Status Consumption – Parting from Rationality

Why do people consume goods? Fifty years back, a simple answer would be to satisfy
necessities. People would mainly spend money on food, shelter, and clothing. Only the people
at the top of the pyramid would think of extravagant expenditures. However, with the advent
of globalization, consumer behavior has undergone a drastic change. In today’s globalized
world, consumption is no more just about satisfying one’s necesseties. It has become more
about depicting one’s socio-economic status.

This kind of behavior is known as status consumption. Such a trait is highly subjective, which
leads to irrational behavior on the part of consumers. The consumer no more works on the basic
economic assumption of rationality. Under the influence of psychological and social factors,
the consumer desires to conform to societal norms. The consumer does not only consume the
good for its intrinsic value but also to climb up the virtual social ladder.

With the advent of globalization, the idea of ‘global economics’ becomes more prevalent. When
the flow of ideas, goods, capital, and people has become so dynamic, human behavior cannot
remain insensitive. Unlike in the past, consumers are now a part of the global market. We
should note that globalization has all political, cultural, and economic influences. When the
social values change, it inadvertently leads to economic changes. In this case, the close-knit
markets from across the borders have led to a drastic change in consumption patterns.
Calvin Klein apparel, Johnny Walker whisky are examples of status consumption. They have
a high perceived value, and thus, consumers consume them to boost one’s social standings.

Marketing
Status consumption involves expensive and luxurious goods. The liberal market actions
facilitate this consumer behavior. In the present times, consumers are driven to buy
commodities or services which would boost their status. Therefore, marketers often have come
up with the luxurious and exclusive segment of products. This segment aims at the individuals
belonging to the high fiber groups and the ones who are prey to this tactic of marketing. The
psychological value of such goods to the consumer is much more than their intrinsic value.

Interestingly, the consumption of such goods is relative. Consider GAP apparels. It is
affordable to almost anyone in countries like America. However, in India, someone wearing
GAP is perceived to be luxurious by the middle-class population. This perception leads to a
vicious cycle. Here is how: now GAP gets an automated fan base in India. People will not buy
from it because of its quality or design but because of the perceived value. Now, when the
upper strata in India wear GAP, it will appeal to the lower ones.

Consequently, GAP, a mass-market good in America, would come across as a luxury brand in
India because of the trickle-down effect. Thus, a brand affordable to many Americans becomes
a status symbol in India. This inference is an example of how the US possesses cultural
hegemony over the world.

Luxurious commodities tend to fulfill all three fundamentals of materialism – contentment,
centrality, and triumph. Moreover, materialism mainly comes to us in the form of the
possession of material goods. Status goods fulfill this need and sense of self-esteem.
Companies induce the belief in the lower strata of the society that they can match the more
affluent class’s consumption patterns. This is the reason why the capitalist world leverages
countries to open up economies. It is this income differential that works in their interest.
Economic, educational, political, and social backgrounds influence an individual’s choice.
Economically, academically and socially well-off sections tend to engage in status
consumption more. Thus, these become the main target groups for the companies.

Case of Apple
Apple products, over the years, have undoubtedly garnered a fan base. The fad seems to have
picked up all the more pace in the last decade. Technological advancements, over the years,
have undoubtedly led to an increased dependence on technology. Apple had successfully
targeted this market by offering various gadgets like phones, tablets, smartwatches, laptops,
iPods, and offering swift operating systems like the ios when such technology was alien to
many other companies.

People over the years, across the globe, have developed a liking for its products. Consequently,
Apple products have become a status symbol, and thus, we refer to it as status consumption.
Before delving straight away into the analysis, here is an interesting observation. Like every
other company in the market, even the luxurious ones aim to maximize their profits, generally.
However, luxury commodity brands seem to have a more formidable task at hand. They need
to ensure that they do not capture a large chunk of the market, a chunk large enough for them
not to remain luxurious anymore. Thus, brands like Apple and GAP, at least in the Indian
market, need to maintain a knife-edge balance.

The graph below represents the revenue of the company over the past decade in India. To
understand the increase in the sale (and hence demand) of the company’s products, we use
revenue as a proxy variable. Thus, we infer that the demand for Apple products in India has
been increasing one and all. The growth rate has dwindled in some years and has been
exponential in many others. However, it is safe to say that Apple has successfully remained a
status symbol.

This trend opens gates for yet another thought. Let us look at the mobile phone market in India.
Today, many other brands offer high-end services at much lesser prices than Apple. However,
Apple still is a status symbol, unlike others. Why?

One way to approach the answer can be through understanding the marketing strategies
undertaken by the company. In all the market segments, Apple products are placed at much
higher prices than others. Furthermore, they do not seem to make their prices competitive ever.
The company boasts of its USP and, rather than making it a commodity for everyone, wants to
make it exclusive to some. As of Jan 2021, the 512GB version of I-Phone 12 Pro Max costs
over 1.5lakh INR, which is the most expensive iPhone in the Indian market at present. Apple
delivers high-quality, innovative products and does not enter the price war. Thus, the focus has
always been on the USP and not the price.

Secondly, over the years, Apple has significantly worked at product placement and social
media buzz. When we see all the technology enthusiasts, celebrities, and social media
influencers flaunting an iPhone, it is unlikely for others to be tantalized by it.

Apple has come across as a force to be reckoned with. It aims to understand the needs of its
consumers. Apple products are designed to be creative and user-friendly and always speak to
the consumers in a language they can easily understand. For people, Apple is no longer a
product but an experience. It connects to its audience at an emotional level and places its values
at the top. The emotional connection with the brand is what drives the consumers to buy Apple
and nothing else.

Next up, Apple has always stood by its values. It shares what it believes in, what it wants for
its customers and how to deliver it to the world. The guiding principle is what makes it
attractive for all the stakeholders. The powerful narrative of the brand sets it apart from others.
It leverages its community with utmost sincerity and thus, has successfully garnered itself loyal
customers.

Thus, we may infer that Apple’s marketing strategies have yielded magical results for the
company. Before putting forth such a strong argument, let us try to have some data to pack it
up.

Take the case of Google. A multi-national technology company, which revolutionized the
entire technology, software, and internet services industries. The company owns multiple
subsidiaries, including YouTube, Google.org, Fitbit, among many others. From employee
satisfaction to customer contentment, everything about Google is top-notch. However, the
company entered the mobile phone market back in 2016. Although Google Pixel performed
well in the target market, primarily Google enthusiasts and IT professionals, it could not grab
the attention of the masses as Apple does. Asus is one of the pioneers in computers and phone
hardware. The multi-national company has set a firm foot in the gaming laptops industry. On
comparing Asus gaming laptops to Apple Mac, we see that both the companies offer the same
price range and similar performances. Furthermore, when we look at the global market, both
have a set of loyal customers. However, because the respective customer segments tend to
differ, people perceive Apple as a luxury, yet again.

Apple has been successful in building a community of users over the years. They do not just
use the brand but rather identify themselves with it. This Apple has stuck to its promise of their
niche, their quality, their value for money. We would agree that Apple has built an identity for
itself. As economies expand, income grows, living standards rise, and people want to buy an
iPhone. Because, unlike other smartphones, it is not a necessity. I-phones are a luxury, which
no other brand offers around the globe. This has kept the company going not only over a
temporal space but also across countries. Apple brings with it an international tint that extends
beyond the territorial boundaries of nations.