Economics Essay on Conspicuous Consumption

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Middlebury College
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Literature review
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The paper presents a literature review on conspicuous consumption. It uses both the theoretical literature review and the empirical literature review.

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Conspicuous consumption refers to the consumption of luxurious goods for showing off or for social status. These goods are also referred to as noble goods or goods of ostentation. Consumer behavior on the other hand is the study of how users or consumers make decisions to either use, choose or dispose goods and services (Solomon, M. R. 2003).Consumption is the process of completely destroying , incorporating or used up a substance at a given period. . Companies use mind manipulation as a strategy to maximize this conspicuous consumption. Mind manipulation is therefore the controversial way of subjecting the human subjects to an impairment of autonomy or the ability to think in a particular desired direction.

This paper has the following objectives;

To find out techniques that business firms use to control customers mind.

To establish the need for mind manipulation for clients or customers.

To determine the impact of mind manipulation on sales of products.

Theoretical literature review.

This paper explains the theory of consumption that leads to consumer manipulation. There are four theories of consumption. They include: The Keynesian theory or called the absolute income hypothesis; the Duesenberry is also called as the relative income hypothesis, the Miller-Modigliani theory or life cycle income hypothesis and the Friedman theory also called permanent income hypothesis.

Keynesian theory of consumption.

The theory states that consumption of individuals depends on the fixed or absolute income of a person such that as income increases, the consumption also increases but not at the same ratio as the increase in income. The theory, therefore, means that the propensity to consume is less than zero. By this theory, business organizations can decide the markets into segments and price discriminate. Friedman improved this approach and came up with a theory of permanent income hypothesis. According to Friedman, absolute income can be transitory or permanent (Berggren, L., Hybel, N., & Landen, A. 2014) Temporary income is that income that comes as a result of money illusion, but they are not budgeted for. For example, performance allowance given to an employee or bonus is income that a consumer cannot take into account when making consumption decisions. Through mind manipulation by the business organization, transitory income is also affected, and this makes the consumers overspend up to reservation point. Permanent income is that income that can be predetermined and is expected at given periods such as monthly salaries. A salaried customer tends to plan for his purchase in more regular patterns since salaries are expected at the end of every month. Such consumers if manipulation by the business organization can spend more than the budget line and this can lead to deficits and in the long run leads lower demand of goods and services.

Duesenberry theory of consumption.

The theory states that use of in households depends on the community percentile. That is, consumption of an individual will not only determined by personal income but also the relative income of the society around them. The theory of relative income hypothesis forms the basis for mass consumption of products within a given set of the group, age, sex or economic class.

Duesenberry explains that consumption of an individual not only depend on absolute income but also the relative income of the society. For example if the income of individuals in the society increases will mean that the absolute income also increases. An increase in income results to an increase in consumption. However, a decrease in income will not result to a decrease in consumption and therefore the propensity to consume will remain the same. Theory explains why individuals who are in a community of rich people tend to consume as the rich. The theory further explains the demonstration effect that state that household tend to copy the consumption style of their neighbors. For example if an income goes down or reduces, the consumption of these individuals will not change much and two things are likely to happen;

First the household who reside in a place where income is relatively high will spend less on consumption and secondly, household who reside in an area where income is relatively low will spend most of their income on consumption so as to remain where they were before decrease in income. It is therefore true as per this theory that consumers can sometimes do not mind of what to consume provided such consumption is within their budget line.

Empirical literature review.

Conspicuous consumption experience the abnormal demand curve since it does not obey the law of demand that states that the lower the price the higher the quantity demanded. Veblen goods that fall under this category positive demand curve as shown below

Veblen goods demand curve

Price P1

140017555245 P0

Q0 Q1 Quantity

The diagram above shows the demand curve of Veblen goods. It shows when the price of a product is P0,the quantity demand is Q0.If the price increase to P1,the quantity demanded also increases the from Q0 to Q1.The trend depicted from the graph contradict the law of demand. For example, there are certain cars that are very expensive and have higher demand such as Range Rover in the developing countries. The rich usually like to be associated with these class of cars for prestige and lifestyle (Byrd, J. 2013).

In conspicuous consumption, a product is consumed more when its price high than when its price is low. The Companies therefore manipulate the minds of consumers through product differentiations to realize this dream. Consumers in this category are ready to spend so long as such expenditure will bring them or portray them as the highest in the social class (Ciulla, J. B., Martin, C. W., & Solomon, R. C. 2014).For these companies to manipulate the customers they use different techniques apart from product differentiation. A technique is a method that a firm targeting a specific group of consumers uses to reach those targeted consumers. Some of these techniques are discussed below.

Misleading visuals. It is a technique where advertisers use deceptive adverts to mislead or manipulate consumers. For example a ripe mango can be sprayed by hairspray to create an illusion of freshness, using mashed potatoes in place of ice cream and the use of photo shopping models to attract to manipulate the mind of consumers to a given directions to as to buy the products. Therefore Companies use this strategy to manipulate the mind of consumers so that they can buy more of the advertised products

Anthropomorphism. It is the type of advertising where human characteristics are given to non-human beings. For example, an Elephant is made to speak like a human being. Anthropomorphism thus manipulate the consumers' mind since viewers will feel empathize with the animal or feel emotional to the animal hence buys the product.

Social proof; some organizations advertise through the social media such as Facebook, Instagram, Tweeter and others. The words such as'' like our page'' are witnessed in these sites. Through using these sites, consumers are manipulated to think that such a company has the best product and can even identify each customer. Social proof is, therefore, an example of mind manipulation by different firms to reach more customers.

Acknowledging resistance; this is a technique used by companies to reach consumers who are resistant to their advertisement. It is a technique where a firm uses anti-consumerism. For example when a hotel company acknowledges its shortcomings as a low-end lodging option. This type of advertisement can manipulate the mind of a consumer to think about the cost and not the quality of services provided and therefore can lead to increase in sales.

Suggested sex appeal; it is a technique used in an advertisement to make a product have sex appeal. From research, it has been established that mentioning sex or products that increase chances of having sex makes viewers more active. Firms also a technique where advertisers use deceptive adverts to mislead or manipulate consumers. For example, a ripe mango can be sprayed by hairspray to create an illusion of freshness, using mashed potatoes in place of ice cream and the use of photo shopping model to attract to manipulate the mind of consumers to a given directions to as to buy the products.

b) Need for mind manipulation for customers.

As a marketing strategy, manipulating the mind of consumers to think that the product being advertised is the best has the following merits;

Increase sales of slow moving goods; through advertising consumers' minds are manipulated, and therefore they end up making purchase decisions leading to increasing sales of goods in the high income class.

Creating awareness of the existence of a particular brand in the market. Through advertising, consumers are informed of the products in the market. Information is critical to consumers since they cannot, therefore, be exploited by other business organizations and gets the products at a fair price (Ikeda, S., Kato, H. K., Ohtake, F., & Tsutsui, Y. 2016)

Creates employment opportunities. Mind manipulation of consumers' results to increase sales due to creating awareness. When firms sell their products more people are employed as these companies can increase sales thereby getting revenue to pay salaries as wages and salaries, and this improves the welfare of the community as a whole.

c) Impact on mind manipulation of consumers.

Impulse buying is encouraged. Impulse buying is a scenario where one is made to buy the product at a time that he/she did not plan (Bianchi, M. 2009). It is, therefore, true to say that manipulation of consumers' mind distorts their reasoning regarding purchase decisions. Impulse buying when encouraged can render many people poor since they will not conform to the budget line given the indifference curve.

Firms on the other hand benefit from impulse buying since consumers can buy more of the products including those they did not plan for and this increase revenue for companies.

Manipulation of consumers mind is disastrous to consumers since users are made to overspend. Consumption behavior requires that consumers to make the purchase decision based on the combination of products given the budget line. Persuasive advertising can encourage over expenditure that may result in poverty in the long run (Solomon, M. R. 2003)

Recommendation on the best marketing strategies that may have the impact of mind manipulation.

Partner with allies, its a marketing strategy where firms producing similar goods come together and by so doing they reach wider market than an individual can

Collaborating with influencers; it is marketing strategies where famous and popular players advertise the products. Customers tend to be associated with such products since consumers are manipulated.

Helping customers solve a problem; business usually prosper because it provides solutions to the client problems (Gerson 1994).If customers are given the opportunity to find a solution by themselves through civic education and training, this can manipulate the mind of the consumer and even spend more.

Overview of literature review

Consumers are very significant in the market since the market is composed of customers and sellers. It is the customer that makes it possible for Companies to increase revenue by reachi...

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