Some of the reasons why people buy luxury goods when they can't afford them include a sense of irrationality, the supposed quality, the impact they have on self-esteem, and a sense of accomplishment.
Consumers who buy luxury goods are not just purchasing a product; they are investing in a lifestyle, a social status, and a sense of belonging to an exclusive club of people who can afford to buy these brands.
Luxury has a unique potential to fulfill that psychological longing for a sense of accomplishment. In fact, luxury purchases have been shown to oftentimes trigger the release of dopamine, the feel-good hormone. People buy or desire to experience luxury for the purpose of making themselves or others feel good.
Psychologists have posited that people splurge on luxury goods as a form of conspicuous consumption – that is, the purchase of goods, products or services mainly or solely to show off one's wealth. Another oft-cited reason is the sense of accomplishment that comes from buying branded items.
The Luxury consumption is often associated with high levels of affluence and social status. It is viewed as a way for individuals to demonstrate their wealth and success, and to signal to others that they are part of a select group of individuals who can afford to indulge in these luxury goods and services.
Bain & Co. has identified seven distinct personality types of luxury consumers: Conservative, Opinionated, Disillusioned, Hedonist, Omnivore, Wannabe, and Experimenter.
One of the most common reasons people buy luxury goods is because they believe that they are getting something authentic. In a world where so much is mass-produced, people increasingly crave items that are unique and special.
What is quiet luxury? Marked by expensive materials in muted tones, quiet luxury, also known as stealth wealth, is “the complete lack of logos and anything too conspicuous,” said Thomaï Serdari, professor of marketing and director of the fashion and luxury program at NYU's Stern School of Business.
“While we find that ownership of luxury products is associated with a higher satisfaction with life compared to ownership of non-luxury products, the mere use of luxuries decreases an individual's satisfaction with life,” says the study abstract. So that means borrowing just won't cut it.
Target audience
Luxury brands target high-net-worth individuals (HNWI) and aspirational consumers who are willing to pay a premium to own exclusive, high-quality products. These consumers are by nature hard to find, so data-driven approaches help identify and entice them by speaking to their aspirations and values.
Living a luxurious lifestyle is not about displaying wealth, but rather investing in quality products that stand the test of time. It means trading in frequent shopping trips to shop for lower quality items, in favor of investing in higher quality items, less often.
We are drawn to luxury by deep emotions of love, nostalgia, empathy or pride which we attach to an advertised product or lifestyle. This enables us to make the purchasing decision more easily, even if the price of the product may be fairly high.
The late, great L'Wren Scott said that “Luxury is a state of mind.” When I think of these words, I take them as her meaning that when you pull yourself from anticipating the potential wrongs of the future and free yourself from the regrets of the past, you can live in the luxurious moment.
Customers who had just recently started purchasing luxury products. Luxury fanatics who frequently bought products from their favorite brands. Personal stylists who buy luxury goods for their wealthy clients. A luxury consultant, who provides advice to high-profile luxury clients.
Key Takeaways
It contradicts a necessity item that is vital to satisfy basic human needs. There are different types of luxury things like a private yacht, jewelry, designer handbags, exclusive fashion apparel, high-end automobile, premier watches, etc.
The lower cut-off for households in the upper quintile, about US$75,000, provides a reliable definition of the luxury market (households with income within the upper quintile of the BLS's model). The average income for those households in the upper quintile is US$121,367.
Once you hit an annual household income of $75,000 (£62,000), earning more money didn't make you any happier. In 2021, the happiness researcher Matthew Killingsworth released a dissenting study, showing that happiness increased with income and there wasn't evidence of a plateau.
Although the mass media has convinced many Americans that wealth leads to happiness, that’s not always the case. Money can certainly help you achieve your goals, provide for your future, and make life more enjoyable, but merely having the stuff doesn’t guarantee fulfillment.
If a good is a luxury, its income elasticity of demand is Positive and greater than 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good.
According to Danielle Alleres, an author specialising on luxury knowledge, there are three tiers of luxury: Accessible, Intermediary and Inaccessible/Supreme Luxury.
If you know someone who's totally addicted to luxurious things and all of life's pleasures, call her a sybarite.
Studies have confirmed that wearing luxury brand clothing increases the perceptions of a person's wealth and status and that these perceptions lead to all sorts of advantages.