The concept of luxury has been present in the society in various forms since the beginning of civilization. With very clear differences between the social classes back in the day, the consumption of goods categorized as luxury items were restricted to the elite classes. This also defines the underlying thought behind luxury goods; whatever the poor couldn't afford to have while the elite could, came to be identified as luxury. The word luxury is derived from the Latin term "luxus" meaning, "soft or extravagant living, indulgence, sumptuousness or opulence" (Anon., n.d.). Nevertheless, luxury is quite a slippery term to define because of the strong involvement of human element and the value recognition from others.
A luxury good, is basically any good that is expensive and pleasant to own, but not necessarily required for daily routine and can be lived without (Anon., n.d.). They are mainly purchased by people with more wealth and income than the ordinary. While the word 'luxury' is used in daily lives to refer to certain lifestyle, the underlying construct's definition is consumer and situation specific. If you earn less than a dollar a day, an ice-cream would be a really big luxury item for you. But on the other hand, if you are attending a party with some wealthy hotshots then a $100,000 car even may not be classed as a luxury. In Economics, a Luxury Good is defined as such a good whose demand increases, however proportionally more, as income rises. The income elasticity of demand is positive and greater than one for a luxury good (Anon., n.d.). Demand for luxury goods can be seen as a bellwether of burgeoning economies, as wealthy population segments consume more leather goods, clothes, watches, liquor and other high-end goods during boom times. The epicenter of this industry is in Europe, where companies such as LVMH, Swatch and Hermes have established dominant portfolios of luxury goods in a largely consolidated market.
Whenever a consumer sets out to purchase a good, initially, he tries to purchase those commodities of choice that promise greater utility. He also gives consideration to substitute commodities that are available in the same or "give or take" a few price ranges, and then chooses that which offers more utility for the given price. Some of the factors that affect the consumer behavior that lead to the repeated purchases of luxury goods, despite of them being expensive and expendable, are the social and psychological factors of living in a society. Other factors that affect consumer behavior are cultural, economical, personal (such as age, occupation etc.) etc.
However, for the purpose of this paper, the relevant factors are psychological and social. Every society possesses some form of a social class. Each class has a certain similar buying behavior. The social class can be determined not only through income, but also through education, occupation, family wealth etc. Persons in each social class exhibit behavior, as such to ensure or to pose to other members of the class as well as the society that they belong there. Such behavior is common in each particular classes as its considered the norm of that class and any member that is to deviate from that norm is said (or perceived) to have shifted in between the different classes. A person's role or status in the given society also affects their consumption patterns. Each person possesses a different role and status in the society depending upon the groups, family, organizations, clubs etc. To which he belongs. For example, the buying decisions of the president of a bank shall be influenced by his status in the society and the organization that he runs, and also how the society expects him to behave and comport.
Lifestyle is another factor that impacts one's choice of goods to purchase. Lifestyle is essentially how a person lives in a society and is expressed by things that surround him/her. Usually, determinants of a certain lifestyle are the interests, opinions, activities etc. that shapes that part of society that person interacts with. Along with these social factors, there are other psychological factors that must be taken into account when considering what makes the buying decisions of an individual tick.
Fundamentally, there are four important psychological factors that affect the consumer buying behavior. These are, motivation, learning, perception and beliefs and attitude. Motivation basically, comes from the different needs of a person that he has to satisfy. A need becomes a motive when one need is more pressing than the other. It presses the person to seek satisfaction of purchasing a good. Another very strong factor, when considering the drive behind consumer choices is perception. Perception can be that of the individual himself with regard to the good and it can also be that of the society with regard to it. Perception means selecting, organizing, and interpreting information in such a way that to make it mean something specific to the world. There are three different perceptual processes which are selective attention, selective distortion and selective retention. In case of selective attention, marketers try to attract the customer attention. Whereas, in case of selective distortion, customers try to interpret the information in a way that will support what the customers already believe. Similarly, in case of selective retention, marketers try to retain information that supports their beliefs. It has already been established that customers possess certain beliefs with regard to various goods and products. These are the beliefs that and attitudes that make up the brand image of a product and heavily affect the consumer buying habits (Shah, 2010).
A belief can be described as a thought or idea in the consumer's mind relating to a product, a brand or a service (Kotler, 2005). Such a thought can arise due to various reasons similar to the real knowledge of the brand, an opinion about it or the faith the customer has in that specific brand. A belief can be varied, given that the knowledge, opinion or faith in a brand changes considerably. An attitude, on the other hand, is the description of a person's feelings, his/her evaluations and tendencies towards an idea or an object. This inter-relates the two concepts of attitudes and beliefs. But unlike beliefs, the attitude of a person towards a brand or a service is very difficult to change. It all depends on the impression a brand or a service leaves on a consumer and how effectively it impacts upon the consumer's beliefs. To make decisions while opting for a product or a brand, the attitudes and beliefs of a consumer play a vital role when applied together.
There have been many evidences presented that suggest that the process of consumer decision and judgement making is best portrayed as an effort of belief harmonization. In the past, several approaches in relation to attitude and persuasion literature based upon consistency theories. These theories mainly proposed that it is considered more preferential by people to have beliefs that are consistent with each other and do not show contradiction. For example, a person arrives at an electronic store with the motive to purchase a computer system for his home. Now, this person believes that since he is a gamer, he should go for a computer that that has the latest video graphics card and huge storage memory. Now, for say, two brands such as Dell and HP are available to choose from. Dell is cheaper for him, while HP has a better brand image. His brother has an HP for gaming purposes, while a Dell system is available at his office that tends to be slow. But HP is high maintenance comparatively and Dell has a longer life. Considering these substantive factors and aligning them together in harmony, bringing about a balance by eliminating contradicting beliefs will help him decide which computer system to purchase.
Successful decisions for issues like this example were considered to be achieved through belief harmonization. Theories such as the Balance Theory (Heider, 1946) and Cognitive Dissonance Theory (Festinger, 1957) were two such approaches in the early 1960s. These were built upon the notion that people deemed any considerable contradiction to be aversive and thus, they worked towards eradicating those contradictions to bring a balance to their beliefs to come upon a decision. But only recently, with approaches such as the Connectionist Modeling (Smith & DeCoster, 1998)and Parallel-Constraint Satisfaction (Shultz & Lepper, 1996), it has been proven the existence of complex webs of beliefs. With this, these approaches have come up with algorithms that aim to create coherent bonds amongst many beliefs, removing contradictions and also explaining various social phenomena, such as stereotyping (Kunda & Thagard, 1996), legal decision making (Holyoak & Simon, 1999) and cognitive dissonance (Shultz & Lepper, 1996). All such approaches can be witnessed with ease in the decision making process of a consumer, where eradication of contradictions and brining coherence within numerous beliefs are two main steps.
Most of the literature regarding consumer behavior supports…