Why Consumers Spend Their Precious Resources on Lavish Purchases during Recession?

Feeling powerless is an aversive psychological state that people try to eliminate or diminish. Behaviors such as associating oneself with figures of power, wealth and fame and emulating what they do are driven by the desire to build status and compensate their feeling of lack of power, although they usually leads to decline in self-confidence. Researchers found that, in a time of economic downturn, consumers are more likely to feel powerlessness and, therefore, spend beyond their means to purchase status-related items. Their experiments showed that subjects who experience a sense of low power 1) were willing to pay a higher price to acquire status-oriented items, like silk ties and fur coats, but not regular products like minivans and dryers; 2) expressed increased willingness to pay for a picture of Northwestern University, but only when it was portrayed as an exclusive item providing high status, rather than a mass-produced item available to anyone; 3) were more likely to perceive status-oriented products as providing a sense of power. As marketers determine target market segment and develop persona, they need to take the compensatory consumption into consideration…


View the article