. Consumers acquire incentives to amplify their consumption with the intention of gaining positions in social settings. For those that show their consumption patterns externally (self-reporting), individuals concern with status is one factor that has been identified to motivate such actions; a tendency that explorative marketers have identified to draw more product-support from the social grouping such as youths via the targeted ads. Social visibility as one of the key aspects of status consumption plays the role of linking individuals with certain brands; and a factor that is very much used in brand and/or product marketing. Indeed, a personal inspection of consumption patterns suggests a strong and directed affinity to a superior-association with a given product. This may well explain the reason as to why households spending concentrates much into furnishing living and dining rooms compared to private rooms such bedrooms The intention of gaining social status by consumers more often results from observed consumption patterns, especially from peers prior to making a final decision on whether to engage in a purchasing decisions or not. Moreover, individuals need alibi (reasons) that validate their purchases to their surrounding as well as to themselves. It is obvious that all of these phenomena only come in to play once an individual has made contacts with the product from a second party in a form of an advertising kind of. Indeed, one of the possible misconceptions that marketers make when predicting consumption behavior is sticking with the old knowledge versions that bind buyers’ choices entirely with their needs. Realistically, out of the products that are purchased by consumers, majority are actually considered non-necessities in terms of survival. Buyers are far more affected by consumption of the social groups that one interacts with the most. In the words of social anthropologist Edmund Leach, individual actions are shaped one way or another by learned behaviors from others within the immediate or observable surroundings (Jones 74). It is a clear fact that if a person do not have adequate information, or simply does not value what being in possession of a Mercedes Benz signals to others in the immediate surroundings, then the individual would presumably not consider buying the car. If anything, Toyota-Prado is clearly a much cheaper option and sometimes with even better and more rewarding quality from a utility standpoint. The brand image seems to take center stage as a means of sending sway-signals to influence the larger public’s ultimate decision to buy Mercedes Benz over Toyota-Prado, for instance. To many consumers, success seems be to more valuable if it can be demonstrated to others; expressed by purchasing expensive but often unnecessary stuff. With the developments of the current economic meritocracy, individuals in possession of less or traditional resources previously labeled as “unfortunate” have found a new label of “failures.” It is the fear attached to the latter label that persistently drives consumers to work towards higher incomes to enable them prove to the public their success (De Botton 5-8). Literature Review The notion of conspicuous consumption, pioneered by Veblen’s work, herein referred to as status consumption, has found literary support from a variety of scholars since inception. Status/Conspicuous consumption is an increasing “form of consumer behavior” which can no longer be dismissed as trivial; though economists have over the years felt instinctively uncomfortable with its inclusion in consumption economics (Wendner and Goulder 1968). As it is today, status consumption is a form of power that engenders in it some form of respect and envy from those who regard it as the soul of a culture. Modern evidence confirming the existence of status consumption is widely supported in the current literature. Those countries regarded as affluent nations are topping the list with the largest number spending on goods that are actually less important. The average size of homes in the United States has increased by more than 50 percent in the last three decades (Deacon 34). Party holidays, for example, have become a favorite for status consumption with over $1,000 per couple being spent on luxurious formal wear, limousines, and hotel suites among many more non-necessities (Dupor and Liu 425). More in depth studies have gone to the extent of unraveling male habits of turning to status consumption to regain past image of masculinity in the wake of gender equality (Berrett 814-21), whereas adolescent girls are rapidly turning to smoking to show their new found status as well (Wearing 48). Many modern theorists have tried in their own version to shed more light as to how and why status consumption occurs. As pointed out above, some theorists describe it as a relative consumption effect driven by the consumption of others (Samuelson 112-113). To the others theorists, it is bandwagon effect in which consumers are persuaded to purchase certain types of goods just because others possess a particular good. While to others, it is due to the snob effect where one avoids the use of particular or rather popular goods to maintain individuality as a sign of keeping a different, uncommon status (Corneo and Jeanne 334). From the nature of products bought, group of reference, to institutions of learning attended, all have been associated with status consumption (Juliet 90; Wong, 197). Relationship between Status consumption and product demand While the field of status consumption studies has received much recognition in the past, the research dubbed “Luxury Fever” provides a flush of theoretical insights into how marketer have utilized status consumption to increase customer base to certain brands or products (Frank 174). Research into the buying trends of women’s cosmetics also serves to illuminate the effectiveness of status consumption with regard to advertisements appealing to particular targets (Chao and Schor 107). According to Frank, while not all spending are pegged on status consumption, households as well as individuals spending have significantly risen in the last few decades. Noteworthy, the average value of new cars have substantially increased by more than 75 percent just in the last ten years yet consumers still go for those that are considered expensive (Frank 4). Affinity to a reference group and social visibility are cited as the most crucial factors that have upheld continued consumption of such luxurious lifestyle products. Frank further notes that despite calls for “downshifting” in status consumption to allow for more savings, the concept remains very much alive (188). In his accounts of historical trends, Frank cites in his writing a house belonging to the Vanderbilt family built in Biltmore Estate, Asheville-North Carolina in 1895 with 250 rooms. The house remains the largest in America history. He proceeds to the current trends giving example such purchases of vehicles like Porsche, which in 1999 had a one-year manufacturing waiting list in America. Exorbitant vacation spending is significant in America, evident by the hotel bookings done at a cost of $5,000 per night- the booking in Aspen noted. Home appliances, the purchases of Patek-Philippe Wristwatch and cosmetic surgery among many more examples in the modern consumption trends show the existence of status consumption in much of Americas social spending. This is clear evidence that that consumption is not only influenced by the most crucial needs, but also by a determination to fit within a given social grouping; a factor thoroughly susceptible to exploitation by ad marketer to increase product consumption and sales revenues. Frank adds that luxury consumption is very real not only in America also in many developed nations such as Russia, Canada and European nations with few spotted cases in the developing world (32). But even so, America leads the pack in status consumption. Angela Chao and Juliet Schor did begin their work by asking whether consumer demand does depend on the quality of the goods or interpersonal influences (107). The two scholars’ mission was to find out the existence of status consumption in the field of women’s cosmetics. Their research was based on the correlation between social visibility on one hand and price and intrinsic value, on the other hand. Using a regression analysis to draw a conclusion from the data collected, the authors found strong support for status consumption in cosmetics products for women owing to social visibility; another created reason for purchase by the social visibility through usage ads. The Influence of Product/Brand Marketing in Status consumption La Rochefoucauld did acknowledge that the world, more than imagined, often rewards signs of achievements that are visible than the real achievements themselves (De Botton 4). This gives an opening for product marketing with an increasing effect on demand. It is obvious that various levels of success exist; the terms-“middle class” and the “affluence” are familiar in modern society. It is thus appropriate that the various distinctive indicators for these levels be made known to consumers, and this brings forth the factor of social visibility (Clotaire 127. Research has confirmed immense power of advertising in influencing consumer behavior even through the media. With magazines reaching the affluent more than any other group, for instance, targeted ads can actually have a tremendous increasing effect on sales revenue. Thackeray, an English novelist, noted in one of his writings that consumers’ obsession with elevated social status are highly encouraged by the vast amount of magazines and newspapers imposing ideas of how important the noble class is on a daily basis. The invention of television and radio in the twentieth century greatly added the impetus into more consumption rates. Notably, adverts on such platforms still work the magic of attracting traffic towards a particular brand. Indeed, the presence of more visible ads have made information gathering even much easier, and in a sense increased consumption (Pepall, Richards and Norman 16). In product marketing, one of the most important steps to influence buyers’ decision-making to buy is simply the creation of an alibi (self-conviction of necessity). As indicated earlier herein, most consumers do not buy simply because they want to, but unconsciously develop reasons to validate purchasing choices given the cultural settings (Clotaire 126). Noteworthy to stress, creation of alibi is at the center of purchasing decisions. No wonder that the sales of luxury items often adopt such tactical approaches of raised emotions as validating reasons to buy. More particularly, most companies supplying luxury products often delineate social visibility through target advertising. It would be much easier to convince a consumer into purchasing a Mercedes Benz if it is marketed not merely as fashionable and status signaling, but also as lifetime investment that guarantees comfort with extensive lifesaving chances in case of accidents. A powerful alibi has the potential of igniting product purchases or association with a brand by repackaging the consumers’ decision to purchase a particular product without feeling guilty of status consumption (Clotaire 126). This would perhaps dissipate the obvious controversy that hangs over luxury products whether they are “needs” or “wants.” Consumers buy items they do not actually need due to emotions surrounding the products. Thus, conscious marketers navigate the notion of “needless-buys” when developing reasons that cultivates instincts to attract-to- buy. More often than expected, facts such reasons for purchase are often secondary in forming decisions to buy. The responsiveness of consumers to cues that communicate to them emotionally is more of a signal to marketers to design emotionally catchy adverts towards target groups (Danziger 32). Conclusion The fundamental characteristic of status consumption is that it signifies a popular but unique lifestyle. Psychological evidence in the researches mentioned above supports the existence of status consumption and that the phenomenon of seeking status is influenced largely through the display of luxurious lifestyle. From behavioral scientists to evidenced based research, all agree that it is human nature to aspire for acknowledgement and appraisal. Product marketers for luxury goods do employ tactical approaches that involve influential displays through visible ads that can add to the demand of their products. Conspicuous consumption does not entail necessities and so the underlying factor that motivates purchase is the signaling effect of improved status. The Gap for Further Research Fashion cycles, for instance, are inherently disruptive with inbuilt costs in terms of foregone economies of scope (Earl and potts 626). In an era where technology influences a huge chunk of the buying decisions, obsolete knowledge and rules are costly and may engender errors likely to last for a lifetime. Security concerns over income-streams necessary to service status lifestyle seem to be a challenge in choosing the right products in a functional sense; the roaring twenties culminating in the great depression was but a teaching experience. Given the natural adaptiveness of consumers to desire what peers have, the lethal power of “raised emotions” in product demand relative to sustainability is almost a virgin area for further research. Work cited: Berrett, Jesse. 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