Wednesday, July 28, 2010

Signaling Status with Luxury Goods: The Role of Brand Prominence

Luxury goods are often used as signals by consumers who crave the status brought about by material displays of wealth. For example, many wealthy consumers use specific brands of purses, watches, cars, and other goods to signal social class. Consequently, manufacturers can produce a product with conspicuous branding or tone it down, depending on whether the user intends to signal loudly or quietly. The authors introduce the concept of “brand prominence” to reflect this variation in brand conspicuousness. They also develop a taxonomy, assigning consumers to one of four groups according to their wealth and need for status. The taxonomy helps predict consumers’ preferences for conspicuously or inconspicuously branded luxury goods, which corresponds to their desire to associate or dissociate with members of their own group and the other three groups.

Members of the first group, “patricians,” possess significant wealth and pay a premium for inconspicuously branded products recognizable only to other patricians so as not to be misconstrued as someone who uses luxury brands to differentiate themselves from the masses. Members of the second group, the “parvenus,” also possesses significant wealth, but they crave status and are primarily concerned with separating themselves from the “have-nots” while associating themselves with other “haves.” Thus, they use well-known luxury brands with conspicuous marking to show others that they are wealthy. Members of the third group, the “poseurs,” do not possess the financial means to afford authentic luxury goods. However, they want to associate with those they recognize as affluent, the parvenus, and dissociate themselves from other have-nots. Thus, they are especially prone to buying counterfeit goods. Member of the fourth group, the “proletarians,” are not affluent, do not crave status, and either cannot or will not concern themselves with signaling using luxury goods.

The authors validate this taxonomy across four studies. In Study 1, they analyze market data from several prominent luxury brands to show that, on average, inconspicuously branded luxury goods cost more than the same manufacturer’s goods with more conspicuous branding. This is consistent with patricians paying a premium for understatement. Study 2 uses market data from Thai counterfeiters and an online seller of knockoffs to reveal how counterfeiters disproportionately copy lower-priced, louder, luxury variants within the product line of the brands they knock off, which would appeal to poseurs attempting to emulate parvenus. Study 3 is a field study; it demonstrates that only patricians can read subtle brand cues correctly. Together with Study 1, Study 3 shows that patricians pay a premium for signals that only other patricians can decipher. Study 4 shows that preferences for loud or quiet luxury goods differ predictably among the four groups, corresponding to their social motives. Furthermore, poseurs are far more likely than parvenus to buy counterfeits, the loud bags that appeal to these two groups. The findings have implications for managers in the luxury goods market, including the need to develop and manage a griffe, or a set of special signatures for their brand.

Young Jee Han is a doctoral candidate in Marketing in the Marshall School of Business at the University of Southern California. Her research interests lie in better understanding how consumers use products and brands to signal their identities. She also explores how identity signalers and recipients interpret and respond to one another’s behavior. She is a winner of a Marketing Science Institute grant, and her work has been published in the MSI Working Paper Series. She has a Master of Science degree in Marketing and a Bachelor of Arts degree in English Language and Literature from Korea University, Seoul, Korea.

Joseph C. Nunes is Associate Professor of Marketing in the Marshall School of Business at the University of Southern California. His research focus is on loyalty programs, status and luxury goods, pricing, and consumer and managerial decision making. He has published numerous articles in top academic journals, including Journal of Marketing, Journal of Marketing Research, Journal of Consumer Research, and Marketing Science. He serves on the editorial boards of Journal of Marketing Research, Journal of Consumer Research, Journal of Consumer Psychology, and Marketing Science.
Xavier Drèze is Associate Professor of Marketing in the Anderson School of Management at the University of California, Los Angeles. He has authored several publications in the marketing field, which include studies of loyalty programs, pricing and promotion policies, consumer knowledge of prices, and Internet marketing issues. The quality of his research has earned him both the prestigious Alpha Kappa Psi award for best paper published in Journal of Marketing and the award for best paper published in Journal of Retailing.

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