Why Do Consumers Like to Engage in Conspicuous Consumption - Essay Example

Introduction Conspicuous consumption can be simply be defined as purchasing costly “luxury” products whose functional benefits if any, over “non- luxury” equivalent is not enough to justify the premium pricing of the product. O’Cass and McEwen (2004) notes that, demand by consumers for these products remains hard to explain, nevertheless, in the recent past the market has witnessed tremendous increase in these products. These products are normally supported by high and extensive market promotion and advertising by manufactures of the products, creating a “status symbol” for wealthy individuals. This research paper examines why consumers buy some goods for conspicuous consumption at prices which are normally higher. The papers will examine the concepts that try to explain this behaviour, and examine other factors. The paper will also explain the goods which qualify to be termed as conspicuous consumption. Market implication of in accordance to the 7Ps in relation to this phenomenon will also be analysed and a conclusion drawn after the analysis. Theories to explain the behaviour Veblen (1899) provided an explanation of conspicuous consumption behaviour in his prominent concept of “the leisure class”. He notes that in order for people to show their wealth or power their have to put it into evidence, since self esteem can only be rewarded through evidence. Thus, one way of an individual showing off his wealth is through conspicuous consumption. Using Veblen, conspicuous good can be defined as a product whose consumption can be viewed by all in the market economy. In this context “Veblen effect” will refer to conspicuous consumption, which is seen as an action of consciously displaying and consuming a product that is bought at a higher price that its marginal cost. (Veblen, 1899) Veblen concept thus rises two important questions that needs to be examined in brief 1. Can it be possible to formulate a formal theory in which “conspicuous consumption” convincingly show wealth and promotes social status? 2. Which products qualify to be termed as conspicuous consumption products? Some literature has tried to give answers to the first question. It is assumed that a person’s value is directly enhanced by purchasing higher priced products. (Nagel, 2002) unfortunately, this approach does not explain why individuals will prefer premium pricing. To (Trigg, 2001) explains that people prefer conspicuous goods because of monopolistic goods. However, other scholars are in view that individuals use conspicuous consumption as means of evaluating their social status in the society. (Nagel, 2002) This agrees fully with Veblen’s concept. Yet again, it is not easy to generalize the “Veblen effect” in this competitive market. The second question that regards what product can be termed as conspicuous can only be answered by trying to examine the characteristics of a product that can be termed as conspicuous consumption. This question remains hard to answer because there is no very little literature on it however, conspicuous product should be exclusive and have high utility. In general the decision of buying conspicuous consumption product depends on material need to satisfy the individual and also on social prestige need of the individual. In recognizing such needs, companies emphasize the exclusivity of the company product. For example, in 2002 Ferrari promised to produce only 4,300 cars despite the fact that there was a waiting list of the cars of over 2 years. (Trigg, 2001) this method of limiting the number of products is also applied in other industries such as watches and jewellery. Sometimes companies limit their products through use of exclusive distribution channels and at times use of legal actions. For example, Christian Dior sued supermarkets in fear that they may carry a large number of its product. (Nagel, 2002) These marketing strategies by companies are undertaken wit a belief that the product value will diminish if the customers find the product widely available thus, question the justification of highly pricing the product. Studies have for a long time reviewed on the function of products as a way of individual expressing himself. (Braun and Robert 1989) it was found out there are two main competing social requirements among consumers. These are need for uniqueness and need for similarity. (Braun and Robert, 1989) TABLE 1 A Structural Analysis of Conspicuous Consumption Behaviour (Braun and Robert, 1989) Social structure Primary Objects of consumption Drives of behaviour consumes Principal behaviour dimensions Pre-capitalist feudal Slaves, women food Military and political Nobility Pure ostentation Modern capitalist Very Expensive products e.g. diamonds Social power and status Nobility and upper middle class Ostentation and signalling and uniqueness Post-modern Image and experience Self-expression and self image Middle-class and the “masses” Uniqueness and social conformation The above table gives a brief history of conspicuous behaviour. Characteristics of consumer shopping behaviour Today, the market is being driven by consumers are more informed and have more money spend than previous. Customers currently are shopping for quality and luxuries so that they can enhance their quality of life. With improved purchasing power consumers are turning way from purchasing material things to experimental consumerism. Thus, customers will purchase a product because of one or more reasons underlined below. Experimenting marketing behaviour Currently the society ha become more affluent, many consumers have got all the material products and goods they really need. Due to this many consumers who go to shop in the store are hardly ever motivated by the need to buy anything in the shop. On the contra, the consumers are purchasing products based on desire to have an experience with the product or a feeling of the product. (O’Cass and McEwen, 2004) Satisfy need and desire Consumers have different needs and desires that they wish to satisfy when buying a product. Many people have different anticipations and dreams when they buy a product. Thus, a person will buy a product so that the product can satisfy his/her needs and wants. However, the market offers a lot of different but similar products to the consumer who ends up not knowing exactly what is perfect for his/her specific needs, it is this availability of varieties that as seen many consumers buying products that at fail to satisfy their needs and desires. (O’Cass and McEwen, 2004) Purchasing to acquire Basically, a person may want to acquire or own a product, thus some consumers buys products because their want to acquire and own a product. Many studies reveal that many people purchase products so that their can own them, this gives them a sense of power and achievement. Even though the product may not be that important or useful to the consumer but having it becomes a priority. (O’Cass and McEwen, 2004) Marketing implications terms of the 7Ps Product This is an object or service that a company produces or manufactures particularly on large scale with precise amounts. (Bitner and Booms, 1981)A company should have a large collection of products that it sells to the market. The products cater for different tastes of consumers. In relation to the marketing implication that is being witnessed due to conspicuous consumption products and buying, companies are coming up with high quality products that can be premium priced. The characteristics a company’s products should be well defined to meet the needs of the consumers; the packaging of the product has to be considered attractive to entice the customers to buy the products. (Bitner and Booms, 1981) Customers tend to believe quality of a product, this quality is what gives them a sense of uniqueness. Today, companies are ensuring that the quality of their products is perfect, that is, it is the quality that matches with the prescription of the product in the market so that it can maintain its consumers who are not misled with the misrepresentation of the qualities with its competitors. (Bitner and Booms, 1981) Promotion Promotion includes all communications that a company uses in marketing its products. We have four different elements in promotion; this includes advertising, point of sale, word of mouth and public relations (Bitner and Booms, 1981). If a company incorporates all the four elements then a certain level of crossover do occur. Companies have greatly used this marketing mix to its full advantage. Companies have incorporated all the four aspects of promotion which as seen the many companies capture and retain a big share of their market especially in the motor industry. Many companies continue to sell their luxury products through using captivating adverts that entices consumers to buy conspicuous goods. It should be noted that advertisement is a very powerful marketing tool that is used to create more market for the company. (Bitner and Booms, 1981) Promotion also ensures that a company communicates what it has to its customers. With the current shift in customers’ requirement; of high valued gods and services, the marketing is witnessing competitive promotional activities being undertaken by companies to sell their products. Current market research reveals that alt of companies are investing a fortune on promotional activities. As more customers go for conspicuous products, the current trend is to promote such goods to look more valuable and exclusive. Price The amount that a customer pays for a certain product is its price. This amount is determined by various factors which includes product identity, competition, market share and the perceived worth of the product by the customer. Many companies that target conspicuous consumption customer focus on producing quality products at a premium price. Premium pricing is where the uniqueness of the company product is defined such as a fixed price. Though, products from a company may seem to be having a higher price, this is because the quality of the products is normally high. Premium pricing from the company is also a marketing strategy that is working. (Bitner and Booms, 1981) Premium pricing; use of high price which indicates uniqueness of a product, this approach is applicable where a substantial competitive advantage is in existence such as for luxuries. Premium pricing normally positions a company higher than its competitors and makes its customer to belief that the company’s products are superior. Thus many companies such as BMW are using premium pricing to give their products a better sense of luxury and quality. Place This stands for, location where the products from a company are found and purchased. This in many cases refers to distribution channels of the company which can be physical stores or even virtual stores found on the internet. (Barlon, 2006) In order to make a product to more exclusive many companies are trying to limit its distribution production or limit its distribution. This creates a high demand for the product and the company then can increase its price. This aspect is being witnessed in clothes industry, watches and other products. (Barlon, 2006) Customer will feel having something unique if the product is scarce, the market implication of conspicuous consumption thus is creating scarcity of the product. Research reveals that, when a product is scare is value increase and so does its exclusiveness. Thus, companies though will prefer producing a product in high numbers such a product will may not be seen as exclusive. (Barlon, 2006) People Any person that will interact with your consumer will create a certain impression, and the impression can have a profound effect on your customer either in a positive way or a negative way in regard to customer satisfaction. (Barlon, 2006) Thus the reputation of the company products rests in the hands of the company employees who will come in contact with the company’s customers. The employees have to be well trained and highly motivated to leave the right impression on the customers. Thus, a company should; Ensure that employees who come in contact with the customers are the right ones and have proper training Give a high level of after sale service and support as one way of adding value to the product and giving the company an advantage over its competitors. To many customers this is more important than the price of the product. When relating this to the current market implication, it is clear that, today, many companies are taking employees to be part of their brand image. Employees today, are highly trained well looked after to display a better company image. These employees thus easily attract customers to buy conspicuous products. (Barlon, 2006) Process This includes the process of how the service is delivered, and the behaviour of those who are offering the service, is important for customer satisfaction. Aspects as information about the product and the time it takes to serve the customer are aspects that make a customer happy or not. Companies have to note that; 1. Customers are more interested on how the system of the company works and not in details of how the company runs. 2. The quality of customer service that a customer receives is what is important to the customer. Companies continue to use high technology to improve their products and the process in which the products are manufactured. The quality of products has continued to be improved tremendously in order to attract more customers who are willing to pay a lot of money for better products goods. It is not easy for a company to sell conspicuous products if it can not offer high quality service to its customers. Thus, the market is witnessing better service delivery from companies as they compete to sell their exclusive and highly priced products. (Barlon, 2006) Physical evidence This general applies to service providers, it has been noted that a service can not be experienced, unless it is delivered. Thus it means that a customer takes a risk when choosing a service that he/she can not see. This risk can be reduced by assisting prospective customer to “see” what they are purchasing. This can be done through offering testimonials and case studies which can give evidence of good services from the company. The physical evidence being shown by the company has to validate the customer’s previous assumptions. For example, if a company is offering financial services it has to do so in a formal setting. (Barlon, 2006) To this end, the market has become highly creative and competitive, leadership and management styles in companies has undergone major changes to try and woo customers to buy conspicuous goods. Today, companies are employing celebrities as C.E.Os in order to attract consumers to by the products of the company on the basis the image the CEO creates. This is more apparent in the companies which deal with luxuries products. (Barlon, 2006) Conclusion Conspicuous consumption can be simply be defined as purchasing costly products whose functional benefit may not be realised over it substitute. Customers currently are shopping for quality and luxuries so that they can enhance their quality of life. Many companies have thus taken up to offer high premium products to consumers who value quality and value than price. The market has continue to witness a lot of changes in terms of the 7Ps with price highly becoming premium, and promotion taking centre stage for many companies. Improved purchasing power has played an important role in making customers to purchase conspicuous products. As the world continue to witness high quality products and improved economy, many people will continue to demand for more luxurious products in order to satisfy their changing dreams needs and anticipation. Reference: Barlon, K. (2006): The concept of the marketing mix Presentation on marketing management, Vol 1, Oulu University -Finland Bitner, J. and Booms, B. (1981): Marketing strategies and organizational structures for service firms, in Donnelly, J. and George, W. Marketing, American Marketing Association, Chicago. Borden, N. H. (1964): The Concept of the Marketing Mix, Journal of Advertising Research, June, Vol. 4. Berry, C. J. (1994): The Idea of Luxury: A Conceptual and Historical Investigation. New York: Cambridge University Press. Trigg, A. (2001): Veblen, Bourdieu, and Conspicuous Consumption; Journal of Economic Issues, 35 (1) Braun, O. L. and Robert A. W. (1989): Psychological Antecedents of Conspicuous Consumption; Journal of Economic Psychology, 10 (2) O’Cass, A. and McEwen, H (2004): Exploring Consumer Status and Conspicuous Consumption; Journal of Consumer Behaviour, 4(1): Nagel, T., R. H. (2002): The Strategy and Tactics of Pricing; Prentice Hall; Upper Saddle River, NJ. Veblen, T. B. (1899): The Theory of the Leisure Class. Boston: Houghton Mifflin. Read More