Abstract

The Neo-Freudian Theory highlights the influence of culture on personality. Cultural norms and values shape our beliefs and attitudes, which, in turn, influences consumer behavior. A product or advertisement that aligns with cultural values is more likely to resonate with consumers.  Consumers’ reaction to the market and products that reflect individual personality. People purchase products that match their traits and tailoring marketing content by studying consumers’ personalities can increases engagement and conversion. It can help build a deeper connection and a better understanding of the target market.

Freud’s theory of id, ego and super-ego

According to Freud, the id is the source of all intuitive/psychic energy, making it the primary component of personality. It’s the fundamental component of personality that is present from the birth of a human. This aspect of personality lies in the entirely unconscious mind.  The unconscious mind is a reservoir of feelings, thoughts, urges, and memories that remain on the outer surface of our conscious awareness.

The conscious mind contains all the thoughts, memories, feelings, and wishes of which we are aware at any given moment; whereas the unconscious mind is a reservoir of feelings, thoughts, urges, and memories that are outside of our conscious awareness. The id is very instinctive in nature and instigates erratic/impulsive behaviours. It is the impulsive part of our mind which responds directly and immediately to basic urges, needs and desires. The personality of the newborn child and toddlers is driven by id.  It is unorganized, demanding, adamant, illogical, moral-less, instinctual, selfish and unconscious. It is driven by the pleasure that strives for instant gratification of all desires, wants, and needs.  Consumers often are driven by id to satisfy their wants and desires. The id drives Conspicuous (which means visible) consumption is the spending of money on luxury goods and services to display financial power to the public. Robust sales of luxury cars and fine art and artifacts have helped push the global luxury goods market higher than €1tn (£700bn), according to a new report, despite slowing demand for personal luxuries such as jewellery and handbags. The annual report from consultancy Bain & Co. Chinese consumers accounts for 31% of global luxury sales, followed by US consumers at 24% and Europeans at 18%.

According to Freud, ego arises and develops from the id and ensures that the impulses of the id can be expressed in a manner acceptable in the real world. Ego eventually emerges to moderate between the urges of the id and the demands of reality. The ego functions in the conscious, preconscious and unconscious mind. The Preconscious is dormant parts of the brain that are readily available to the conscious mind, although not currently in use. An example of preconscious mind is having readily available data in mind for giving clarification of a situation. When we brainstorm in a business meeting, we get the data stored in mind just in on spur of the moment to clarify our point. Freud used this term to make clear that self-consciousness is a part of the unconscious, not all of it, which is to say that the subdued does not comprise the whole unconsciously. The ego is the component of personality that is responsible for dealing with reality. It operates on facts and realism. The reality weighs the costs and benefits of an action before deciding to act upon or discard impulses. Maturated people handle their id impulses to be satisfied through a process of delayed gratification. The basic function of the ego is based on patience.

The last component of personality is the superego. According to Freud, the superego begins to emerge at around age five. The superego holds the internalized moral standards and ethics that we acquire from our parents, teachers and society. Superego gives us a sense of right and wrong. The superego provides guidelines for making judgments. Therefore, it is important to train your children from age 0 to 5 with a proper sense of moral values.

The superego has two parts: the conscious and ego ideal. The conscience superego includes information about behaviours that are viewed as bad by parents and society which are often forbidden and lead to bad consequences, punishments, or feelings of guilt and remorse. The ego ideal includes the rules and standards for behaviours that the ego aspires to achieve; for example, acquiring higher educational degrees, acquire special skills in life, mastering an art etc. 

Neo-Freudian theory

Neo-Freudian psychologists were thinkers who agreed with many of the fundamental beliefs of Sigmund Freud but changed and adapted the approach to incorporate their own beliefs, ideas, and opinions. Psychologist Sigmund Freud proposed many ideas that were highly controversial, but he also attracted several followers.

Many of these thinkers agreed with Freud’s concept of the unconscious mind and the importance of early childhood in personality development of people. There were, however, a few points that other scholars disagreed with or directly rejected. Because of this, these individuals went on to suggest their own unique theories of personality and cognition. The neo-Freudians, generally agreed with Freud that childhood experiences matter, but de-emphasized sex, focusing more on the social environment and effects of culture on personality.  From beginning man has assumed that woman’s nature is more complex and foreign to the nature of man.

Neo-Freudian Disagreements

There are a few different reasons why these Neo-Freudian thinkers disagreed with Freud. For example, Erik Erikson believed that Freud was incorrect to think that personality was shaped almost entirely by childhood events. Other issues that motivated Neo-Freudian thinkers included: Freud’s importance on sexual urges as a primary motivator, Freud’s lack of emphasis on social and cultural influences on behavior and personality, and Freud’s negative view of human nature.  The neo-Freudians felt that Freud’s theories focus too heavily on psychopathology, sex, and childhood experiences. Instead, many chose to focus their theories on more positive aspects of human nature and the social influences that contribute to personality and behavior. Though neo-Freudians were influenced by Freud, but they developed their own unique theories and perspectives on human development, personality, and behavior.

Major Neo-Freudian Thinker Carl Jung and Analytical Psychology

Carl Jung and Freud once had a close friendship, but Jung broke away to form his own ideas.  Freud once viewed Jung as his protege, but their disagreements eventually led to the breakdown of their friendship and professional relationship. Jung referred to his theory of personality as analytical psychology and introduced the concept of the collective unconscious. He described this as a universal structure shared by all members of the same species, containing all the instincts and archetypes that influence human behavior.

Jung still placed great emphasis on the unconscious, but his theory placed a higher focus on his concept of the collective unconscious rather than the personal unconscious. Like many other neo-Freudians, Jung also focused less on sex than Freud did in his work.

Carl Jung was a Swiss psychiatrist and founder of the school of analytical psychology. He proposed and developed the concepts of the extroverted and introverted personality, archetypes, and the collective unconscious. The issues that he dealt with occurred from his personal experiences. For many years Jung felt as if he had two separate personalities. One introverted and other extroverted. This interplay resulted in his study of integration and wholeness. Jung’s perspective on personality is quite insightful; he wrote that what appears to be random behavior is the result of differences in the way people prefer to use their mental capacities.

Introverts are known for having fewer connections in their life, but these connections are usually much deeper. Extroverts think as they talk or let’s say that talk as they think.  The process for introverts is much different and it’s so internal that you can’t make out outwardly that anything is happening. An introvert could be sitting in corner thinking about the meaning of life or could be solving some grave problem of his organization. Just because they are not more vocal about everything does not mean they are not passionate about life. Introverts feel things just as deeply as extroverts; the difference is that they are simply not very effusive about it.  Perhaps their thinking process does not frequently involve others.

It is known that introverts are quieter and tend to feel more energized from spending time alone, while extroverts are louder and gain fortification and energy from being around with others. Extroverts often exhibit qualities of charm, magnetism, and affiliation, while introverts tend to be creative and prefer to work alone. But it’s not always black and white: we all coexist on this planet – introverts and extroverts need to work together manifesting qualities of each depending on the circumstance. And being an introvert doesn’t mean being a recluse: introverts can often be amiable social butterflies in their own quiet way.

Alfred Adler and Individual Psychology

Adler was one of the early members of Freud’s psychoanalytic discussion group that met each week in Freud’s home. He played an essential role in establishing psychoanalysis but eventually broke away from Freud’s ideas. Adler believed that Freud’s theories focused too heavily on sex as the primary motivator for human behavior. Instead, Adler placed a lesser emphasis on the role of the unconscious and a greater focus on interpersonal and social influences. His approach, known as individual psychology, was centred on the drive that all people must compensate for their feelings of inferiority. The inferiority complex, he suggested, was a person’s feelings and doubts that they do not measure up to other people or to society’s expectations.

Alfred Adler created Personality Theory which he called Individual Psychology because he believed that people are unique, and each one requires a different treatment. Adler initially followed Sigmund Freud’s teachings, but he disconnected after a disagreement. Freud’s theory says that human behaviour is driven by sex. Adler’s Personality Theory says that the base of human behaviour is to overcome the feelings of inferiority. This is the fundamental difference between Freud’s and Adler’s theories. Adlerian therapy is a short-term, goal-oriented, and positive psychodynamic therapy based on the theories of Alfred Adler. Adler focused a good deal of his research on feelings of inferiority versus superiority in people; besides the number of obstacles, one faces in life. He also observed that each one craves for a sense of belonging in one’s own community and society.  According to Adler, feelings of inferiority can result in irrational behaviour. But, in the right setting, an individual can be motivated to strive for greater success. Adlerian therapy focuses on how individual personality is interconnected with society at large.

Usefulness of the theory: Adlerian therapy is useful in any type of psychological disorder or mental illness. Adlerian therapy may be used in combination with other therapeutic approaches such as insightful counselling, music therapy or art therapy as it best suits the needs of the individuals involved. An Adlerian approach can be employed with children, adolescents, adults, individuals, couples, families and business organizations. Especially for understanding consumer behaviour.

Erik Erikson and Psychosocial Development

While Freud believed that personality was mostly set in stone during early childhood, Erikson felt that development continued throughout life. He also believed that not all conflicts were unconscious. He thought many were conscious and resulted from the developmental process itself. Erikson de-emphasized the role of sex as a motivator for behavior and instead placed a much stronger focus on the role of social relationships. His eight-stage theory of psychosocial development concentrates on a series of developmental conflicts that occur throughout the lifespan, from birth until death. At each stage, people face a crisis that must be resolved to develop certain psychological strengths.

Erickson’s eight stages of psychosocial development:

1. Trust vs Mistrust 0-18 months: This is the first stage of human development. The child builds trust in this stage. Infants develop based upon the quality their caregivers give them to meet their basic needs. If these needs are not consistently met, they develop suspicion, distrust, and anxiety. The basic virtue in this stage is hope. According to Erikson, the trust versus mistrust stage is the most important period in a person’s life because it shapes a child’s views of the world perpetually.

2. Autonomy vs Shame 18 months –3 years: Autonomy versus shame is the second stage of Erik Erikson’s stages of psychosocial development. This stage takes place between the ages of 18 months to around age to 3 years. According to Erikson, children at this stage are focused on developing a greater sense of self-control. The child in this stage tries to become self-reliant. The basic virtue in this stage is will. In this stage a child develops a sense of personal identity which continues to influence his/her ego identity and development for the rest of life.

3. Initiative vs Guilt 3 – 5 years: During the initiative versus guilt stage, children begin to assert their power and control over the world expressing it in their play and other social interaction. The basic virtue in this step is purpose. They start exploring lot of things. During this stage, it is important for caregivers to encourage their exploration and to help children make appropriate choices. Caregivers who discourage or act unresponsive may cause children to feel ashamed of themselves and this may affect them in overly depending upon the help of others.

4. Industry vs inferiority 5-12 years: This stage occurs during childhood between the ages of five and twelve. The virtue in this stage is competence. Children at this stage learn to read and write, do homework, to do sums, to do things on their own. School and social interaction play an important role during this time of a child’s life. A child’s social world expands considerably as they enter school and gain new friendships with peers. Through social interactions, children begin to develop a sense of pride in their accomplishments and abilities.

5. Identity vs Role Confusion 12-18 years:  During this stage of adolescence children explore their independence and develop a sense of self. In this stage success leads to an ability to stay true to oneself, while failure leads to confusion and a weak self-image. Children who don’t have a strong sense of their own identity can easily get influenced by others. This stage is crucial because if the children get wrongly influenced, they get into drug addiction, gambling and other dire habits.  The virtue in this stage is fidelity.

6. Intimacy vs Isolation 18-40 years: The major concern which arises in minds of humans at this stage is of love and intimacy in relationships with other people. Isolation occurs when a person fails to find a partner and fulfil the urge of sexual intimacy. If they don’t find a partner, they feel lonely and inferior. The basic virtue at this stage is love.

7. Generativity vs Stagnation 40-65 years: This is the seventh of stage of Erik Erikson’s theory of psychosocial development. This stage occurs during middle adulthood. The term generativity was coined by Erikson which refers to establishing an ethnicity/a culture/ a base which will guide the next generation. Generativity also refers to “making your mark” on the world through creating or nurturing things that will outlast an individual. A generative person instigates a change. The virtue in stage is care.

8. Ego Integrity vs Despair 65 onwards years: Erikson identified that at this stage a person faces internal conflict which involves reflecting on one’s life and feeling either satisfied and happy with one’s life or feeling of deep sense of regret. Basic virtue in this stage is wisdom.

Karen Horney and Feminine Psychology: Karen was a German psychoanalyst who practised in the United States during her later career. Her theories questioned some traditional Freudian views. This was particularly true of her theories of sexuality and of the instinct orientation of psychoanalysis. She is credited with founding feminist psychology in response to Freud’s theory of penis envy. She disagreed with Freud about inherent differences in the psychology of men and women, and she traced such differences to society and culture rather than biology. She is often classified as Neo-Freudian.

Karen Horney was also one of the first to criticize Freud’s depictions of women as inferior to men. Horney objected to Freud’s portrayal of women as suffering from “penis envy.” Instead, she suggested that men experience “womb envy” because they are unable to bear children. Her theory focuses on how behavior was influenced by several different neurotic needs.

She asserted that male realities cannot describe female psychology or define women’s gender by virtue of the lack of experiences of voices from girls and women. As a woman, she felt that the charting out of trends in female behaviour was a neglected issue. Women were regarded as objects of charm and beauty which clashed with every human being’s ultimate purpose of self-actualization.

Women, according to Horney, traditionally gain value only through their children and the wider family. She de-romanticized the Victorian concept of how a marriage bond should be. Horney explained that the “monogamous demand represents the fulfilment of narcissistic and sadistic impulses far more than it indicates the wishes of genuine love”. Most notably, her work “The Problem of the Monogamous Ideal” was fixed upon marriage. Her essay “Maternal Conflicts” attempted to shed new light on the problems women experience when raising adolescents.

Horney believed that both men and women have a drive to be ingenious and productive. Women can satisfy this need normally and internally; to do this they become pregnant and give birth. Men satisfy this need only through external ways; Horney proposed that the striking accomplishments of men in work or some other field can be viewed as compensation for their inability to give birth to children.

Contributions of the Neo-Freudians to the field of psychology and buyer behaviour

While the neo-Freudians made important contributions in shaping the field of psychology, their theories were also the subject of criticism. They took a highly philosophical approach and lacked empirical, scientific support. Jung’s theories, for example, were primarily rooted in his observations of dreams, mythology, and legends. Erikson’s work, for example, influenced the field of developmental psychology with its emphasis on how social and cultural factors impact human development throughout the entire lifespan. Adler and the other neo-Freudians’ also influenced the work of psychologist Abraham Maslow, who developed an influential hierarchy of needs to explain human motivation. Karen Horney disagreed with Freud about inherent differences in the psychology of men and women, and she traced such differences to society and culture rather than biology.

Effects of neo-Freudian Theories in Buyer Behaviour

1. Women spend a lot of time trying to find the perfect solution. Men, however, pick the first product that just works for them. Women tend to be more astute consumers than men because they are willing to invest time and energy necessary to research and compare products.
2. Neo-Freudian theory help predict consumer behavior by analysing neural responses to marketing messages. This can help marketers anticipate how consumers will respond to different marketing strategies and adjust their campaigns accordingly.
3. It provides insights into the subconscious and emotional responses of consumers to marketing messages. This can help marketers understand consumer behavior better and design more effective marketing campaigns.
4. Improving product design: It also helps improve product design by analysing consumer responses to different product features. This can help marketers create products that are more appealing to consumers.
5. Testing packaging: Neuromarketing can help test different packaging designs to see which ones are more likely to catch the attention of consumers and influence their buying decisions.
6. At different stages of life consumers demand products that suits their needs. A customer lifecycle describes a buyer’s progression through the different stages of purchasing a product or service. The stages of the lifecycle are reach, acquisition, conversion, retention and loyalty. This concept applies to sales, marketing and customer service professionals, as it helps them understand where a customer is in their purchase journey.
7. Understanding the customer purchase journey is important because it directly contributes to the growth and revenue of a company. It helps the marketers to understand where a customer is in the purchasing process.
8. Awareness of this consumer lifecycle helps marketers to communicate effectively with customers at any stage of the lifecycle.

The Veblen effect is named after American economist Thorstein Veblen, who wrote about Conspicuous (which means visible) consumption; it means spending of money on luxury goods and services to display financial power to the public. In the 19th century, the term conspicuous consumption introduced by Veblen in his book “The theory of leisure class: an Economic Study in the Evolution of Institutions.” Conspicuous consumptions occur by men, women, and families of the upper class who show off their great wealth as a means to manifest their social power and prestige either real or seeming. Veblen wanted to site the relationship between the economy, society, and culture.

Conspicuousness was in existence since ages. In 75 BCE a band of Cilician pirates in the Aegean Sea captured Julius Caesar; the capture was a minor inconvenience for Caesar but he took the chance to prove his worthiness. From the start, Caesar simply refused to behave like a captive. When the pirates told him that they had set his ransom at the sum of 20 talents (approx 620 kg of silver), he mocked at them for not knowing whom they had captured and suggested that 50 talents (1550 kg of silver) would be a more appropriate amount. He then sent his followers out to gather the money and settled in for a period of captivity. The pirates were dumbfounded. It’s rare that a hostage negotiates his ransom up. The task took 38 days, once he was freed, Caesar managed to quickly raise a small fleet which he took back to the island where he had been held captive. He captured and killed them and took back his 50 talents of silver, along with all their possessions. Thus, in 75 BCE Caser created a Veblen effect.

Perhaps the most powerful psychological flaw exists among investors is the bandwagon effect, where people alter their behaviour to fit in with the crowd. This can lead to groupthink where the market effectively becomes one person rather than a group of individuals. Brands such as Carter, Rolls-Royce, Aston Martin, Harrods, Champagne, Christian Dior and Louis Vuitton etc are perceived to be worth more, simply because they cost more. They are not actually any better than their counterpart goods in their category. Their price alone makes them desirable. The most obvious paradox concerns function. Luxury goods are clearly not purchased to satisfy so-called primary needs such as clothing, hunger, thirst, shelter or transport. Their function is psychological – they promote a sense of being financially powerful and they serve as markers of a real or projected status in society.

The function of luxury goods is largely a derivative of their price. The retail price at which most luxury goods are sold can contradict classic economic theory as demand, instead of increasing with a decrease in price, it follows the opposite curve. A bottle of perfume that costs 85 Euros can be more attractive to a purchaser than a bottle costing 20 Euros, although intrinsic differences might be insignificant. But the demand curve does not increase indefinitely with price and once a certain threshold has been reached, demand will drop or fall away completely, but the propensity to purchase goods and services on account of the higher rather than lower price differential compared to average prices in a generic category is undoubtedly one of the principle characteristics of the luxury domain.

As society, we are so obsessed with how the rich people live their conspicuous lives. I think it has more to do with psychology than sociology. When we think about ourselves, we swiftly fall back on class stereotypes: HIG (High Income Group), MIG (Middle Income Group) and LIG (Low Income Group). To the conspicuous consumer, a public display of wealth and power is a means either of attaining or of maintaining a given social status. Flashy people in society use such behavior to maintain or gain higher social status. Flashiness as a behavior is deeply entrenched in culture of our society. It is extremely important to recognize the way in which conspicuous consumption directs our spending habits, and our consumption pattern.

There is also a ‘Counter-Veblen Effect’, where people believe they will be admired for buying bargains or for being prudent in their purchases. This can be seen where people boast about how little they paid for a normally expensive item. It can also be a motivator for buying in sales and low-cost outlets. A lot of research has been conducted to study cases of goods which show interface effects, and in which people seem to receive more pleasure from more expensive goods.

Perception of quality: In Veblen’s analysis of conspicuous consumption, the economist noted that for certain luxury goods and services, a higher price was often associated with the perception of higher quality. Therefore, a price increase was seen as evidence of the producer improving quality.

Positional goods: The quantity demanded of a positional good depends on how the good is distributed in society. Veblen goods often exhibit a negative positional effect, i.e., the quantity demanded of Veblen good increases with a reduction in the distribution of the good. It occurs because the utility gained by a consumer from holding such a good arises purely from the fact that few other consumers hold it. High levels of conspicuous consumption are seen as socially undesirable. Because high levels of conspicuous consumption may be an indicator of high levels of income inequality. And, secondly, utility provided by the goods is alleged high quality, which may not be true.

Consumerism is an economic theory which says that a progressively greater level of consumption is beneficial to the consumers. Since the 1800s and the Industrial Revolution, the world has been consuming at a higher rate than ever. Yes, consumerism is good for the economy, in light of the fact that it creates more economic action. More demand for goods and services creates more activities to satisfy the demand; wit gives rise to more manufacturing, more innovations, more research and more development. If there was no consumer there would be no need for a market. The reason a trade exists is everyone has needs, wants and demands. In economics, consumerism may refer to economic policies which emphasise consumption.

Consumerism is a socioeconomic model in which people buy and acquire goods and services including luxury goods such as car, house, white goods, jewellery etc. The thought whether consumerism is good or bad is critical: it is good for economy, it is bad because it leads to the devastation of natural resources. Another problem of consumerism is that it gives rise to greediness and materialism. Financial mechanisms have encouraged consumerism. The advent of credit cards allowed people to spend money that they did not have; debit cards gave people quick access to more money than they were currently carrying and often the option of overdraft, as well.

Because there are consumers who are ready to buy products which are pricey and even extravagant, we see a spurt of new products and services which keep entering the market. They are advanced than their predecessors, often, far ahead of the customer expectations. We are consuming these products at an ever increasing rate and the markets never give us a moment where they do not have something new to offer on the line. A big group of consumers are not just consuming to fulfil their basic needs but are enjoying a condition where they are spending hugely to fulfil their endless needs and wants. People are ever on rise to impress the world with material possessions. Social scientist Thorstein Veblen coined the phrase “conspicuous consumption” to describe the lavish spending on goods and services acquired mainly for the purpose of displaying immense wealth.

Consumerism is often misinterpreted with capitalism but the latter is an economic system, while the former is a persistent cultural mind-set. A model combining the two is sometimes referred to as consumer capitalism, a system in which consumers demand goods this increases sales. The model relies on stimulating consumer desire for goods far in excess of satisfying needs at times to hoard the goods. The stimulation is created by advertising to promote daily and luxury items. Every day, each of us is bombarded with around 1,600 commercial messages.   We see advertisements in news paper, on the radio, on TV, on the local bus, trains, on our mobile phones; needless to say, this bombarding is beyond control.

The phenomenon of consumerism has raised the bar of tough and unrestrained competition which is cut-throat; competing in an unfair way, without considering any harm caused to others. It is an ugly competition leading to illegitimate and unlawful means. We are experiencing endless money laundering like never before.

Most critical wave against consumerism is that it has started degrading the mother earth, and natural resources; common effects include decreased water quality, increased pollution, greenhouse gas emissions, depletion of natural resources and contribution to global climate change. Some of these are the direct result of human activities, whereas others are secondary effects that are part of a series of actions and reactions. The steep rise in the global population has always been an issue and as consumerism leads to campaigns, research and advertisement that emphasis on increasing consumption the fear of scarcity of resources that is already there for future generations increases.

It has been observed that stronger nations are in a bid to acquire greater amount of resources by controlling the weaker ones.  This is the cause to international tension and wars. Waste disposal is becoming a problem worldwide, and our oceans are slowly but surely becoming a giant waste disposal pit. It is estimated that over half of the plastic produced every year is single use, this means that it is used once, and then either thrown into landfill or finds its way into the environment. According to scientists, up to 12 million tons of plastic enters the ocean every year, forming giant floating garbage patches all over the world.

There has long been a connection observed between materialism, a lack of empathy and engagement with others, and unhappiness. But research conducted over the past few years seems to show causation. As people become more materialistic, their wellbeing in terms of good relationships, interdependence, sense of purpose and peace of mind diminishes. As they become less materialistic, it rises. We are becoming materialistic because with have started giving less importance to emotions and feelings and are trying to create a bigger room for material things. The less we care about emotions, the more materialistic behaviour dominates our mind.

Rampant development is destroying our world. The biggest problem with all of us is that we are not realising that there is a problem. We are already consuming resources at an alarming rate, and quicker than our planet is able to replenish them. The huge rise in resource consumption in wealthier countries has led to an ever widening gap between the rich and the poor. Mindless consumption turns into excessive consumption, the truth is we have very limited real needs.

Conspicuous (which means visible) consumption is the spending of money on luxury goods and services to display financial power to the public. In the 19th century, the term conspicuous consumption was introduced by the economist and sociologist Thorstein Veblen in his book “The theory of leisure class: An Economic Study in the Evolution of Institutions.” In that 19th-century social and historical context, the term “conspicuous consumption” was used to describe the men, women, and families of the upper class who showed off their great wealth as a means of publicly manifesting their social power and prestige either real or seeming.

As society, we are so obsessed with social class. I think it has more to do with psychology than sociology. When we think about ourselves as a people, we swiftly fall back on class stereotypes: HIG (High Income Group), MIG (Middle Income Group) and LIG (Low Income Group). Also, we are so attracted to the way the rich and famous lead their lives, that subconsciously we follow literary classics, great movies and drama, television shows etc. To the conspicuous consumer, a public display of wealth and power is a means either of attaining or of maintaining a given social status. Flashy people in society use such behavior to maintain or gain higher social status. Most classes have a flashy consumers who affect and influence the others in those classes. The lavish consumption of goods is meant to provoke the envy of other people. The term conspicuous compassion is used to describe the deliberate charitable donations of money in order to enhance the social stature of the donor. It is a display of superior socio-economic status. Flashiness as a behavior is deeply entrenched in culture the society. It is extremely important to recognize the way in which conspicuous consumption directs our spending habits, and our consumption pattern.

Conspicuous consumption is swelling the luxury markets across the world. The number of luxury goods and services buyers in the developed world is being swelled by two other trends. First, consumers are increasingly adopting a “trading up, trading down” shopping strategy. Many traditional mid-market shoppers are abandoning middle-of-the-range products for a mix of lots of extremely cheap goods and a few genuine luxuries that they would once have thought out of their price league. Alongside this “selective extravagance” is the growth of “fractional ownership”: time-shares in luxury goods and services formerly available only to those paying full price. Fractional ownership first got noticed when firms such as NetJets started selling access to private jets. It has since spread to luxury resorts, fast cars and much more.

Robust sales of luxury cars and fine art and artifacts have helped push the global luxury goods market higher than €1tn (£700bn), according to a new report, despite slowing demand for personal luxuries such as jewellery and handbags. The annual report from consultancy Bain & Co. Chinese consumers account for 31% of global luxury sales, followed by US consumers at 24% and Europeans at 18%.

The Indian economy continued to perform well in 2015 and Indian luxury goods was able to post strong growth. The market is still in a nascent stage and has many opportunities for growth amongst international players. The urban rich consumer base of India is indulging highly in luxury goods for both style and prominence reasons. Apart from the economic and demographic factors, during 2015 luxury players invested in marketing campaigns to increase the awareness of luxury goods among local consumers.  A study stated that with the increasing brand awareness and growing purchasing power of the upper class in tier II and III cities, Indian luxury market is expected to cross $18.3 billion by 2016 from $14.7 billion in 2015; it is growing at a compounded annual growth rate (CAGR) of about 25%.

The factors that have fuelled the luxury industry’s growth are rising disposable incomes, brand awareness amongst the youth and purchasing power of the upper class in Tier II & III cities in India. Areas such as five star hotels and fine-dining, electronic gadgets, luxury personal care, and jewelry performed well in the year of 2015 and are expected to grow by 30-35% over the next three years. Big ticket spends such as on luxury cars mainly SUVs are likely to continue, growing upwards of 18-20% over the next three years, driven by consumption in smaller towns and cities.

A recent research also suggests that the luxury sector is swelling in apparel and accessories, pens, home decor, watches, wines and spirits and jewellery, services such as spas, concierge service, travel & tourism, fine dining and hotels and assets, yachts, fine art, automobiles. According to the study, the high internet penetration across tier-II and tier-III cities along with high disposable income shall lead to approximately 100 million transactions on the Internet by 2020. As a result, the luxury consumption is going to increase manifold in the country.

In the book “Income, Saving and the Theory of Consumer Behavior” (1949), J.S. Duesenberry proposed that a person’s conspicuous consumption psychologically depends not only upon the actual level of spending, but also depends upon the degree of his or her spending, as compared with and to the spending of other people. The conspicuous consumer is motivated by the importance he/she gets and society’s opinion about them. The status and the opinion of the social and economic reference groups are very important for conspicuous consumers.

Over-sized houses aids other forms of conspicuous consumption: such as an over-sized garage for the family’s over-sized motor vehicles, buying more clothing to fill larger clothes closets etc. hence, conspicuous consumption becomes a self-generating cycle of spending money for the sake of social prestige. Similar to the consumer trend for over-sized houses is the drift towards buying over-sized light-trucks, specifically the off-road sport utility vehicles as a form of psychologically comforting conspicuous consumption, because such big motor-vehicles usually are bought by people who reside in a city, an urban nuclear family.

High levels of conspicuous consumption may be seen as socially undesirable on two grounds; firstly, as it is often associated with high relative income, high levels of conspicuous consumption may be an indicator of high levels of income inequality, which may be found intrinsically or instrumentally objectionable; secondly conspicuous consumption differs from other forms of consumption in that the main reason for the purchase of positional goods is not due to the additional direct utility provided by the goods alleged high quality, but rather the social status associated with the consumption of that good.

So, is conspicuous consumption good or bad? The fact is that it stimulates economic growth. Because people spend their discretionary income, it increases the likelihood that the working class will be able to make more money. When you buy a product, the company you are buying from makes money. When they make money, they can afford to hire more workers. They can also then afford to pay their workers higher wages. When the workers get higher wages, they can afford a reasonable living standard, if they work two jobs or more, quit one, leaving it open for someone else who is unemployed. They also could afford to consume a bit more than the bare necessities and buy more products, further stimulating the business. This is an infinity symbol of transfer of wealth. The money keeps traveling than remaining stagnant. More millionaires in the society will spend more money which will stimulate markets, jobs, and boost the economy. Also economies grow because of luxury tax applied to goods and services for conspicuous consumption. It is a type of progressive sales tax that at least partially corrects the negative externality associated with the conspicuous consumption of luxury goods.