Uncovering heterogeneous prestige effect in luxury consumption: Insights from the Chinese luxury market

Abstract

This paper investigates the impact of price-related factors on consumer choices within the Chinese luxury watch market. It explores how the positive prestige effect and negative substitution effect contribute to consumer preferences for luxury watches. Notably, heterogeneity in the prestige effect is observed at both the consumer and brand levels. Consumer-level analysis reveals a U-shaped relationship between family income and prestige sensitivity, emphasizing heightened sensitivity among lower and higher-end middle-income consumers. Top-tier luxury watch brands demonstrate a more pronounced prestige effect compared to lower-tier counterparts at the brand level. What-if simulations underscore the advantages of brand promotion and enhanced prestige, especially for top-tier brands. Income escalation benefits top-tier luxury watch brands, while its impact on lower-tier brands is intricate. These findings offer strategic insights for marketers to refine their approaches and harness the power of the prestige effect.