The Veblen Effect, or Why We Make Irrational Purchases

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:41

Each of us probably came across small shops with a catchy sign of a well-known brand and truly "cosmic" prices. Despite the fact that goods of this quality can be easily purchased at a more reasonable cost, there are people who prefer to overpay for the useful properties of products sold in such outlets. Moreover, the desire to get a piece of clothing at an exorbitant price can sometimes be so strong that people waste precious time waiting in long lines - how to explain this behavior?

The Veblen effect: concept and essence

In economic theory, it is customary to divide the solvent need for a product into two large categories: functional demand and non-functional. And if the first group is directly determined by the consumer qualities of a product or service, then the second one depends on factors whose connection with useful properties can be quite difficult to trace. Some people buywhat their acquaintances prefer to acquire (the effect of joining the majority), others seek to stand out from the crowd (the snob effect), and still others want to raise their prestige and defiantly buy expensive things. The last case was described in detail by the economist T. Veblen, in honor of which the use of goods or services not for their intended purpose, but in order to create an indelible impression, was called the “Veblen effect”.

This American futurist and publicist wrote a number of books, such as "The Theory of Entrepreneurship", "The Theory of the Leisure Class", etc., thanks to which the concept of "prestigious and conspicuous consumption" has become firmly established in the everyday life of sociologists and economists. According to Veblen, in modern society, demand is very much influenced by how the "cream of society" lives. The lifestyle of the leisure class is increasingly becoming the norm and standard for all other people. Therefore, many try to copy the tastes and preferences of the oligarchs, "golden youth", show business stars, etc. Well, marketers use this perfectly.

The Veblen Effect: Real Life Examples

Status consumption can be observed at almost every step. Just look at how our deputies dress and what they drive. You can also go to one of the fashion boutiques for the sake of interest and ask about prices. The Veblen effect often manifests itself in the appreciation of works of art, it operates in expensive restaurants and hotels, it often manifests itself in advertising on the pagesexpensive magazines. And if we add that the Russian soul tends to go to extremes, then it becomes clear why some believe that perfumes must be from Armani, clothes from Brioni, and watches from the Patek Philippe collection. The latter, by the way, are very popular among the Russian elite - the fans of this brand include V. Putin, A. Chubais, S. Naryshkin, etc.

Features of domestic status consumption

The Veblen paradox has been known for a long time, and there are no countries that could be written as an exception. However, the way it works in the countries of the former Soviet Union differs significantly from its manifestation in Europe. If rich residents of highly developed countries give their preference to unique exclusive goods or a brand with a history of several hundred years, then the main indicator for our compatriots is nothing more than a high price. The higher the cost of the goods, the more valuable and desirable it becomes for them. This should be borne in mind if you suddenly have a desire to please yourself with some kind of “brand” thing. Our marketers are cunning people, in their promotions they do not disdain to use all sorts of psychological tricks. Knowing what exactly motivates us to purchase certain things, we will be able to make our choice more intelligently and avoid unnecessary spending on our budget.