Consumers who perform charitable acts such as donating money, or volunteering to work for non-profit organisations, are much more likely to subsequently spent significant amounts of money on luxury goods, according to a new consumer behaviour study from Carnegie Mellon and the Yale Center for Customer Insights.
It's a "guilt thing", the researchers say. How often do you really want an expensive wrist-watch or computer gadget but feel slightly guilty about buying it? According to the study's authors, consumers facing that problem should consider donating money to a good cause, or perhaps spend a weekend building homes for the under-privileged.
The study, entitled 'Licensing Effect in Consumer Choice', explains that consumers who act or feel altruistic are more likely to subsequently buy luxury goods, thanks to a "licensing effect" whereby giving something to others removes the guilt from getting something for themselves.
According to the study, this phenomenon illustrates that engaging in - or merely expressing a preference for - a virtuous behaviour pattern can create a positive self-image that acts as a license to purchase a luxury product (or at least a more-indulgent-than-usual item). The boost in self-image helps offset the pang of guilt and negative self-image that consumers often experience when buying expensive or frivolous items (often referred to as "buyer's remorse"). Simply put, it becomes easier to justify the purchase of a luxury item after a charitable act.
I'm worth it...
According to Ravi Dhar, director of the Yale Center for Customer Insights, and professor of marketing at the Yale School of Management, "Consumers are often looking for ways to justify their choices. So performing a charitable act makes you think, 'I am a good and helpful person'. That positive self-concept is enough to liberate you from the guilt and responsibility associated with choosing a luxury like designer jeans instead of buying a necessity like a vacuum cleaner."
The marketing of luxury goods has changed over time depending on the social climate. The "I'm worth it" approach was followed by the "heirloom" approach of passing the expensive item onto children. Currently, the authors say, marketers of luxury products are framing such purchases as a necessity, in an attempt to reduce consumers' negative, guilty feelings.
Charity before sales
The study's findings suggest that another way to reduce resistance is to highlight other decisions consumers make that are likely to boost their self-image. The marketing implications are even greater for online and catalogue retailers, who can control the sequence of events customers go through leading up to a purchase. As Dhar pointed out, "Providing customers with the opportunity to perform licensing acts before browsing might increase the likelihood of purchase. For online retailers, this can be as simple as offering a list of charitable causes a customer can donate to."
But marketers beware: not all charitable acts produce this effect. In fact, the authors found that the licensing effect does not work if the virtuous behaviour is externally motivated or enforced. For example, performing community service as a penalty for a driving offence does not increase the consumer's willingness to buy luxury goods, because it's not their own choice and does little to boost their own self-image.
The study, conducted by Ravi Dhar and Uzma Khan (assistant professor of marketing at the Tepper School of Business at Carnegie Mellon University), is to be published in full in a forthcoming issue of the AMA's Journal of Marketing Research.