Luxury Consumption in China - Literature review Example

?\ Luxury Consumption in China Chapter Introduction to the Topic Background Since the emergence of different marketing mediums, the trends towards buying luxury branded goods has increased dramatically across the globe. It has been estimated that the sells of luxury branded goods on global stage has increased by more than $ 300 billion a year. Though, the luxury goods manufacturing industry is operating in a favorable environment, there are numerous challenges that are still causing lapses in the development of this industry. These challenges might include globalization of industries, intense competition; majority of the luxury markets has reached to a maturity stage and the highly complex consumer preferences towards consumption of luxury branded goods (Hauck & Stanforth, 2007). Despite of these challenges, the luxury industry still is becoming highly attractive as the affordability of consumers is also increasing. As the middle class in the world is gaining strength and becoming more loyal to luxury branded goods, luxury industry still have a number of lucrative market segments to be catered. It was estimated in 2003, that the financial returns of luxury goods manufacturing industry globally was $ 90 billion, which crossed the $ 150 billion mark in 2007. By offering services and products to the untapped market segments, the luxury industry is expected to increase the size of its returns by $ 400 billion by the end of year 2015 (Heaney et al., 2005). As the size of luxury branded goods industry is increasing, the format of business is also changing. Now, luxury goods manufacturing businesses are no more privately or family owned business, but transforming into public limited companies. In this manner, the luxury branded goods industry is attracting investments from all around the world which enables them to invest heavily on research and development to understand consumer behavior. Understanding consumer behavior is essential for expanding the size of luxury businesses into untapped international markets. The understanding of consumer behavior has delivered its fruits in recent years, which is evident from the dramatic expansion of industry’s size in India, China, South Africa and Brazil. Especially China has remained the front runner, where consumers are becoming more brand conscious and spending lavishly on purchase of luxury branded goods (Michman & Mazze, 2006). Being the fastest growing economy in the world, China offers the biggest market place to luxury brands. The increase in the economic development has resulted in the increase in personal incomes of Chinese consumers. Due to this, a large section of the consumers has formed a market segment which is wealthy and social stimulators, which is described as the “new rich”. This segment of the market has the tendency to live a celebrity lifestyle and satisfy their desire for expensive and sophisticated goods and services (Dubois et al., 2005). According to a research of Ernst and Young, it was estimated that by the end of 2015, China would account for 29% consumption of luxury goods and services in the world. This rate of consumption would cause China to become the 2nd largest consumer of luxury goods and services in the world. This is the reason, that heavy investments are made by luxury brands to understand the consumer behavior of Chinese consumers, so that the product and marketing strategies can be developed accordingly (Ernst & Young, 2005). Keeping in view the lucrative opportunities available to luxury brands in China, a number of these brands has installed production facilities in the country. These include Bally, Gucci, Ferragamo and Luis Vuitton. Other brands like Zara, Jimmy Choo and others are preparing their action plans to enter Chinese market as a local producer of luxury goods, to take full advantage of lucrative opportunities in the country. Beside factories in China, a number of luxury brands have their subsidiaries, operational facilities and stores in China. For example, Ermenegildo Zegna has more 38 stores in 25 cities of China. Similarly, Armani has 35 of its flagship stores in China, Prada has 17 stores in China and Zara has 5 stores in the country. In addition to these, Gucci also has 30 stores in 20 cities of China. Cartier recently has also decided to increase its presence in Chinese markets after reporting enormous growth in the country’s market (Chandler et al., 2004). But the question arises here, why are these luxury brands focusing and exhausting majority of their resources on Chinese market. This is only possible after carefully reading, understanding and segmentizing consumers’ preferences towards luxury branded goods in China. Those luxury brands in China, who entered the market without prior understanding of the market’s traits, has only achieved limited popularity and profitability, and few of them failed to maintain their presence in the market and vanished soon after launching their businesses in the country. The current study would focus on understanding the behavior of Chinese students towards purchasing of luxury goods and services. In addition, the study would also focus on understanding the main derivers that actually motivates Chinese students to spend lavishly on purchasing of luxury goods and services. 2. Problem Statement A number of researches are carried out by researchers and scholars in past, regarding consumer behavior towards purchasing of luxury products. Additionally, consumer behavior towards consumption of luxury products in China has also been discussed and researched frequently in the past. These researches focused on examining and elaborating on the consumption patterns and derivers that motivates Chinese consumers to spend lavishly on luxury products. The current research work would be an interesting piece of work in a way that it focuses on a particular segment of luxury market in China, i.e. Chinese students of colleges, schools and universities. For this reason, a number of research studies from past will be utilized to refer to the theoretical grounds on the basis of which, research questions will be answered. 3. Research Objectives The basic objective of the current study is to examine the impact of several factors on the Chinese students’ attitude, intentions, and buying decisions related to luxury branded products. This objective is achieved by identifying a model of behavior and then applying to the current context, which will be beneficial in analyzing and elaborate on the Chinese students’ behavior pertaining to luxury banded products. 4. Project aim The basic aim of this research works is to understand factors that influence Chinese students’ behavior towards luxury products. These factors include social environment, cultural variations, demographic variables and personal attitudes and beliefs. These factors are studied in a context, that how they act in the consumer decision making process. That is how they influence beliefs and motivates consumers to act in favor or against their usual attitude and norms to build intentions towards adopting a particular buying behavior. 5. Research Questions Following are the underlying research questions that will be answered by the current research work: 1. What motivates Chinese students to purchase luxury banded products? 2. What are the perceived motivators, beliefs and values that positively influence the behavior of Chinese students towards luxury branded products? 6. Research Structure Chapter 1: Introduction This chapter contains the background discussion on the topic of current research work and builds the grounds for further discussion and theoretical referencing. Additionally, this chapter would contain research objective to clarify the aims of the project, research questions that will be answered with the help of primary and secondary findings and problem statement that would justify the selection of the topic. Chapter 2: Literature Review This chapter would include theoretical framework that contains a number of theories to develop a logical ground for the study. These theories will be used justify the findings of the current research work. Additionally, the chapter also contains conceptual grounds, on the basis of which, the research design for current study will be chosen and how the researches carried out by researchers and scholars in past were concluded, on the same topic. Chapter 3: Research Methodology This chapter communicates to the readers, the research philosophy and design adopted by the researcher to accomplish research objectives. Moreover, the chapter would also describe tools and techniques through which primary and secondary data will be retrieved and examined to provide a logical conclusion to the study. Lastly, the chapter also contains information pertaining to the sampling method adopted by the researcher and the underlying limitations of the research methodology adopted. Chapter 4: Findings and Analysis The fourth chapter of the study consists of primary findings of the study. The primary data retrieved will be manipulated into an understandable format in this chapter, and the researcher will then justify these findings by discussing the findings of previous researches and theoretical guidelines discussed in Chapter 2. Chapter 5: Conclusion and Recommendations The last chapter of the research work presents to the readers, answers to the research questions and concluding points. Additionally, the chapter also contains set of recommendations for luxury brands, so that they can improve their operational and distribution mechanisms. Lastly, the chapter communicates to the readers what areas of luxury brand industry and luxury goods’ consumption in China requires further research and development efforts in the future. Chapter 2: Literature Review 1. Introduction This chapter presents the previously published literature pertaining to the research problem in order to establish a theoretical ground to develop hypothesis to be tested. The chapter begins with theoretical framework which contains discussion related to the true meaning of luxury products, factors behind luxury products’ consumption and the consumption of luxury products and services in China. This section is followed by conceptual framework which contains discussion related to theory of reasoned action and theory of planned behavior, which helps the researcher to formulate research hypothesis. 2. Theoretical Framework 2.1. What are Luxury Products? Whenever someone hears or think of luxury products or services, certain features of these products, services and brands come into mind. A typical luxury product, such as a Gucci’s hand bag, Channel’s perfumes, Zara’s suit, and all shares features and attributes that separates them from other hand bag, perfume or suiting brands. These features can be the high pricing of the products, superior quality and use of expensive raw material, unique design of the product, rich heritage, strong reputation of the brand, and inaccessibility to all segments of the market and reflection of persona. Researchers and scholars from past has used these characteristics for their facility, to separate luxury products from mass consumption products and services. For example, Riley et al. (2004) identified a number of features of fast moving consumer products that differentiates them from luxury products. These researchers are of the view that luxury products are manufactured for a targeted niche segment and the manufacturer keeps the exclusivity of the distribution of these products so that they can’t be imitated or cloned by the manufacturers of cheap and fast moving consumer products. Fast moving consumer goods will be marketed through traditional channels including numerous suppliers and distributors in the supply chain. These cheap products would be purchased by consumers due to the easy availability and cheap prices, whereas; luxury products are purchased by the consumers after evaluating the prestige of the brand associated with it. Moreover, the consumer would also perceive that the luxury product will add to the personal status of the individual in a society and will serve the purpose for a longer time period due to its durability. For fast moving consumer goods, personal relationships are developed at the point of sale, whereas; after sales services plays a vital role in the success of a luxury product brand. The success of fast moving consumer products is based on the use of technology and unique attributes, whereas; the success of luxury products is based on the craftsmanship and the rich heritage associated with the brand (Perugini & Bagozzi, 2001). From economic point of view, a luxury product is one whose demand increases with the increase in personal income of consumers in the marketplace. Thus, economic implication of luxury products is that, it possesses high income elasticity of demand. On the other hand, increase or decrease in personal income of individuals in the marketplace has nothing to do with the demand for fast moving consumer products. From marketing perspective, luxury products are those which are expensive, marketed through prestigious magazines, events and manufactured with aesthetically selected raw material. This definition of luxury products from marketing perspective is not broad or has a correct implication; this is the reason that critics have questioned marketers’ inability to develop a proper marketing definition of luxury products. This inability of marketers to define luxury products has raised a number of conflicts in the mind of the consumers and luxury product manufacturers. This is because; when a luxury brand goes on to define its target market, it will not be clear about the characteristics of individuals who can be counted as a consumer during target market strategy development. For example, if a person purchases a luxury product, he might be doing it to inherit prestige, personality and quality. On the other hand, another individual might be purchasing a luxury product just because this is his/her necessity. Another major reason, that no definite definition for luxury product is developed, is that the meaning would vary from culture to culture (Phau & Prendergast, 2000). In their efforts to define luxury products, Phau and Prendergast (2000) formulated a comprehensive definition which defines five factors to be essentially present in a luxury brand and its products. These five factors are as following: 1. Available on exclusive branded stores only 2. Carrying a strong brand identity 3. Possess a customer base which is highly aware about the brand and its products 4. Superior quality 5. Have the ability to retain customers Seringhaus (2005) also made an attempt to define what luxury products are. According to Seringhaus, luxury products are those with which, consumers have an emotional affiliation and perceives that the product will develop their image and status in the society. These products produce congruity with self-concept and produces self-confidence amongst their consumers. Vickers et al. (2003) proposed a three dimensional model to understand the consumer behavior pertaining to luxury brands’ consumption. The model, embedded with theory of consumer behavior, creates distinction between luxury products and fast moving consumer products. Vickers et al. (2003) defined luxury products on the basis of their functions, experience and symbolic attributes. But t he major focus was still laid on associating luxury products with their ability to satisfy personal desires and improve social identity of the consumers. Nueno et al. (1998) defined luxury products and brands as: “Luxury brands are those whose ratio of functional utility to price is low while the ratio of intangible and situational utility to price is high. Luxury goods deliver not only tangible meaning but also intangible representations by which consumers can satisfy not only material needs but also symbolic needs.” (Nueno & QUelch, 1998) Despite of the fact that marketers so far has failed to present a concrete definition of luxury products, the discussion and evaluation of different definitions presented by different researchers has statured clear understanding of luxury products. From the understanding of previously discussed definitions of luxury products, it can be asserted that luxury products are perceived to be delivering private value and social codes. These products can be viewed as adding to the personality of their consumers and improving their identity in the society. Thus it can also be asserted that sociability and desires for expressing self are the major motivators towards purchasing luxury products (Vigneron & Johnson, 2004). 2.2. Why Consume Luxury Products? So far, the discussion in this literature review has lead researcher to a point, where he can assert that consumer behavior pertaining to luxury products is the resultant of five types of motivations. These motivators are perceived by the consumers of luxury brands as helping them to achieve five types of values, i.e. hedonic, quality, social, unique and conspicuous values. Vigneron et al. (2004) elaborated on these values in their research work and formulated a conceptual model to define why consumers of luxury products are actually attracted to buy expensive brands. 2.2.1. Customers’ Perception of Conspicuous Value Consumers of luxury brands perceives that the purchase of an expensive and branded product would raise their status in the society and would leave an impression on the members of the society, that he/she is wealthy and respectable. Social status, in this regard, can be viewed as of pivotal importance in the consumer behavior towards purchasing luxury products. The word, conspicuous itself, means highly expensive or made for the elite class. In this manner, the perceived conspicuous value is a major motivator for consumers of luxury brands to purchase these products (Eastman et al., 1999). 2.2.2. Customers’ Perception of Social Value Customers who perceive that purchasing luxury product would help them achieve social value are focused on purchasing luxury items, just because they think that it will help them to appear differently from other members of the society. Purchase of luxury products would help these customers become prestigious in the society and have the desire to adopt a unique lifestyle. They perceive their social status as an indicator of their social identity and tend to enhance their self-confidence by purchasing luxury products. These customers want to establish a very powerful and successful image in the society. Such a consumption of luxury products is also referred to as “status consumption”. Eastman et al. (1999) are of the view that: “The motivational process by which individuals strive to improve their social standing through the conspicuous consumption of consumer products that confer and symbolize status both for the individual and surrounding significant others”. (Eastman et al., 1999) To justify their assertion, Eastman et al. (1999) carried out six studies in order to develop a scale to measure the intensity of consumption of status oriented luxury products. The scale helped the researchers to identify three reasons behind status oriented consumption of luxury products which are as following: 1. Consumers purchase luxury products because it increases their status in the society, 2. Consumers purchase luxury products because it they have the ability to pay any asking price, 3. Consumers purchase a luxury product only because the product has the similar image in the marketplace as do the consumer have in the society and reflects his/her character. 2.2.3. Customers’ Perception of Unique Value Customers’ perception of unique value refers to the desire of consumers, which lead them to purchase expensive products just to create a self-identity and to establish a unique personal taste pertaining to different products they use in daily life. By being unique, consumers perceive that they are the elitist personality in a social circle or group. They tend to buy products that are not similar, in any manner, to the products their friends, colleagues or family members are using. Even if they possess a luxury product which someone else in the society or their close circle also possesses, they will not be satisfied because there will be no uniqueness. Special editions of wrist watches, vehicles, garments and perfumes are launched to satisfy consumers’ desire to appear unique among the social circle, because; these limited editions are not possessed by everyone. Consumers who perceive unique value of luxury products would reject any product which is used by masses in the society would focus on exclusivity, preciousness, rarity and uniqueness of the luxury product they are buying (Eastman et al., 1999). 2.2.4. Customers’ Perception of Hedonic Value The perception of consumers of luxury products, which leads them to focus on the intangible features of these brands, is referred to as customers’ perception of hedonic value. These intangible attributes of luxury brands includes the gratification that consumers’ feel, sensory pleasure and the aesthetic appeal of the luxury products that consumers are buying. These customers would focus on those attributes of the product that would help them to inherit self-respect and make them stand at a higher ground in the society. On the other hand, consumers of luxury products focusing on hedonic value would not perceive social standards, status and popularity as their primary desire or need, but would want to treat themselves for the hard work they had done to purchase expensive luxury products. They would want to look glamorous, exquisite and stunning everywhere they use the purchased luxury product (Eastman et al., 1999). 2.2.5. Customers’ Perception of Quality Value Lastly, consumers purchase expensive luxury products just because they perceive, the product is going to be delivering superior pleasure, service and quality to them. These consumers are highly quality conscious and would be ready to pay any amount to possess a long-lasting and durable hand crafted luxury product. These consumers perceive fast moving consumer products as of less quality and durability against the luxury products, just because luxury products are expensive and made from best available raw material. These consumers are referred to as perfectionist and focus on craftsmanship, luxury, quality, sophistication and superiority of the product before making a purchasing decision. This group of consumers is the most complex structured and difficult to be satisfied group of consumers (Eastman et al., 1999). After understanding the reasons and factors that motivate consumers to purchase expensive luxury products, the discussion is now shifted towards understanding luxury brands’ consumption in China. Particular focus is paid on understanding the behavior of Chinese students’ towards purchasing luxury brands (Eastman et al., 1999). 2.3. Luxury Brands’ Consumption in China Being the second largest consumer of luxury products in the world, Chinese consumers have learned a lot about their consumption patterns and where they should spend more to inherit values attached with the consumption of luxury products. As the level of personal income is increasing rapidly, Chinese consumers increasingly view it as more important to treat themselves by purchasing luxury products. The encouraging sign is this, majority of the new consumers of luxury products in China belong to low-tier cities. An average household in China earning between $ 45,000 and 150,000 annually, would spend 20% on average on consumption of luxury products. This new sect of luxury consumer is increasing in China by an enormous 15% every passing year and it is estimated, that 5.8 million new households in the country would start spending on consumption of luxury products by the end of 2015. On the other hand, those families in China earning more than $ 1 million a year are increasing by 20% annually which indicates a further 38% increase in the consumption of luxury products in the country (Atsmon et al., 2011). The major deriving force, which is helping luxury brands to expand their businesses in China, is considered to be its youth. It is estimated that 75% consumption of luxury products in China is made by individuals belonging to the age group of below 45 years. To further breakdown these figures, it is also estimated that 45% of the luxury consumption is made by the individuals belonging to the age group of 18 to 35 years. The economists and industry critics are of the view that the major reason behind youth being the driving force in the growth of luxury brands industry, is that this age sect has never seen a recessionary period in their lives and they are not aware of affordability constraints. They have seen their country growing rapidly in their lives and covering stages of development step by step. This is the reason that youth, particularly the student sect of Chinese population, tends to spend lavishly on consumption of luxury products. The positive attitude of Chinese youth reflects in the fact that around 65% of them are of the view that their income and their family’s income would tend to increase significantly in the coming years (Atsmon et al., 2011). From the review of previous researches and studies carried out on the similar topic, it is revealed that Chinese luxury consumers can be categorized into four categories. These categories are formulated on the basis of individuals’ income, families’ income, changing trends, shifting consumer preferences and shifting attitudes towards perceiving different factors while making a purchasing decision. These four categories are discussed in the lines below: I. Core Luxury Customers This sect of the luxury consumers is the basic sect which comprises of households having annual income in between $ 15,000 to $ 150,000. This sect is believed to spending around 12% to 20% of their annual incomes on purchasing luxury products (Atsmon et al., 2011). II. Luxury Role Models This section of the luxury brands’ consumers comprises of children and youngsters, including students and new professionals. Majority of these consumers are fashion conscious and tends to purchase luxury products just because it satisfies their personal desires. They just want to appear differently from other members of their social circle and tend to indulge themselves with the purchase of expensive products. Their intention by purchasing luxury products is not to show-off their wealth or social status. These consumers are mostly self-employed, corporate executives, residents of metropolitan cities in China and students in college or universities of the countries (Atsmon et al., 2011). III. Fashion Fanatics These consumers are the members of middle-class of China, majority of them employed in corporations and working in junior or middle level corporate positions. This sect of the luxury consumers also includes students of college and universities, housewives and fresh graduates. These consumers spend a disproportionate amount of their incomes on the purchase of luxury items and have a mindset, which is not future oriented. That is; these customers focus on satisfying their current desires rather than focusing on future unforeseen scenarios. They do not tend to save money but spend on fulfilling their primary and secondary necessities. Even if they do not have sufficient amount of money to satisfy their needs, they would do so by taking credit. These consumers tend to purchase luxury products to show-off their wealth or to leave a deceiving impression on others. But to the benefit of luxury brands industry, these are the consumers who have the majority of influence on other members of the society. As they show off more often, they market their purchased luxury item to others just to communicate how expensive wrist watch, clothes or a pair of shoe they are wearing (Atsmon et al., 2011). IV. Middle-Class Aspirants These consumers belong to middle-class too but majority of them live in second or third tier cities of China. They do not purchase luxury products more often and focus on achieving a sense of being successful by purchasing expensive luxury products. By purchasing luxury brands, these consumers perceive that they have fulfilled all the criteria to belong to a higher status in the society. These consumers do not possess sufficient knowledge about the luxury brands and tend to spend cautiously on purchasing of luxury items (Atsmon et al., 2011). To project the current and expected spending trends of above mentioned four luxury brands’ consumers, following figure would elaborate the projection: From this figure, readers can observe that core luxury buyers and fashion fanatics are the most heavily spending sects of Chinese society on the purchase of luxury brands. It has already been established that these two categories of luxury brands’ consumers comprises of youth and students in majority. Therefore; it can be asserted here that youth or students of China are the most lucrative sect of Chinese luxury brands’ consumers and shows the tendency to become a more lucrative target of luxury brands in the coming years (Atsmon et al., 2011). 3. Conceptual Framework 3.1. Theory of Planned Behavior Ajzen and Fishbein redefines the theory of planned behaviour by stating that this theory basically helps in identifying the relationship between customers’ intentions and attitudes towards a product, subjective norms and perceived behavioural control. This implies that this theory overviews the intentions of an individual related to the particular behaviour that they reflect. In light of the present study, the theory can help in presenting a prediction regarding the behaviour of the consumers. As for the present study, it implies that greater an individual’s behavioural inclination towards purchasing luxury products, the greater the probability that the individual will make purchasing decisions or make inquiry about the product. It is evident that the subjective norms of individuals are positively influenced and the behavioural inclination of individuals feels in the favour of purchasing an expensive luxury brands’ products. In this manner, it can be said that the theory of planned behaviour is relevant to consumer behaviour of Chinese students towards purchasing expensive luxury products as it helps to understand the degree of acceptability to the luxury brands’ marketing messages and the attitude that consumers show towards the message. In their model, Ajzen and Fishbein (1980) proposed a multi-attribute approach which constitutes of a complex and influential concept regarding the relationships between individuals believes their attitudes, intentions, and behaviour. With respect to consumer behaviour pertaining to purchasing of luxury brands, the multi-attribute model suggests that the consumers’ attitude to the luxury items depends on their evaluation of distinctive attributes of luxury brands’ products and services. This reflects the fact that an individual’s positive attitude towards the luxury brands depends upon the nature of his or her believe which should also be positive and the individual should be willing to receive and respond positively to the advertisements and marketing efforts of luxury brands. This also implies that attitudes of the consumers might fluctuate with a change in their evaluation of the marketing message of luxury brands or a change in their belief which they have interlinked with their decisions regarding the product offered in these advertisements. Subjective norms refer to the expectations that others have that the person commit the action. While managerial pressure is likely to be the strongest subjective norm in a business setting, the expectations of peers as well as subordinates constitute an influence that falls under the subjective norm construct. Since multiple sources may influence an individual, a person may experience subjective norms from one group that are in conflict with the subjective norms exerted by another group. An example might be a plant manager who is incentivized by senior management to increase output, but manages workers who seek to avoid overtime. In such a situation, a comprehensive measurement of subjective norms would be needed to determine the net effect on the plant manager's behavioral intentions (Ajzen & Fishbein, 1980). The purpose of separating individual attitudes from subjective norms is to enable measurement of a person's independent, voluntary desire to perform an action, which is formed by attitudes, and the external pressures on the person to perform the action. In this way, the theory examines intrinsic motivations by way of attitudes and extrinsic motivations by way of subjective norms imposed by others (Ajzen & Fishbein, 1980). The theory of reasoned action also claims that a person who has formed a behavioral intention to perform an action is likely to commit the behavior. Though this relationship is seemingly obvious, it does not hold in a number of practical situations. For example, people might intend to wake up at a certain time but instead find them pressing the snooze bar in the morning. They might intend on quitting smoking forever, but find themselves unable to quit. This can occur in business situations as well. Best practices are often compiled by managers with well-formed intentions but poorly implemented in practice despite those intentions. Circumstances may intervene, and steps that are known to be of long-term benefit may be skipped to address ad hoc issues. The intention to perform the step cannot compete with the urgency of the situation management may find themselves in (Ajzen & Fishbein, 1980). The theory of reasoned action is a very general theory intended to a wide variety of human behaviors (Ajzen, 1991), both unplanned activities and those planned in advance. This allows a very general theory that can be applied to a number of specific situations. The first determinant of intentions is the attitudes toward the specific behavior. This refers to the "degree to which a person has a favorable on unfavorable evaluation or appraisal of the behavior in question." This "salient information, or beliefs, relevant to any given behavior" is to be contrasted with general beliefs that mayor may not apply to a given situation but instead form traits of the individual. The second determinant of intentions are subjective norms, which represent the social pressure to perform (or avoid) the action or behavior. This construct was also part of the theory of reasoned action. The third determinant of intention is perceived behavioral control. Perceived behavioral control reflects the actual ability of the actor to perform the behavior regardless of the actual intention to perform the behavior. The justification for perceived behavioral control stems from the generality of self-efficacy theory. Self-efficacy measures the extent to which actors believe that they can competently execute the behavior. Bandura (1982) determined that a wide section of literature showed that self-efficacy is an important determinant of actual behavior. On these grounds, perceived behavioral control is claimed to influence behavior. Bandura's (1980) concept of self-efficacy, which forms the theoretical basis for perceived behavioral control is to be kept distinct from Rotter et al. (1972)’s concept of locus of control. Self-efficacy is specific to the behavior being performed, while locus of control refers to a trait characterizing the general ability of the individual. Locus of control remains stable for an individual across situations, but the individual and the particular situation being faced jointly determine the individual's perceived behavioral control. It is not a generalized trait of the individual independent of context (Ajzen 1991). Perceived behavioral control may directly affect the behavior rather than being fully mediated by intentions. For example, weight loss studies performed by Netemeyer et al. (1990) and Schifter and Ajzen (1985) found that perceived behavioral control actually had a stronger direct effect on than intentions. Ajzen (1991) notes that studies of job search behavior, video game playing, problem drinking, leisure activity behavior, and cognitive task performance found direct effects between perceived behavioral control variables and the focal behavior that were not fully mediated by intentions. Though actual behavioral control would arguably be a better measure, perceived behavioral control has shown itself to be a well supported proxy (Ajzen 1991). Madden, Ellen, and Ajzen (1992) confirmed the utility of the theory of planned behavior relative to the theory of reasoned action. They examined ten behaviors and determined that the theory of planned behavior's inclusion of perceived behavioral control greatly improved the predictions of intentions and behaviors. In particular, behaviors that were likely to be difficult to perform were more likely to be improved. This implies that for complex behaviors that involve judgment and uncertainty, the theory of planned behavior is more likely to be suitable than the theory of reasoned action. The theory of reasoned action (Fishbein and Ajzen 1975; Ajzen and Fishbein 1980) sought to better explain the connection between attitudes held by an individual and action. One of its contributions was to separate behavioral intentions from the actual performance of a behavior to allow for factors that may inhibit a person's intentions from being carried out in action. See The theory posits three constructs: behavioral intentions, attitudes, and subjective norms. An intention to commit a behavior is dependent both on the relevant attitudes held by the person. For example, a person who has developed the attitude that the cigarettes are disgusting may be more likely to form the intention to quit smoking. List of References Ajzen, I., 1991. The theory of planned behavior. Organizational Behaivor and Human Decision Processes, 50(2), pp.179-211. Ajzen, I. & Fishbein, M., 1980. Understnading attitudes and predicting social behavior. NJ: Prentice Hall. Atsmon, Y., Dixit, V., Leibowitz, G. & Wu, C., 2011. Understanding China's Growing Love for Luxury. Industry Profile. Beijing: McKinsey&Company McKinsey Insights China. Bandura, A., 1982. Self-Efficacy Mechanism in Human Agency. Amwerican Psychologist, 37(2), pp.122-47. Chandler, C., Wang, A. & Zhang, D., 2004. China Deluxe Armani, Mercedes, Dior, Cartier--luxury brands are rushing into China's red-hot market. [Online] Available at: [Accessed 27 December 2013]. Dubois, B., Czellar, S. & Laurent, G., 2005. Consumer segments based on attitudes towards luxury: emperical evidence from twentieth century. Marketing Letters, 16(2), pp.115-28. Eastman, J.K., Goldsmith, R.E. & Flynn, L.R., 1999. Status consumption in consumer behavior: Scale development and validation. Journal of Marketing Theory and Practice, 7(3), p.41. Ernst & Young, 2005. China: The new lap of luxury. [Online] Available at: [Accessed 27 December 2013]. Hauck, W.E. & Stanforth, N., 2007. Chinese students buying behavior of luxury bands. Journal of Fashion Marketing and Management, 11(2), p.175. Heaney, J.G., Goldsmith, R.E. & Jusoh, W.J., 2005. Status consumption among Malaysian consumers: exploring its relationships with materialism and attention-to-social-comparison-information. Journal of International Consumer Marketing, 17, pp.83-98. Michman, R.D. & Mazze, E.M., 2006. The affluent consumer: Marketing and selling the luxury lifestyle. Westport: Praeger Publishers. Nueno, J.L. & QUelch, J.A., 1998. The mass marketing of luxury. Business Horizons, 41(6), pp.61-68. Perugini, M. & Bagozzi, R.P., 2001. The role of desires and anticipated emotions in goal -directedf behaviors: Broadening and deepening the theory of planned behavior. British Journal of Social Psychology, 40(1), pp.79-98. Phau, I. & Prendergast, G., 2000. COnsuming luxury brands: The relevance of the Rairty Principle. Journal of Brand Management, 8(2), pp.122-38. Riley, F.D., Lomax, W. & Blunden, A., 2004. Dove vs. Dior: extending the brand extension decision making process from mass to luxury. 12(3), pp.40-55. Rotter, J.B., Chance, J.E. & Phares, E.J., 1972. Application of a social learning theory of personality. NY: Rinehart & Winston. Seringhaus, F.H.R., 2005. Selling luxury brands online. Journal of Internet Commerce, 4(1), pp.1-25. Vickers, J.S. & Renand, F., 2003. The marketing of luxury goods: an exploratory study-three conceptual dimensions. Marketing Review, 3, pp.459-78. Vigneron, F. & Johnson, L.W., 2004. Measuring perceptions of brand luxury. Journal of brand management, 11(6), pp.484-506. Read More