These products are normally supported by high and extensive market promotion and advertising by manufactures of the products, creating a "status symbol" for wealthy individuals.
This research paper examines why consumers buy some goods for conspicuous consumption at prices which are normally higher. The papers will examine the concepts that try to explain this behaviour, and examine other factors. The paper will also explain the goods which qualify to be termed as conspicuous consumption. Market implication of in accordance to the 7Ps in relation to this phenomenon will also be analysed and a conclusion drawn after the analysis.
Veblen (1899) provided an explanation of conspicuous consumption behaviour in his prominent concept of "the leisure class". He notes that in order for people to show their wealth or power their have to put it into evidence, since self esteem can only be rewarded through evidence. Thus, one way of an individual showing off his wealth is through conspicuous consumption. Using Veblen, conspicuous good can be defined as a product whose consumption can be viewed by all in the market economy. In this context "Veblen effect" will refer to conspicuous consumption, which is seen as an action of consciously displaying and consuming a product that is bought at a higher price that its marginal cost.
Veblen concept thus rises two important questions that needs to be examined in brief
1. Can it be possible to formulate a formal theory in which "conspicuous consumption" convincingly show wealth and promotes social status
2. Which products qualify to be termed as conspicuous consumption products
Some literature has tried to give answers to the first question. It is assumed that a person's value is directly enhanced by purchasing higher priced products. (Nagel, 2002) unfortunately, this approach does not explain why individuals will prefer premium pricing. To (Trigg, 2001) explains that people prefer conspicuous goods because of monopolistic goods. However, other scholars are in view that individuals use conspicuous consumption as means of evaluating their social status in the society. (Nagel, 2002) This agrees fully with Veblen's concept. Yet again, it is not easy to generalize the "Veblen effect" in this competitive market.
The second question that regards what product can be termed as conspicuous can only be answered by trying to examine the characteristics of a product that can be termed as conspicuous consumption. This question remains hard to answer because there is no very little literature on it however, conspicuous product should be exclusive and have high utility.
In general the decision of buying conspicuous consumption product depends on material need to satisfy the individual and also on social prestige need of the individual. In recognizing such needs, companies emphasize the exclusivity of the company product. For example, in 2002 Ferrari promised to produce only 4,300 cars despite the fact that there was a waiting list of the cars of over 2 years. (Trigg, 2001) this method of limiting the number of products is also applied in other industries such as watches and jewellery. Sometimes companies limit their products through use of exclusive distribution channels and at times use of legal actions. For example, Christian Dior sued supermarkets in fear that they may carry a large number of its product. (Nagel, 2002) These marketing strategies by companies are undertaken wit a belief that the product value will diminish if the customers find the product widely available thus, question the justification of highly