Which consumers believe luxury must be expensive and why? A cross-cultural comparison of motivations

Abstract

To pursue growth, luxury brands are expanding their markets, but such expansion puts their exclusivity at risk. To offset this threat, leading luxury brands systematically increase their average prices, such that their profitability depends on luxury consumers’ sustained acceptance of high prices. This pricing strategy requires luxury brands to determine why some luxury consumers believe luxury must be expensive, as well as assess the relative weights of their motivations to adopt this belief. A cross-country, covariance-based, causal analysis of the antecedents of the belief reveals the same hierarchy of motivations. Overall, extrinsic motivations dominate intrinsic motivations in both Western and Asian cultures and in mature and emerging countries. Unexpectedly, the pursuit of high quality is not a driver. This result creates a dilemma for luxury brand communications, which tend to emphasize high quality and craftsmanship, because of the concerns associated with a strong reliance on extrinsic motivations.