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Luxury
Luxury consumption factors consumption
Melika Husic and Muris Cicic factors
School of Economics and Business, University of Sarajevo, Sarajevo,
Bosnia and Herzegovina
231
Abstract Received November 2007
Purpose – The purpose of the paper is to analyse the luxury market and determine the factors that Revised May 2008
determine luxury consumption. Luxury consumption has been neglected, and yet many questions Accepted May 2008
arise concerning the underlying dimensions of luxury shopping.
Design/methodology/approach – Two scales were used: questions concerning luxury
consumption were used in order to determine the sample of luxury consumers, and a PRECON
scale was used to measure individual differences in consumers’ prestige shopping preferences. After
the scale validation process, factor analysis was conducted, along with regression analysis of all
PRECON factors.
Findings – The results show that in this market consumers perceive quality as a brand determinant.
Further, strong patron status suggests a “snob effect” among respondents, who buy exclusive items in
an attempt to distinguish themselves. Hence, rare products indicate respect and prestige among the
respondents. Furthermore, this paper defines two sub-categories, namely “old aristocracy” and “new
money”, with the latter more ascendant in the case of a developing market. It also showed that luxury
consumers behave similarly worldwide, regardless of economic or social surroundings.
Research limitations/implications – Luxury consumption should be put in the context of
psychological determinants, and perhaps tested according to lifestyle.
Originality/value – This paper brings attention to luxury consumption, its motives and consumer
styles.
Keywords Consumption, Design, Consumer behaviour, Premium products, Bosnia and Herzegovina
Paper type Research paper
Luxury consumption
Definition of prestige and luxury
For centuries, people worldwide have satisfied themselves with the possession of
beautiful goods. As a result, luxury products have been the subject of intensive
discussion and debate. Today, consumers have at their disposal a larger discretionary
income than ever before. Income has increased throughout the hierarchy scale, but
most dramatically in the highest social classes. Current consumers are willing to offer
considerably higher amounts of money for luxury products.
Traditionally, luxury goods or status goods have been defined as goods for which
the mere use or display of a particular branded product brings prestige to the owner,
apart from any functional utility (Grossman and Sharpiro, 1988). Deeter-Schmelz et al.
(1995) defined prestige preference as “an individual’s preference for shopping in
clothing stores where the combination of patron status, store type and atmosphere,
merchandise price, quality, branding, and fashion combine to create a particular Journal of Fashion Marketing and
prestige level”. Phau and Prendergast (2001) assume that luxury brands “evoke Management
Vol. 13 No. 2, 2009
exclusivity, have a well known brand identity, enjoy high brand awareness and pp. 231-245
perceived quality, and retain sales levels and customer loyalty”. Similarly, Beverland q Emerald Group Publishing Limited
1361-2026
(2004) created a luxury brand model with the following dimensions: DOI 10.1108/13612020910957734
JFMM .
product integrity;
13,2 . value-driven emergence;
.
culture;
.
history;
.
marketing; and
232 .
endorsement.
Moore and Birtwistle (2005) are critical towards this model, and assert that other
details need to be incorporated in order to build a modern luxury brand. Currently,
study of the luxury market is taking a new direction. Because of the unprecedented
demand coming from Asian countries, recent research focuses on the cross-cultural
comparison of attitudes toward the luxury concept (Dubois and Laurent, 1996; Dubois
and Paternault, 1997).
Vigneron and Johnson (1999) defined five values of prestige behaviour combined
with five relevant motivations, and from these identified five different categories of
prestige consumers. According to Vigneron and Johnson’s (1999) categorisation of
luxury products, hedonists and perfectionists are more interested in pleasure derived
from the use of luxury products, and less interested in the price than quality, product
characteristics and performance. These consumers know what they want and use their
own judgment, while price exists only as proof of quality. The Veblen, snob and
bandwagon effects are evident with consumers who perceive price as the most
important factor, with a higher price indicating greater prestige. They usually buy rare
products and in this way emphasise their status. Vigneron and Johnson (1999) explain
luxury consumption according to the effects detailed below.
The Veblen effect – perceived conspicuous value. Veblenian consumers attach
greater importance to price as an indicator of prestige, because their primary objective
is to impress others.
The snob effect – perceived unique value. Snob consumers perceive price as an
indicator of exclusivity, and avoid using popular brands to experiment with
inner-directed consumption
The bandwagon effect – perceived social value. Relative to snob consumers, bandwagon
consumers attach less importance to price as an indicator of prestige, but will place greater
emphasis on the effect they make on others while consuming prestige brands.
The hedonic effect – perceived emotional value. Hedonist consumers are more
interested in their own thoughts and feelings, and thus will place less emphasis on
price as an indicator of prestige.
The perfectionism effect – perceived quality value. Perfectionist consumers rely on their
own perception of the product’s quality, and may use price as further evidence of quality.
Brand influence
Why do office ladies purchase Ferragamo shoes on instalment plans? Why do junior
executives happily shell out their entire month’s salary for a Gucci purse? The answer
lies in the old ways of denoting who you are and your place in society. From rigid social
orders defined by birth, caste, family position, or profession, suddenly how much
money your have is the key classifying criterion. Those Gucci bags and Ferragamo
shoes are not merely girlish indulgences, and neither are the Armani suits and Rolex
watches just male vanity; they are part of a new social protocol where your identity
and self-worth are determined by the visible brands on your body. Today, 94 per cent
of Tokyo women in their twenties own a Louis Vuitton piece, 92 per cent own Gucci, 57
per cent own Prada, 51 per cent own Chanel, and so the list goes on (Prasso and Brady,
2003). A new trend among luxury designers is merging and forming conglomerates.
Today, three major groups form the luxury scene in fashion clothing and accessories.
They are shown in Table I.
It is known that French designers hold a majority of the luxury market. The
approach they use is completely different from US designers, or Italian designers. US
Analysis
This study uses a reliability assessment which determines the consistency of
respondents’ answers and reveals what proportion of variance in the data is true
variance. The Cronbach’s a is 0.95, which suggests high, almost perfect reliability.
Luxury consumption
First an analysis was made regarding the level of luxury consumption among
consumers with different incomes. As shown in Table III, luxury consumption differs
greatly in various income categories.
Since there are high differences in standard deviation, an ANOVA analysis and post
hoc tests were used. All post hoc tests show that there is a significant difference
between the group of consumers with income above e35,000 and all other groups. This
means that all income categories use luxury products, but respondents with an annual
income above e35,000 annually spend the highest amount on luxury. This statement is
JFMM logical because those respondents that come from a wealthier category, with a higher
discretionary income, can more easily afford luxury goods.
13,2
Luxury consumption factors
In order to conduct factor analysis, it is necessary first to examine any inter-correlation
between variables. Kaiser (1974) suggests KMO (Kaiser-Meyer-Olkin measure of
238 sampling adequacy) values above 0.5 to be acceptable. In this case, the KMO value is
0.91, an excellent result. A Bartlett test showed significance (p , 0:001), allowing the
conclusion that factor analysis is suitable for the given data. The analysis reveals the
solution of four factors.
As mentioned previously, Deeter-Schmelz et al. (2000) developed the PRECON scale,
used in this research, and identified five factors which motivate luxury consumption:
(1) image;
(2) quality;
(3) fashion;
(4) store atmosphere; and
(5) patron status.
Table IV shows the results reached in this research, which revealed the organisation of
four factors in this market.
As shown in Table IV, statements concerning brand image and quality are perfectly
represented in one factor. This solution is suggested by Deeter-Schmelz et al. (1995),
but in their further work, Deeter-Schmelz et al. (2000) divided this category into two
factors. Possibly, consumers use a brand as quality assurance; therefore those two
factors correlate.
H1 is partially correct. Given factors do influence luxury consumption. In this
situation, however, rather than five categories, they are grouped into four categories:
(1) brand image and quality;
(2) fashion;
(3) store atmosphere; and
(4) patron status.
In order to test the second hypothesis, this study uses a regression analysis (see
Table V). This reveals that the given four factors explain only 12.3 per cent of the
variance, while the rest is unexplained variability, or the luxury consumers are further
influenced by hedonism, lifestyle or other psychographic characteristics.
Table VI gives the results of variance analysis (ANOVA), with an F-ratio of 6.538,
with (p , 0:001).
In this model (see Table VII), FAC2_1 (store atmosphere) and FAC4_1 (fashion) do
not demonstrate the necessary level of significance (p . 0:05) and therefore do not
have a significant influence on consumption, while FAC1_1 (brand image and quality)
(standardized b ¼ 0:33) has a greater influence. Further, the authors conclude that if
this factor increases for one standard deviation, luxury consumption will increase for
0.48 standard deviations. Furthermore, factor FAC3_1 (patron status) has a negative
influence on consumption, (b ¼ 20:294), which suggests the presence of a “snob
effect”.
The following is an overview of the findings of this study on luxury consumption
factors:
(1) Brand image and quality: influence significant and positive.
(2) Store atmosphere: no significant influence on luxury consumption.
(3) Patron status: influence significant and negative.
(4) Fashion: no significant influence on luxury consumption.
According to these findings and those of previous studies, H2 can be accepted as
partially correct. To conclude, the four different factors vary in their influence on
luxury consumption, and among these only two, i.e. brand image and quality and
patron status, have a statistically significant influence on consumption. Furthermore,
brand image and quality have the strongest influence on luxury consumption, while
patron status is significant, but negative, suggesting a “snob effect”, as this factor
deals with the issue of influence by other individuals’ behaviours and the imitation of
widely admired individuals.
From the results of the second part of this study, the following may be stressed:
.
H1 can be partially accepted, as luxury consumption is influenced by four out of
the five given factors; and
.
H2 can be partially accepted, as both patron status and brand image and quality
have a strong influence on luxury consumption.
Discussion
Analysing the luxury market, with its constant and extreme growth, we come across
different unanswered questions and more dilemmas are raised. Conducting research on
prestige consumption in troubled, post-war, post-socialist economy is a challenge per
se. It is surprising to find how popular luxury consumption is in a market where
average per capita income is e3,600 annually.
Nevertheless, this is one of the major issues of this paper. Luxury consumers are not
average by any means. Luxury consumers in Bosnia and Herzegovina do not differ
from those in France or Russia or Australia. They use the same brands, they have
JFMM similar discretionary incomes, and they wish to fulfil the same needs with luxury
products. And the main purpose of luxury products is to impress others and position
13,2 the owner in one specific group to which he/she wishes to belong.
Why do consumers try to fit in certain group by consuming specific goods? Why
isn’t education or family background sufficient? Why do they always aim to be
accepted by the wealthier and mightier group? Perhaps the answers are not to be found
242 in sociological studies, but psychological. Prestige-sensitive consumers feel protected
and safe when wearing well-known and recognised brands. This is what gives them
confidence, or perhaps they just want to enjoy it.
Throughout the study, it is clear that luxury consumers come from different social
classes and have different incomes. Prestige consumption is used by individuals who
are concerned about the impression they make on others. By using status goods as
symbols, individuals communicate meaning about themselves to their reference
groups. This is not determinant only for the highest social status, but for the total
hierarchy scale. However, income or money is a necessity for luxury consumption. The
results show that wealthiest group is the heaviest consumer of luxury goods, which is
expected. Those consumers are used to having prestige products in every aspect of
their lives, and they can afford it. On the other side, there are less wealthy consumers
who treat themselves with a few luxury products a year, in order to either enjoy them
or to be accepted by the rich.
Mainly, this study concerns factors which influence luxury consumption. In this
sample, factors are grouped into four categories:
.
brand image and quality;
.
fashion;
. store atmosphere; and
.
patron status.
Unlike the results reached by Deeter-Schmelz et al. (2000), which were the model for
this research, the findings of this study group two factors into one: brand image and
quality are combined into one category. Consumers use brand as a quality indicator,
and therefore the two are mutually influential. There could be another issue here as
well. Since this is a troubled market, consumers are extremely concerned about the
quality of the product they are purchasing, and probably its durability too. As a
post-socialist country, consumers perceive image only through good quality and they
are very loyal to the idea that every well known brand has to be of good quality.
However, there is a lot of unexplained variance left in this research, which indicates
hedonistic behaviour. Consumers try to treat themselves with a luxury product and to
enjoy it for own sake, not to impress anyone.
Other interesting results are reached by regression analysis of the single influence
of each factor. It is significant that patron status has a negative influence on
consumption, which suggests the presence of a “snob effect” in this sample. Consumers
wish to have unique luxury products, since they pointed out that they do not like to
shop in the same stores as their friends, or people they admire. This directly implies
snobbishness, or consumers desiring products that are in limited supply and therefore
have a high value, while those readily available are seen as less desirable. Products
have an even greater effect on demand if people also perceive the product to be unique,
popular and expensive. Still, as mentioned above, everyone can have and afford luxury
now. So, if everyone can have it, is it still prestige? And what will be the driving force
for exclusive snobs at this point? It will be interesting to follow future trends, where Luxury
snob consumers will probably try to find other means of exclusivity, as it is known that
purses made of endangered albino alligator skin exist on the market, and they are by
consumption
definition exclusive and unique. factors
However, when one chooses a brand, one communicates the desire to be associated
with the group who regularly use that brand. Therefore, the authors assume that
respondents can also be divided into either snobs or “aristocracy” and bandwagon 243
consumers or “new money”. Bandwagon consumers may be conceptualised as the
antecedent of the snob effect. Even though snobs and followers buy luxury products
for apparently opposite reasons, their basic motivation is essentially the same: whether
through differentiation or group affiliation, they want to enhance their self-image. Only
they are doing it differently; the new flashy money will use LV bags full of logos, while
snobs will a pay higher amount for a Hugo Boss hidden brand label. What is their
future? Will they try to find new role model, not just a wealthier group, but
intellectually, emotionally, or in any other way superior? Probably not. Money seems to
be a reflection of power and happiness, and money is shown by visible luxury goods.
This behaviour illuminates the present situation on the luxury market. On one side
there are consumers who wish to differ from others in order to suggest their power and
success, with the courage to be “trend setters”, while on the other are those who can be
described as “new money”, who imitate the first group in everything, including their
aspiration to distinguish themselves from others. Nevertheless, one can always say
“Nouveau riche is better than no rich at all”.
To conclude, factors of luxury consumption can be well grouped into four
categories:
(1) brand image and quality;
(2) fashion;
(3) store atmosphere; and
(4) patron status.
However, there are areas not covered by those factors, and they reflect hedonism and
other psychographic characteristics. The intensity of the factors’ influence varies, with
the most important being patron status, which revealed a strong snob effect among
respondents. Luxury consumers want to be different, so they use products to which
others have limited access, no matter what the price. Still, two subgroups were defined:
the “old aristocracy”, or real snobs, and “new money”, their followers, which accords
with the situation of a developing market and society.
The main limitation of this research was the uneven distribution of respondents
according to income. Lower incomes were not represented due to the presence of
eliminatory questions in the questionnaire, which left only luxury consumers in the
sample. The uppermost social class was not present, since those respondents are rare
and difficult to reach. Therefore, this study had a homogeneous sample and its
analyses and tests can only be applied to the present luxury consumers.
Furthermore, in the questionnaire, income was shown as total household income,
which does not give a clear idea of the discretionary income used to finance luxury
consumption. However, this is difficult to measure, as respondents often strain to
provide complete and honest answers.
In the further research, other factors of luxury consumption should be analysed,
such as lifestyle and hedonic behavioural factor. Lifestyle involves different
JFMM psychographic characteristics among consumers, including hedonism, and would
provide a better vantage for the examination of luxury consumption.
13,2
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Appendix
Figure A1.
Luxury consumption
Corresponding author
Melika Husic can be contacted at: melika.husic@efsa.unsa.ba