BY VANESSA PAGE Updated Mar 28, 2019 Buying a luxury handbag these days seems to be no more uncommon than purchasing a pair of shoes at Target Corp. (TGT). The physical appeal of luxury goods is undeniable – the leather is softer, the shoes are more comfortable – but the price tag is often off-putting. Unless you’ve got a good job or fantastic savings habits, luxury consumer goods will sit on your credit card for a long time. The Irrational Consumer It’s well known that people don’t behave rationally, and considering the enormous consumer debt Americans have, consumers clearly don’t always act in their best financial interests. Luxury goods are a great example of how irrational we can be; a decent and sturdy handbag can be purchased for $50, yet people will still spend thousands to buy a brand name. It's always been this way and consumers' desire to own the finer things in life will likely never change. One reason involves the way we tend to look at the positive elements of a product while ignoring its disadvantages. There’s no need to explain why this works in favor of the luxury goods companies’ marketing departments. Take Apple Inc. (AAPL), for example. Consumers wait overnight for new releases and have immense brand loyalty even though MacBooks and iPhones aren’t technologically unique or superior. In fact, Samsung makes phones with better features and Microsoft Corp. (MSFT) and Xiaomi make phones at a much cheaper price point. Nevertheless, Apple seems to break sales records year after year. The company has mastered the art of retail marketing and exerted more economic influence on us than any company in history, according to NYU Professor Scott Galloway. Since some perceive non-luxury goods as inferior, they are quick to point out the negatives of those products. When talking about a cheap foreign car that needs repairs, it’s a piece of shoddy construction; on the other hand, a luxury car that needs repairs is just suffering from wear and tear. Some conclude that higher priced goods are of better quality and we spend irrationally, believing you get what you pay for regardless of whether the goods are proven better than their affordable counterparts. Self-Esteem and Luxury Goods Low self-esteem is a big factor in whether a person will buy luxury goods that they may not be able to afford. For consumers trapped in institutionalized poverty or those living paycheck to paycheck, a luxury good can go a long way in increasing self-esteem or providing a sense of belonging. With marketing departments creating a need for luxury goods and the rise of online shopping, a $500 scarf is just a click away. Luxury goods are the ultimate retail therapy, and fortunately for luxury brands, the Internet has made them easily accessible for impulse shopping when you’re feeling blue. A sense of accomplishment is yet another reason why some people buy luxury goods. They want to reward themselves for their hard work by treating themselves to something they typically can't afford. Authenticity Matters There’s a reason why people will pass the fake Rolex sellers on the street to pay full-price for an authentic one: Despite appearing the same, the owner will know that they don't have a real luxury good. This flies in the face of reason yet again. If we buy luxury goods to show off to others and to feel like we belong, why wouldn’t a facsimile do the trick? Researchers at Yale have determined that this quest for authenticity develops early in childhood. A study that tried to convince children that a cloning machine had produced their favorite item found that most children refused to accept the duplicate as identical. It turns out that the sentimentality of the item – the memory or pride or feeling that comes from having purchased a genuine luxury good – is part of the reason that we seek authenticity. Simply put, treating yourself to fake Louboutins would be like not having treated yourself at all. The Bottom Line People buy luxury goods for a variety of reasons, all of which are related to the strong emotions that we attach to expensive material goods. Whether we are financially comfortable or not, we will often purchase luxury items to show off to or gain acceptance from others and to reward ourselves for an accomplishment. Now that we understand the psychology behind why people buy luxury goods, we’ll be better equipped to quash down any emotions that try to convince the rational part of our brains that the more expensive something is, the better its quality. https://www.investopedia.com/a...
ktmpost · Nov 3, 2019 8:20 AM · 1,964 views
How The Psychology Of Income Inequality Benefits Luxury Brands Basically, people living amidst greater income inequality are more interested in luxury goods. Many low-income Americans can’t afford to appear like low-income Americans. I like to think that despite being wealthier than most Americans, I remain immune to materialistic desires. I drive a 17-year-old Honda Accord and wouldn’t know designer clothes if you wrapped me in them, head to toe. But it turns out that I’m wrong. I’m not above materialism despite my wealth and social status. I’m immune because of it. Since I don’t need to signal my social value, I can save my money for other purposes. In places with great income inequality, those people with lower incomes live under great social stress. Their low position in the social hierarchy is more obvious and more consequential. In response, some poor people purchase the kinds of good that create the impression that they have social resources to spare, even when they are cash-strapped. And people living in low-income neighborhoods–the ones who are relatively well-off compared to their neighbors–are nevertheless worried that they’ll be misperceived as resource-poor. So they purchase expensive and conspicuous goods, to make sure their resources are visible to outsiders. As an example of this behavior, researchers recently examined Google search trends across the U.S. and found that people in states with relatively high income inequality were more likely to search for luxury brands than those in other states. Looking for the latest from Ralph Lauren (who, I discovered, manufactures overly expensive clothes)? The frequency of such Google searches is higher in Mississippi than Iowa (relative to more generic Google searches, like for “weather”) and in New York than Nebraska. Basically, people living amidst greater income inequality are more interested in luxury goods. And here is a very similar looking map, showing the relative frequency of people searching on Google for Ralph Lauren: Redder states had higher income inequality. This map shows the level of correlation for a search term that was positively associated with residual state income inequality. Redder states had greater positive associations. (Psychological Science) This map shows the level of correlation for a search term that was positively associated with... PROMOTED When people criticize young African American men from poor neighborhoods for purchasing Air Jordan sneakers, or whatever overpriced athletic shoes are currently the rage, they might be right that such purchases are an economic burden for people already under financial stress. But such criticisms fail to recognize the utter humanity of visible luxury goods. I may pat myself on the back for eschewing visible signs of my wealth. But I can afford the luxury of foregoing luxury goods. My status in society is secure. In fact, my very avoidance of luxury goods probably furthers my status in my immediate social circle–“A well-known professor and he still drives a beater!” Many low-income Americans can’t afford to appear like low-income Americans. It is hard to attract a romantic partner if you look like a loser. It is hard to get a good job if you show up at an interview looking like someone who’s never held down a job. And the more extreme income inequality becomes, the more pressure people feel to create the impression that they’ve climbed up the social ladder. People who can’t afford luxury goods often feel they can’t afford to look like they can’t afford luxury goods. https://www.forbes.com/sites/p...
logan · Nov 3, 2019 9:02 PM
This conversation is preserved exactly as it was on the original Sajha.com and can't accept new replies.
Start a New Discussion