Modelling the Demand For Status Goods

MODELLING THE DEMAND FOR STATUS GOODS

Roger Mason, Department of Business and Management Studies, University of Salford

ABSTRACT -

As many nations move into a postmodernist, post-scarcity era and as global communications continue to have such significant effects on the material ambitions of consumers worldwide, so the need to fully understand the psychology and economics of status-related consumer behaviour increases. Whilst purchase and consumption for display is now recognised as an international phenomenon, models of consumer behaviour continue to describe status-seeking consumption, either implicitly or explicitly, as atypical and peripheral. The need now is to develop a conceptual model of such market behaviour and to explore the search, evaluation and selection processes by which status goods are purchased and consumed.

INTRODUCTION

The existence and significance of status-seeking market behaviour has been widely observed. Early work into the social systems of traditional and developing societies clearly established the extent to which ceremonies surrounding the ownership, distribution and consumption of goods were at the centre of social networks and hierarchies and helped to secure the status and position of individuals at all levels of society (Malinowski, 1922; Mauss, 1925). Later, studies of Gilded Age conspicuous consumption in the United States (Vablen,1899) further confirmed the importance of social influences on consumer behaviour. Today, literature an the social psychology of status-directed consumption is well established.

Status-seeking generates that part of demand which is socially inspired and where utility derives not from personal consumption but from the "external effects" that consumption has on others. Within modern societies, three principal external effects have been identified (Liebenstein, 1950). "Veblen' effects offer consumers the opportunity to use product price as a means of ostentatiously displaying wealth in order to gain in social status. Satisfaction derives not from the utilitarian attributes of any given purchase but from audience reaction to the wealth displayed by the purchaser. In contrast, "snob" effects motivate individuals to buy an item because of its high quality and scarcity value. They reflect the desire of purchasers to be exclusive and, whilst product scarcity stimulates demand, snob purchases of any given product will decrease as others increase their consumption. Whilst both Veblen and snob effects are associated with high prices, they differ in that whilst the former is a function of price itself, the latter is decided primarily by the consumption of others. Finally "bandwagon" effects encourage people to purchase goods and services in order to be identified with a particular social group by adopting identical or similar patterns of consumption. They represent the desire of people to be seen to conform and in this respect contrast most sharply with snob effects. The extent to which these three social influences on consumer behaviour affect demand for any particular good is determined by their marginal external consumption effect which increases the elasticity of demand for bandwagon purchases but makes demand more inelastic when buyers seek Veblen or snob effects.

Since the mid-1970s, a subfield of academic study and research, extending across the social sciences, has developed around consumption and its relationship to culture and society (Belk, 1982; Hirschman, 1990; Levy, 1986; McCracken, 1986; Solomon, 1983). Increasingly sophisticated explanations of the cultural and social meaning of consumer goods have been developed both in the U.S. and Europe. These contributions have moved research forward and at the same time have seen a greater integration of social psychology with economics in seeking to explain modem-day preoccupations with social consumption. As a result, a more comprehensive modelling of status-seeking consumer behaviour can now be attempted.

A CONCEPTUAL MODEL OF STATUS-SEEKING CONSUMPTION

1. The Propensity to Consume for Status

In attempting to explain and predict the propensity to purchase for social recognition and esteem and the extent to which this propensity is translated into consumption within any community, a distinction has first to be drawn between 'formalist' markets in which purchasing and consumption are motivated primarily by economic and utilitarian factors, and "substantivist' markets where social needs and relationships qualify seemingly rational economic behaviour. In reality, all consumer markets reflect a mix of socioeconomic cues and stimuli, but the link to relative affluence must not be too strongly made. Evidence from the poorest societies suggests that the need to conspicuously consume, for example, can be perceived as a first-order priority; those living in all but the most desperate poverty are highly sensitive to social position and will "consume" to secure it.

Three basic approaches to consumption can be identified within the substantivist school. First, a Pavlovian analysis, stressing the importance of learnt response; second, a more Freudian explanation relating to largely unrecognised, subconscious cues; finally, and most significantly, an interpretation focused on interpersonal relationships which argues that purchase and consumption is largely conditioned by social membership groups and social aspirations. In terms of status-directed consumption, this social-psychological model provides the most appropriate base for theory construction, but needs further refinement if it is to have real value.

Within this framework, it is possible to identify three distinct forms of status-seeking consumption and to link these with Liebenstein's taxonomy (Figure 2). Whilst the need to gain recognition for achievement finds expression at the wider cultural level in many different ways, it also generates conspicuous consumption and the ostentatious display of wealth. In a similar way, the need to conform and to secure social relationships produces, inter alia, significant levels of bandwagon purchasing. And the desire for distinction not only promotes individual and sometimes eccentric behaviour but in market terms encourages snob purchasers to seek and consume products whose aesthetic quality and scarcity value are high.

The propensity to purchase for display and for social gain is clearly determined by a mix of these social-psychological motives, but the extent to which any dominates within a particular culture will also determine the extent and nature of status-seeking behaviour, Cultures which emphasize conformity will, other things being equal, encourage bandwagon purchasing rather than Veblenian conspicuous consumption. Similarly, achieving societies will promote Veblenian display to a far greater extent. It also has to be recognised that, within any culture, subcultures exist which promote status-seeking of a particular type and so produce variations in social consumption both within and between social groups.

Whilst the primary determinants of status-directed consumption can be identified, it is self-evident that not all people even within what may be a strongly substantivist society choose to purchase and consume for status and some explanation has to be offered for this. In fact, variations in the propensity to status-seek within any culture, sub-cuiture or social group can arguably be attributed to variations in personal values and preferences explained by differences in personality (Homey, 1958; Kassarjian, 1971; Krech, 1962; Rosman, 1950). These traits, largely innate and uncontrolled, may vary significantly between individuals irrespective of the society to which they belong and may help explain why people who have experienced similar social and economic conditioning can show wide variations in their desire to purchase and consume for display. These variations will in practice be further exaggerated by random family influences which shape values at the individual level. Consequently, the overall propensity to seek social status through consumption is determined not only by cultural and social environment but also by personality characteristics which are randomly distributed.

The form and nature of observed ostentatious display as opposed to the propensity to conspicuously consume moves the focus from social psychology to economics. There is clearly a distinction to be made between the wish to seek status through consumption and the ability to do so. In practice, the opportunities open to any individual to consume for display are dependent upon the income or wealth available to that individual. But given the fact that status-seeking behaviour is known to exist at all levels within society, it is income and wealth relativities and not absolute levels of wealth which are the determining factors.

Economic realities impose limits on a consumer's ability to display. The amount of bandwagon, snob and Vablenian purchasing therefore differs both within and between social groups. Within-group variations are explained by (relatively narrow) differences in income and wealth. In contrast, for those seeking 'vertical" status gains, that is, for those intending to move upwards in social terms, a wider gap can develop between the expenditure required to secure the desired status gain and the income or wealth constraints imposed upon purchasing. In short, the greater the vertical ambition underlying intentions to purchase for display, then the greater the economic demands made on the consumer.

Discretionary income which can be made available for conspicuous display is to a significant extent controlled by the individual, who is free to make choices as to how money is spent once essential expenditures have been met. So important can social consumption appear that consumers are often prepared to lower their primary needs threshold to meet the costs of conspicuous display and for this reason it is not realistic to attempt any measure of discretionary income in terms of an economic surplus over and above the cast of necessary expenditure. In general terms, however, the more unequal is income distribution within society then the greater the ability of a significant low to purchase and consume for Veblen effects; conversely, in those societies where distribution is more equal, then the more restricted are the opportunities for ostentatious acts of conspicuous consumption but the greater the opportunities for within-group bandwagon purchasing.

2. The Buying Process

Status-seeking behaviour is at its strongest in those societies which emphasize social status and in so doing generate a high propensity to consume for display. Given such a propensity, the individual consumer will move through intention to purchase and consumption. Figure 3 outlines this process.

The evaluation of product categories differs within and across social groups. First, the perception of categories is influenced and shaped by consumer-specific characteristics - income, wealth, occupation and education - which bring personal, subjective values into play. Second, categories will be selected on the basis of product-specific characteristics. Bandwagon purchasers will need to be reassured that the category has status value and is significantly consumed by the target audience; snob purchasers will look for scarcity; finally, Veblenian conspicuous consumers will look for significant opportunities within the category to ostentatiously display wealth by paying conspicuously high prices.

Mapping these variables to product categories, a sub-set of categories emerges which represents those product classes from which the consumer can choose (the economic constraint) and will wish to choose. The final decision on category ranking will necessarily be a subjective judgement of value for money, where value is an expression of status rather than of functional utility.

Decisions on product category lead to necessary decisions on preferred product forms within these categories. Again, the same consumer-specific and product-specific characteristics are brought to bear on these decisions. Finally, evaluation of specific brands or items within approved product forms is necessary, with available income, wealth and socio-economic status again heavily influencing brand choice. Final selections will again reflect consumer ambitions with regard to achieving bandwagon, snob or Veblen effects.

For the status-seeking consumer, unlike those purchasing for functional, utilitarian purposes, the search and evaluation process does not stop at brand selection. Decisions relating to the act of purchase itself are important in that 'display purchasing" can provide a significant part of the status value which is being sought. Store-related status gains come on the one hand from restricted opportunities to buy, from store image and from the status which is itself enjoyed by the retailer. For the consumer, therefore, purchase through what are seen by his or her target audience as socially correct channels is an important part of consumption: certainly, buyers see a high level of social risk associated with store choice. Manufacturers and retailers work hard to provide a retail ambience which complements their status goods and the buying experience can be extended beyond the store by status-linked packaging and presentation.

Finally, consumption of status products has to be organised in order to secure maximum gains. The social visibility of consumption must be high and there is every incentive to involve relevant others in the consumption process. This explains the importance of social events as vehicles for status display as they allow members of any target audience to observe and to share in the consumption of high-value status goods and to confer status on the donor accordingly.

3. Search, Evaluation and Selection

We can identify those factors which decide a society's overall propensity to consume for status and can derive a conceptual model of the decision-making process associated with such behaviour. However, in order to fully describe the purchase and consumption of status goods, a greater understanding of the search, evaluation and selection procedures adopted by status-seeking consumers is needed.

Research at the individual level is made particularly difficult by the special nature of status-seeking consumption. First, consumers who intend to purchase for reasons associated with social esteem and recognition will often deny that their market behaviour is determined by status-seeking motives. Such denials are rational, for societies generally insist that social recognition and status is conferred upon but not overtly sought by individuals. Whilst there is some evidence to suggest that, in more recent years, younger consumers have been showing a greater willingness to admit to status-seeking expenditures, the taboos surrounding overt and conspicuous consumption are still strong.

While status-seekers will readily concede that others consume for status, most still distance themselves from such motives. At the same time, they have to explain purchases which are intended to impress others. To this end, they can and do argue that such purchases were in fact made for utilitarian purposes rather than for display and that, while others may buy the brand or item for some supposed status value, their own motives were entirely different. The ability to conceal status-seeking behaviour in this way makes research that much more difficult.

The denial of status-seeking motives has therefore to be recognised and allowed for in explaining the search, evaluation and product selection process. Acknowledging this fact, Figure 4 proposes an alternative approach to status-linked consumer research. First, individuals seeking to purchase for status are necessarily directed in their market behaviour by a target group or .audience" whose opinions are critical to the success or failure of any status-motivated expenditure. To make sensible product category and brand selections, status-seekers must identity those purchases which will carry status value within the group they are trying to influence. A first and necessary activity therefore is to understand the values of this group and, more particularly, to identify product categories and brands which the group perceives as having high status. It is their values and attitudes which will inform status-seekers who intend either to reinforce group membership or to be accepted by other social groups to which they aspire.

Target group observation necessarily moves from values through consequences to product attributes. The subsequent process of brand selection by the status buyer moves in the opposite direction from attributes through consequences to values. Having established the appropriate categories and brands which will be effective in status terms, he or she will then accept or discard opportunities to buy according to income and wealth constraints. Once an appropriate product category is selected, a high status brand (C) is chosen for purchase. Whilst others may select this same brand for its utilitarian merits, status-seekers will be buying for the social status such a purchase is able to confer. However, if asked why the brand was chosen, they can point to the product's superior utility and value for money. In reality, however, brand C will have been bought for the attributes, consequences and values represented by the good's perceived social status (C).

This representation of status-seeking buyer behaviour may offer the basis of an alternative measurement methodology with regard to status-motivated consumption. it would recognise the importance of target group opinion in shaping demand for status goods and allow for the fact that most respondents can and will seek to conceal their real purchasing motives. Status-seekers can always offer utilitarian reasons for their purchase preferences and, as status goods are typically premium-priced, they can and do emphasise "quality' in a variety of forms to explain their choices. Whilst they can appear identical to the utilitarian purchaser, however it may be possible to separate the two groups by using an interview format which focuses specifically on perceived product attributes, for it is in the area of real product knowledge that distinctions between real and bogus "utilitarians" can be most effectively drawn.

Using such focused questioning, buyers using utilitarian arguments to disguise status ambitions may be identified. However, while this laddering methodology may well be more effective than others in identifying market behaviour wholly motivated by status, it would not be sensitive to behaviour motivated partly by status but also partly by utilitarian considerations. This 'mix" of utility and display in purchase preference formation is by no means exceptional and is known to determine many decisions to buy. A research methodology which is able to accommodate the" more complex consumer ambitions would still need to be developed.

SUMMARY

Observation of status-seeking consumption has been widely and frequently reported since publication of Vablen's seminal work at the end of the nineteenth century. At the same time, the theoretical process of status-seeking demand, purchase and consumption has received little attention. This paper outlines a conceptual model of the demand for status goods which can hopefully provide a framework for discussion and contribute to the eventual development of a general theory of status-seeking consumption.

FIGURE 1

THE DEMAND FOR STATUS GOODS

FIGURE 2

STATUS-SEEKING MARKET BEHAVIOR

FIGURE 3

A CONCEPTUAI, MODEL OF STATUS-SEEKING CONSUMPTION

FIGURE 4

PRODUCT SEARCH, EVALUATION AND SELECTION

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