Many consumers who buy luxury goods are not in a financial position to afford luxury goods. They do not always act rationally and may spend thousands of dollars on a luxury brand that performs the same function as a similar durable item at a much lower cost.
Many people prefer to buy luxury goods, but the price tag can be off-putting. Unless you earn a high salary or have a great personal savings habit, buying luxury consumer goods can be cost-prohibitive.

Buying luxury brands

Humans tend to overemphasize the positive elements of a product and ignore the downsides. For example, consumers wait overnight for new releases of certain products, even though other brands have better features and are cheaper.
One reason is that people view non-luxury goods as inferior simply because they are non-luxury. They also conclude that higher-priced goods must be of better quality, regardless if the goods are better or not.

Why some consumers purchase luxury brands

<ul>
<li>In some cases, purchasing a luxury item can increase self-esteem and give a sense of belonging.</li>
<li>Some people buy luxury goods as a form of retail therapy.</li>
<li>Others reward themselves with a luxury item that they typically can't afford.</li>
</ul>

Luxury goods produce positive feelings

People prefer to pay the full price for an authentic luxury item over a fake one (even if they look identical).
Researchers found that this desire for authenticity develops in childhood. The sentimentality of the item is part of the reason. If you treat yourself by buying a fake brand, it would be the same as not treating yourself at all.

Authenticity matters

<UL><LI><span data-href="https://www.facebook.com/dialog/share?app_id=659054097907801&amp;display=popup&amp;href=https%3A%2F%2Fwww.investopedia.com%2Farticles%2Fpersonal-finance%2F091115%2Fpsychology-behind-why-people-buy-luxury-goods.asp%3Futm_source%3Dfacebook%26utm_medium%3Dsocial%26utm_campaign%3Dshareurlbuttons&amp;redirect_uri=https%3A%2F%2Fwww.investopedia.com%2FfacebookShareRedirect.htm" data-network="facebook" data-click-tracked="true" title="Facebook" dir="ltr">

FACEBOOK
</LI><LI><span data-href="https://twitter.com/intent/tweet?url=https%3A%2F%2Fwww.investopedia.com%2Farticles%2Fpersonal-finance%2F091115%2Fpsychology-behind-why-people-buy-luxury-goods.asp%3Futm_source%3Dtwitter%26utm_medium%3Dsocial%26utm_campaign%3Dshareurlbuttons&amp;via=investopedia&amp;text=The+Psychology+Behind+Why+People+Buy+Luxury+Goods" data-network="twitter" data-click-tracked="true" title="Twitter" dir="ltr">

TWITTER
</LI><LI><span data-href="https://www.linkedin.com/shareArticle?mini=true&amp;url=https%3A%2F%2Fwww.investopedia.com%2Farticles%2Fpersonal-finance%2F091115%2Fpsychology-behind-why-people-buy-luxury-goods.asp%3Futm_source%3Dlinkedin%26utm_medium%3Dsocial%26utm_campaign%3Dshareurlbuttons" data-network="linkedin" data-click-tracked="true" title="Linkedin" dir="ltr">

LINKEDIN
</LI></UL>
For many people, buying a luxury handbag is not an uncommon purchase: perhaps just as common as buying a blouse at Target Corporation (<a href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=tgt" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1" rel="noopener noreferrer" dir="ltr">TGT</a>). While the appeal of luxury goods is undeniable—the leather is soft, the logo is flashy—the price tag can be off-putting. Unless you’ve got a good job with a high salary, or have developed fantastic personal savings habits, buying luxury consumer goods can be cost-prohibitive (or create a credit card balance that isn't easy to pay off).
<h3>
Key Takeaways</h3><UL><LI>Unless you’ve got a good job with a high salary, or have developed fantastic personal savings habits, buying luxury consumer goods can create an undue financial burden.</LI><LI>Many consumers who buy luxury goods are not in a financial position to be able to afford luxury goods; one way to explain this is that many consumers do not act rationally, or in a way that is in their best financial interest.</LI><LI>Because some people&nbsp;perceive non-luxury goods as inferior simply by virtue of them being non-luxury, they also come to the conclusion that higher priced goods are of better quality (contrary to any evidence about their actual level of quality or durability).</LI><LI>For some consumers, a luxury good can go a long way in increasing self-esteem or providing a sense of belonging.</LI><LI>A sense of accomplishment is another reason why some people buy luxury goods. </LI></UL><h2 dir="ltr"> Some Consumers Do Not Act Rationally </h2>
Consumers don’t behave rationally all of the time. A perfectly rational person would always act in accordance with reason or logic; in other words, a perfectly rational person would always act in their own best interest (including in their own best financial interest).

However, numerous modern behavioral psychology studies have revealed that humans don't always act rationally. And many consumers who buy luxury goods are not in a financial position to be able to afford luxury goods. The proof of this may be in the high rates of consumer debt that many Americans have. Depending on how you look at it, this phenomenon may be evidence that many Americans don’t always act in their best financial interest.

While a high-quality, durable handbag can be purchased for around $100, some people opt instead to spend thousands of dollars on a luxury-brand handbag that performs the same function and is of the same relative quality.
<h2 dir="ltr"> Are Higher-Priced Goods Really of Higher Quality? </h2>
One possible explanation for this is the human tendency to overemphasize the positive elements of a product and ignore its disadvantages. For example, in the case of Apple Inc. (AAPL), consumers wait overnight for new releases of iPhones, iPads, and Mac computers. This despite the fact that Apple products are not technologically unique or superior.

In fact, Samsung makes phones with better features (compared to most models of the iPhone), and Microsoft Corporation (MSFT) and Xiaomi make phones that typically have a cheaper price point. Nevertheless, Apple experiences a high degree of brand loyalty and seems to break sales records&nbsp;year&nbsp;after year.

Because some people&nbsp;perceive non-luxury goods as inferior simply by virtue of them being non-luxury (and not on the basis of their characteristics or qualities), they also come to the irrational conclusion that higher priced goods are of better quality. Contrary to the evidence, they may believe that you get what you pay for, regardless of whether the goods are actually better than their more affordable counterparts.
<h2 dir="ltr"> Self-Esteem May Impact a Person's Purchases </h2>
In some cases, low self-esteem can be a factor that influences whether or not a consumer purchases luxury goods, especially if they can not easily afford the cost of luxury items. For some consumers, a luxury good can go a long way in increasing self-esteem or providing a sense of belonging.

With the rise of online shopping, a $500 scarf is just a click away. For some people, luxury goods are the ultimate retail therapy. Fortunately for luxury brands, the Internet has made them easily accessible for impulse shopping.&nbsp;

A sense of accomplishment is another reason why some people buy luxury goods. They want to reward themselves for their hard work by treating themselves to something they typically could not afford.
<h2 dir="ltr"> Authenticity Matters </h2>
There’s a reason why people may decide to pass up a fake Rolex in order to pay full-price for an authentic one (even if they look identical). Despite appearing the same, the owner will know that they don't have a real luxury good.

This doesn't appear like a rational choice: If we buy luxury goods to show off to others and to feel like we belong, why wouldn’t a facsimile do the trick?

Researchers at Yale have determined that this quest for authenticity develops early in childhood. A study that tried to convince children that a <a href="https://www.investopedia.com/terms/c/cloning.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1" rel="noopener noreferrer" dir="ltr">cloning</a> machine had produced their favorite toy found that most children refused to accept the duplicate as identical.1﻿ It turns out that the sentimentality of the item—the memory or feeling that comes from having purchased a genuine luxury good—is part of the reason that we seek authenticity.

In other words, for some people, treating yourself to a pair of fake Christian Louboutin brand boots would be the same thing as having not treated yourself at all.
<h2 dir="ltr"> The Bottom Line </h2>
People buy luxury goods for a variety of reasons; nearly all of these reasons are related to the strong emotions that we attach to the purchase of expensive material goods. Whether or not a consumer is in a financial position that allows them to be able to purchase a financial item, they may decide to purchase it anyways in order to achieve a certain feeling—for example, a feeling of accomplishment from hard work—or to gain acceptance from others.
<div>Sponsored</div><h3>Hire a Pro: Compare 3 Financial Advisors Near You</h3><div dir="ltr">
 
 
 Finding the right financial advisor that
 <a href="https://adclick.g.doubleclick.net/pcs/click?xai=AKAOjssWB4kHEMfDeF7Q0ScTuOPIOtEhzPY0yKhKi2hBzrNPgsRsJEJQcA9iWMdVMNLxm8deJbvzXta3XR2MkATCX__07NC3GshxoJPKkMyASPcnsHPsfLJM7OWcrV7aDDgWdyT6a7ItCQUwsqtlcFSoacCJqeCcAM0klbZ0c3tGNY5C0khZLzqmgaquuJF90rtDu10O_dM-TmFZR7r9Ey3iM7UShnrHEzuxenY6ZmJi-sRdKHaIujizQsqoDJKXTnRylTLOr9Szjcc9XhGj0F_rjTZHsYqbVb8YC9jzjyD4egHn1LbPx-xEerp-oeIqxoEb_EVkJeVDPkk&amp;sai=AMfl-YS2g_hMbY9s81twFsL_ZmE7BgXh1SlW06JvbZoboGIllJhfzOKqU6-jdc7YXRxjoHlkkIIx1Sh3pL2H9veb7NLqFvihF4WIV51UqgNGMDm-GablMKbKMI6Z5d0Iuqw&amp;sig=Cg0ArKJSzF8PYv1Akv89EAE&amp;fbs_aeid=[gw_fbsaeid]&amp;urlfix=1&amp;adurl=https://smartasset.com/retirement/find-a-financial-planner?utm_source=investopedia&amp;utm_medium=cpc&amp;utm_campaign=inv__falc_ros_textlinks&amp;utm_content=13_138307665821&amp;utm_term=nfe423a56290542b7ac2b850ef04a151011" dir="ltr">fits your needs</a>
 doesn’t have to be hard. SmartAsset’s free tool matches you with
 <a href="https://adclick.g.doubleclick.net/pcs/click?xai=AKAOjssWB4kHEMfDeF7Q0ScTuOPIOtEhzPY0yKhKi2hBzrNPgsRsJEJQcA9iWMdVMNLxm8deJbvzXta3XR2MkATCX__07NC3GshxoJPKkMyASPcnsHPsfLJM7OWcrV7aDDgWdyT6a7ItCQUwsqtlcFSoacCJqeCcAM0klbZ0c3tGNY5C0khZLzqmgaquuJF90rtDu10O_dM-TmFZR7r9Ey3iM7UShnrHEzuxenY6ZmJi-sRdKHaIujizQsqoDJKXTnRylTLOr9Szjcc9XhGj0F_rjTZHsYqbVb8YC9jzjyD4egHn1LbPx-xEerp-oeIqxoEb_EVkJeVDPkk&amp;sai=AMfl-YS2g_hMbY9s81twFsL_ZmE7BgXh1SlW06JvbZoboGIllJhfzOKqU6-jdc7YXRxjoHlkkIIx1Sh3pL2H9veb7NLqFvihF4WIV51UqgNGMDm-GablMKbKMI6Z5d0Iuqw&amp;sig=Cg0ArKJSzF8PYv1Akv89EAE&amp;fbs_aeid=[gw_fbsaeid]&amp;urlfix=1&amp;adurl=https://smartasset.com/retirement/find-a-financial-planner?utm_source=investopedia&amp;utm_medium=cpc&amp;utm_campaign=inv__falc_ros_textlinks&amp;utm_content=13_138307665821&amp;utm_term=nfe423a56290542b7ac2b850ef04a151011" dir="ltr">fiduciary financial advisors</a>
 in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is legally bound to act in your best interests. If you’re ready to be matched with local advisors that will help you achieve your financial goals,
 <a href="https://adclick.g.doubleclick.net/pcs/click?xai=AKAOjssWB4kHEMfDeF7Q0ScTuOPIOtEhzPY0yKhKi2hBzrNPgsRsJEJQcA9iWMdVMNLxm8deJbvzXta3XR2MkATCX__07NC3GshxoJPKkMyASPcnsHPsfLJM7OWcrV7aDDgWdyT6a7ItCQUwsqtlcFSoacCJqeCcAM0klbZ0c3tGNY5C0khZLzqmgaquuJF90rtDu10O_dM-TmFZR7r9Ey3iM7UShnrHEzuxenY6ZmJi-sRdKHaIujizQsqoDJKXTnRylTLOr9Szjcc9XhGj0F_rjTZHsYqbVb8YC9jzjyD4egHn1LbPx-xEerp-oeIqxoEb_EVkJeVDPkk&amp;sai=AMfl-YS2g_hMbY9s81twFsL_ZmE7BgXh1SlW06JvbZoboGIllJhfzOKqU6-jdc7YXRxjoHlkkIIx1Sh3pL2H9veb7NLqFvihF4WIV51UqgNGMDm-GablMKbKMI6Z5d0Iuqw&amp;sig=Cg0ArKJSzF8PYv1Akv89EAE&amp;fbs_aeid=[gw_fbsaeid]&amp;urlfix=1&amp;adurl=https://smartasset.com/retirement/find-a-financial-planner?utm_source=investopedia&amp;utm_medium=cpc&amp;utm_campaign=inv__falc_ros_textlinks&amp;utm_content=13_138307665821&amp;utm_term=nfe423a56290542b7ac2b850ef04a151011" dir="ltr">get started now.</a>
 
 
 


 

</div>

Luxury goods exemplify how irrational we can be. A decent, sturdy handbag can be bought for $50, yet people will still spend thousands on a brand name.

Understand yourself and those around you.

psychology

Psychology

personaldevelopment

Personal Development

marketingandsales

Marketing & Sales

moneyandinvestments

Money & Investments

<ul><li>FACEBOOK </li><li>TWITTER </li><li>LINKEDIN </li> </ul>

For many people, buying a luxury handbag is not an uncommon purchase: perhaps just as common as buying a blouse at Target Corporation (<a href="https://www.investopedia.com/markets/quote?tvwidgetsymbol=tgt">TGT </a>). While the appeal of luxury goods is undeniable—the leather is soft, the logo is flashy—the price tag can be off-putting. Unless you’ve got a good job with a high salary, or have developed fantastic personal savings habits, buying luxury consumer goods can be cost-prohibitive (or create a credit card balance that isn't easy to pay off).

<ul><li>Unless you’ve got a good job with a high salary, or have developed fantastic personal savings habits, buying luxury consumer goods can create an undue financial burden. </li><li>Many consumers who buy luxury goods are not in a financial position to be able to afford luxury goods; one way to explain this is that many consumers do not act rationally, or in a way that is in their best financial interest. </li><li>Because some people perceive non-luxury goods as inferior simply by virtue of them being non-luxury, they also come to the conclusion that higher priced goods are of better quality (contrary to any evidence about their actual level of quality or durability). </li><li>For some consumers, a luxury good can go a long way in increasing self-esteem or providing a sense of belonging. </li><li>A sense of accomplishment is another reason why some people buy luxury goods. </li> </ul>

Consumers don’t behave rationally all of the time. A perfectly rational person would always act in accordance with reason or logic; in other words, a perfectly rational person would always act in their own best interest (including in their own best financial interest).

However, numerous modern behavioral psychology studies have revealed that humans don't always act rationally. And many consumers who buy luxury goods are not in a financial position to be able to afford luxury goods. The proof of this may be in the high rates of consumer debt that many Americans have. Depending on how you look at it, this phenomenon may be evidence that many Americans don’t always act in their best financial interest.

While a high-quality, durable handbag can be purchased for around $100, some people opt instead to spend thousands of dollars on a luxury-brand handbag that performs the same function and is of the same relative quality.

Are Higher-Priced Goods Really of Higher Quality?

One possible explanation for this is the human tendency to overemphasize the positive elements of a product and ignore its disadvantages. For example, in the case of Apple Inc. (AAPL), consumers wait overnight for new releases of iPhones, iPads, and Mac computers. This despite the fact that Apple products are not technologically unique or superior.

In fact, Samsung makes phones with better features (compared to most models of the iPhone), and Microsoft Corporation (MSFT) and Xiaomi make phones that typically have a cheaper price point. Nevertheless, Apple experiences a high degree of brand loyalty and seems to break sales records year after year.

Because some people perceive non-luxury goods as inferior simply by virtue of them being non-luxury (and not on the basis of their characteristics or qualities), they also come to the irrational conclusion that higher priced goods are of better quality. Contrary to the evidence, they may believe that you get what you pay for, regardless of whether the goods are actually better than their more affordable counterparts.

Self-Esteem May Impact a Person's Purchases

In some cases, low self-esteem can be a factor that influences whether or not a consumer purchases luxury goods, especially if they can not easily afford the cost of luxury items. For some consumers, a luxury good can go a long way in increasing self-esteem or providing a sense of belonging.

With the rise of online shopping, a $500 scarf is just a click away. For some people, luxury goods are the ultimate retail therapy. Fortunately for luxury brands, the Internet has made them easily accessible for impulse shopping.

A sense of accomplishment is another reason why some people buy luxury goods. They want to reward themselves for their hard work by treating themselves to something they typically could not afford.

There’s a reason why people may decide to pass up a fake Rolex in order to pay full-price for an authentic one (even if they look identical). Despite appearing the same, the owner will know that they don't have a real luxury good.

This doesn't appear like a rational choice: If we buy luxury goods to show off to others and to feel like we belong, why wouldn’t a facsimile do the trick?

Researchers at Yale have determined that this quest for authenticity develops early in childhood. A study that tried to convince children that a <a href="https://www.investopedia.com/terms/c/cloning.asp">cloning </a>machine had produced their favorite toy found that most children refused to accept the duplicate as identical.1 ﻿ It turns out that the sentimentality of the item—the memory or feeling that comes from having purchased a genuine luxury good—is part of the reason that we seek authenticity.

In other words, for some people, treating yourself to a pair of fake Christian Louboutin brand boots would be the same thing as having not treated yourself at all.

People buy luxury goods for a variety of reasons; nearly all of these reasons are related to the strong emotions that we attach to the purchase of expensive material goods. Whether or not a consumer is in a financial position that allows them to be able to purchase a financial item, they may decide to purchase it anyways in order to achieve a certain feeling—for example, a feeling of accomplishment from hard work—or to gain acceptance from others.

Hire a Pro: Compare 3 Financial Advisors Near You

The Psychology Behind Why People Buy Luxury Goods

Buying luxury brands

Why some consumers purchase luxury brands

Luxury goods produce positive feelings

Authenticity matters

CURATED BY

Related collections

More like this