Recession? What recession?
According to a new study from the USC Marshall School of Business, people are still
looking to purchase high-end, luxury items (whether they can afford
it or not), especially those with the brand’s logo
prominently displayed, just as they were before the country entered
these tough economic times.
The study, “Conspicuous Consumption in a Recession: Toning it
Down or Turning it Up?” co-written by USC Marshall School of
Business Associate Professor Joseph Nunes suggests conspicuous
consumption endures, even during a recession.
The researchers also found a number of the world’s foremost
luxury houses introduced even more conspicuously branded goods at
the height of the recession, rather than abandoning prominent logos
for more subdued designs, suggesting they have no intention of
toning it down.
“We asked, ‘Is this true?’ Because it didn’t look that way on the street. And we found the data tell a much different story,” said Nunes.
Designer handbags
For the study, the researchers looked into designer handbags,
considered the “quintessential status good.”
They focused on Louis Vuitton and Gucci, the first and second
ranked luxury brands in 2008, according to Interbrand. They also looked at luxury brand offerings
from Hermès, Burberry, Dolce & Gabbana, Fendi and
Prada. And they paid close attention to changes in prices and
the number of items offered.
Then, they compared data from January 2008 -- prior to the October
2008 collapse of the markets -- with data from May 2009, in the
midst of the recession and found “products introduced during
the recession actually display the brand far more prominently than
those products which were withdrawn.”
This resulted in designer handbags that were more conspicuously
branded than before the recession.
Marketing strategy
Nunes said he and his fellow researchers decided to look at
consumer behavior from the firm side to see if companies were
responding to all of these reports of consumers no longer wanting
to engage in conspicuous consumption.
“Yet, no firm in our study toned things down by offering less
conspicuously branded products,” he said.
Further, Nunes noted, companies either maintained or increased the
extent of logo-laden products in their advertising -- an outlet
affording companies the ability to portray their brand any way they
like.
Other key findings from the study included:
- If consumers had demanded fewer conspicuously branded products during the recession, companies would have responded with more understated designs. Instead, the researchers observed the exact opposite: Companies produced and advertised goods that continued prominently displaying their logos, or displayed them more prominently.
- If luxury goods manufacturers failed to meet consumers’ demand for less conspicuously branded goods, profitability should have suffered. Rather, the parent companies of these luxury firms “appeared to have fared well during the period in question.”
- Luxury handbag superpowers such as Louis Vuitton and Gucci increased their prices, on average, across their handbag product lines.
The data, said Nunes, “suggests that these companies are
reading the consumers correctly. These are savvy companies that
really understand their customers; they understand that they cater
to a certain segment that desires products used to signal their
status. That desire doesn’t go away, even in hard
times.”
Along with Nunes, the study was co-written by Xavier Drèze,
Associate Professor of Marketing at UCLA's Anderson
School of Management, and USC Marshall School of Business
doctoral student Young Jee Han.
The study appears in an upcoming edition of the Journal of Consumer Psychology.
