Customers splurge on expensive products for two reasons.
Luxury Products Can Be Ugly, As Long As They Grab Attention
I launched a new guide on luxury branding.
As a simple guy, I never understood luxury goods. So it was interesting to see the psychology behind their success.
Ultimately, two forces drive these purchases.
1. Brands must signal higher status
Customers buy luxury brands to showcase their status and wealth.
But “higher status” can be subjective. Ironically, upper class people often buy low-class products (e.g., ripped jeans, lobster mac and cheese) to distinguish themselves from middle-class people:
Because emulating lows is costly and risky for middles, doing so provides an alternative way for highs to distinguish themselves (Bellezza & Berger, 2020, p. 5).
Consider this scribbled shirt for $1,350 from Balenciaga, which even boasts a “destroyed and dirty effect.”
Who would spend $1k on a scribbled shirt? People who want to communicate they're wealthy enough to spend $1k on a scribbled shirt.
2. Ownership must be noticeable
Luxury products should be easy to identify.
That’s why they can be ugly. Ugly products are more distinctive, so they signal ownership more effectively (Cesareo, Townsend, & Pavlov, 2022).
Same with grotesque imagery (An, Lee, Kim, & Youn, 2020). That’s why luxury brands often insert unusual designs.
Like this person on Gucci’s site:
That handbag is nearly $4,000. But Gucci assures customers that people will notice the handbag by showing a model wearing an extravagant accessory. You can’t help but stare at this person. You then blame this attention on the handbag: Hmm, I'm staring intensely at this person. If I buy this handbag, other people will be staring at me.
See the full guide for more insights.
- Anthropomorphic Products Generate Word of Mouth - Some brands depict animals or humans (e.g., Mailchimp). Turns out, people are more likely to spread positive word of mouth about these companies because they feel obligated to speak nicely about other people (Chen, Sengupta, & Zheng, 2023).
- Real Names Feel Trustworthy - In ride-sharing apps, users are more likely to confirm a ride when the driver shows a real name (e.g., David), rather than a screen name (e.g., david123; Fu, He, Hong, & Hu, 2022).
- Algorithms Learn Societal Biases - Computer algorithms are trained on billions of data points. And these data often contain gender biases. Researchers found that multiple platforms were more likely to advertise impulsive purchases to women because these algorithms associated women with impulsivity (Rathee, Banker, Mishra, & Mishra, 2023).