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Conspicuous Consumption in a Recession: Toning it Down or Turning it Up?

Joseph C. Nunes

Xavier Drèze

Young Jee Han

Joseph C. Nunes is Associate Professor of Marketing, Marshall School of Business, University of Southern California, Los Angeles, CA 90089-0443. Xavier Drèze is Associate Professor of Marketing, UCLA Anderson School of Management, Los Angeles, CA 90095-1481. Young Jee Han is a Ph.D. student at the Marshall School of Business, University of Southern California, Los Angeles, CA 90089-0443. Questions should be directed to Joseph C. Nunes at jnunes@marshall.usc.edu, Xavier Drèze at xavier.dreze@anderson.ucla.edu, or Young Jee Han at YoungJee.han.2011@marshall.usc.edu. The authors would like to thank the Marketing Science Institute for their generous assistance in funding this research.

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ABSTRACT

The media and pundits agree; the recession has led to the demise of conspicuous consumption. Wealthy consumers are reportedly abandoning luxury goods that prominently display their brands for more subdued designs. Utilizing data collected from designer handbag manufacturers Louis Vuitton and Gucci, both before and in the midst of the recession, this research challenges the conventional wisdom. We find products introduced during the recession display the brand far more prominently than the products withdrawn during the same period. These results suggest a need to signal status using luxury brands persists during economic downturns. We also find both manufacturers introduced products at significantly higher prices while trimming the number of products offered.

Keywords: Recession, Conspicuous Consumption, Luxury, Brand Management, Brand Prominence, Status.

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Luxury goods that prominently display their brands are out. The recession has led

wealthy consumers to adopt more subdued designs that reflect taste rather than signal status. At

least that is what the pundits in the press would have you believe. There will be a “clearing of the

branded bric-a-brac that came to clutter our lives and obscure from view the beauty of true

luxury” pronounced Newsweek magazine, adding that “…the overt way in which we have used

possessions to demonstrate status is no longer regarded as acceptable” (Foulkes 2009). The

financial crisis has aimed a “death ray” at the ethos of conspicuous consumption according to the

New York Times (Dewan 2009). Experts agree. In-your-face luxury is passé and will make way

for “stealth wealth,” predicted Milton Pedraza, CEO of the Luxury Institute (Timberlake 2008).

“The muted, logo-free look is gaining traction as the standard-bearer for a new kind of luxury:

subtle, long-lasting and recession proof,” claimed a report on the recession’s impact on luxury by

ad agency JWT (JWT 2009).

Have consumers really toned it down? This is a difficult question for consumer behavior

researchers to answer. Undoubtedly, numerous consumers respond to surveys with accounts of

how they are being less conspicuous. But the narrative may be intended to avoid appearing

insensitive while watching others suffer as the unemployment rate reached its highest level since

World War II, average home prices fell 30%, and the S&P 500 plummeted 34% below its record

high of October 2007. Social desirability and the need for social approval are well known

sources of biases in surveys (Phillips and Clancy 1972). All of the reports we could locate about

how conspicuous consumption is out of vogue are based on interviews with consumers and

presumed experts, although no data or scientific studies are cited. A more rigorous sociological

study, requiring a good deal of foresight, would prove difficult and costly. Ideally, researchers

would track consumer behavior longitudinally documenting purchases and the use of luxury

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goods used to signal status both before and during a recession. This research takes a more

practical albeit less direct approach. We examine data on product offerings collected from two

luxury handbag superpowers—Louis Vuitton and Gucci—before and in the midst of the

recession. If consumers are indeed demanding less conspicuous products, we would expect this

to be reflected in these manufacturers’ products lines and we should observe firms offering more

understated designs. For firms that do not tone down their products, we should see a marked

decrease in profitability as they fail to meet customer demand. This is not what we find.

We observe that Louis Vuitton and Gucci, the world’s top two luxury brands (Interbrand

2009), have indeed changed their product lines during the worst financial crisis since the Great

Depression, but only to become significantly more conspicuous. Our results indicate these brands

are far more prominently displayed on new product introductions when compared to products

withdrawn. If wealthy consumers are truly concerned with being less conspicuous, it is certainly

not reflected in how either Louis Vuitton or Gucci adjusted their offerings. Notably, we also find

this tactic has not resulted in financial ruin; in fact, the divisions of parent companies LVMH and

PPR SA, respectively, appear to have fared exceptionally well during the period in question.

Admittedly, this research is far from conclusive. However, as far as we know, ours is the first

empirical investigation with respect to conspicuous consumption during a recession.

Further, to deal with plummeting sales of luxury goods—consultants Bain & Company

predicted the industry’s sales would fall by 10% in 2009 to $225 billion (Passariello and

O’Connell 2009) —many firms have reportedly cut prices. Upscale retailer Saks Inc. announced

it would pass on lower prices for select items from Prada and Christian Dior to help spur sales

(Gaynor 2009). Chanel purportedly cut its wholesale prices in the U.S. by 7% to 10%, with

Versace and Chloe following suit (Ritson 2008). Despite claiming to never engage in

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promotions, Tiffany is said to have lowered prices on diamond engagement rings by about 10

percent (Rosenbloom 2009). In contrast, accompanying the increase in brand prominence, we

find Gucci and Louis Vuitton simultaneously increased the prices for handbags they sold directly

to consumers. This is not quite as surprising, as we explain later, because this response is in line

with what marketing theory and pricing experts might advise strong brands. More predictably

perhaps, we also find these manufacturers strategically trimmed their overall product line,

resulting in far fewer offerings during the course of the recession.

Conspicuous Consumption and Marketing in a Recession

Thorstein Veblen coined the term Conspicuous Consumption in his classic treatise The Theory of

the Leisure Class (1899) to describe extravagant spending on products intended chiefly to

display wealth and thus signal status. Consumers frequently pay higher prices for functionally

equivalent goods because they crave the status associated with material displays of wealth

(Bagwell and Bernheim 1996). As work on materialism by Richins (1994) rightly points out,

people make inferences about others’ success based in part on the things someone owns.

Consumers purchase status goods to try to imitate or distinguish themselves from other

consumers (Duesenberry 1949), resulting in a “bandwagon” or “snob” effect, respectively

(Leibenstein 1950). Belk's (1988) notion of extended self suggests a desire to possess prestige

brands may serve as a symbolic marker of group membership. A brand can send meaningful

social signals about the type of person using that brand based on the type of consumers who

typically use that brand (Wernerfelt 1990; Muniz and O’Guinn 2001). Thus, consumers often

look to their own group (Whittler and Spira 2002), groups to which they aspire (Escalas and

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Bettman 2003), and groups with which they want to avoid being associated (White and Dahl

2006, 2007) when making consumption decisions.

While we know a fair bit about conspicuous consumption, we know far less about how

consumers think about consumption decisions during a recession. While the literature in

consumer psychology has yet to address this question in detail, economists find consumers spend

less and look for lower prices when times are tough. Work by Ang (2001) revealed that during

the 1997 Asian economic crisis, risk aversion, value consciousness, and a shift away from

materialism led to a serious decrease in consumer spending. Zurawicki and Braidot (2004) found

a drop in expenditures across all major product and service categories during the Argentinean

economic crisis of 2001-2. However, they also found higher income households reduced and

eliminated various expenditures to a lesser extent than middle-class families. But the wealthy did

cut back too. Feelings regarding an inability to improve one’s situation can dampen aspirations,

resulting in forestalled purchases even for the well-to-do (Katona 1974). Using data from U.S.

Consumer Expenditure Surveys, Bils and Klenow (1998) found that luxuries and durables are

more susceptible to business cycles than necessities and nondurables. Taken together, these

studies support the notion that consumers cut back in their consumption during recessions,

usually in proportion to their wealth and/or income, and that expenditures on luxuries are more

susceptible to being cut.

How might we expect luxury goods companies to respond? Strategically, strong

organizations are right to view economically challenging times as opportunities to overtake

competitors (Srinivasan, Rangaswamy, and Lilien 2005). However, theoretical and empirical

work focusing on marketing tactics during a recession is limited. One exception is research by

Lamey, Deleersnyder, Dekimbe, and Steenkamp (2007), who found consumers switch more

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extensively to store brands during bad economic times. Given a tendency to reduce advertising

budgets, price-promotions, and new product activity, the authors argued that national brand

manufacturers could mitigate the effect of an economic downturn on their shares by intensifying

rather than cutting back marketing expenditures. Consistent with this viewpoint is a well-known

study by Biel and King (1985) that concluded businesses that cut advertising during a downturn

tend to be long-term losers. Using data from some 749 companies in the Profit Impact of

Marketing Strategy (PIMS) database, these authors found firms that increased advertising did no

worse than firms that cut advertising during a recession, but the former were more likely to pick

up market share after the recession. These results are consistent with an earlier study by the

American Business Press and Meldrum and Fewsmith (1979) that surveyed managers to

determine how firms that increased rather than cut or maintained their advertising expenditures

in 1974 and 1975 would fare. They found companies that did not cut marketing expenditures

experienced higher sales and net income both in 1974 and 1975, and for two years after. While a

number of other studies have focused on the impact of advertising on sales during a recession,

far less work has focused on pricing decisions during a recession.

Practitioner-oriented pieces encourage firms to consider maintaining prices and re-

segmenting the market. They note that price-cutting can be shortsighted; when prices fall during

a recession, consumers often become less willing to return to higher price levels during the

economic recovery (Pearce and Robinson 2002). In addition, firms are advised to revise their

segmentation and targeting strategies in anticipation of a recovery while adjusting for shifts in

customer behavior during the recession (Pearce and Michael 1997). The luxury goods companies

we investigate appear to have heeded this advice and their strategy appears successful.

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The Data

In this study, we focus on luxury handbags, considered the “21st Century American

woman’s most public and pricey consumer craving” (Anderson 2007). In 2000, the average

American woman bought two handbags a year; by 2004, that number had doubled (Thomas

2007). The “it” bag is the quintessential status good, with estimated sales of $7 billion in the U.S.

alone in 2007 (Wilson 2007). The popularity of designer purses has resulted in huge profits.

Margins at Louis Vuitton, a division of LVMH, the world’s largest luxury goods company and

one of the companies we look at, are consistently around 40-45% (Economist 2009).

Data from January 2008 were collected and provided to us by Drèze, Han, and Nunes

(2009). They collected the data by downloading information on all of the purses offered by both

Louis Vuitton and Gucci from each company’s website at that time. The availability of this data

leads us to restrict our analysis to these two brands. However, given their size, influence, and

enormous popularity, we believe the actions of these firms are significant. Although there are no

published market share numbers for these companies in the luxury handbag market, consider

that, in terms of brand value, Louis Vuitton ($21.6 billion) and Gucci ($8.2 billion) are number

one and number two, respectively, in Interbrand’s ranking of the leading luxury brands of 2008

(ahead of companies such as Rolex, $4.9 billion, and Ferrari, $3.5 billion). Taken together, these

two brands account for 41% of combined value ($72.6 billion) of the 15 brands that made the list

(Interbrand 2009). Further, in the 2008 Luxury Customer Experience Index (LCEI) survey from

the Luxury Institute, high net-worth consumers (average income of $350,000) rated Gucci the

fashion brand that offers the best customer experience, while Louis Vuitton ranked second

(Reuters 2008). In the Luxury Institute’s “Handbag Brands 2008” report that analyzed which of

26 brands luxury consumers are most familiar with, Louis Vuitton and Gucci ranked two and

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three, after Coach (Hall 2008). It is not only the wealthy that think this way. A study conducted

by market research firm Millward Brown—based on a database of interviews conducted with

more than one million consumers—ranked Louis Vuitton the world’s “most powerful” luxury

brand, with Gucci number three just behind Hermès (Sherman 2008).

In May 2009, we collected data in the exact same manner as Drèze, Han, and Nunes

(2009). While our data set, like theirs, does not include every purse sold by Louis Vuitton or

Gucci, the data are representative of what was sold by these firms at these two points in time.

“Our site offers the same range as you’ll find in a large retail store,” Daniel Lalonde, president

and chief executive officer of Louis Vuitton North America told the San Francisco Chronicle

(Saracevic 2008). Personal discussions with executives at each company reaffirmed this view.

Louis Vuitton’s selection online was said to be identical to what is sold in their stores. Gucci’s

selection online is nearly identical, with the exception of a few unique items offered through

each channel. While we do not have sales data, we presume the products available represent the

company’s best estimation of what consumers want at the time. At Gucci, for example,

merchandising and product development rely on weekly data concerning sales, carryovers,

competitive offerings, etc., to construct a “merchandising grid” that guides designers who create

new products (Asis Martinez Jerez, Corsi, and Dessain 2009).

Data gathered in January 2008 represent consumer preferences prior to the recession

while data gathered in May 2009 represent consumer preferences within the midst of the

recession. The most common definition of a recession calls for two straight quarters of declining

GDP. While the National Bureau of Economic Research eventually concluded in December 2008

that the U.S. had been in a recession since December 2007, it was not known at that time how

bad things were or would get. Consider that, in January 2008, economists were still debating

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whether or not the U.S. economy was even heading into a recession (Lim 2008). In February

2008, it became news that consumers’ view of present day conditions “weakened significantly”

that month, falling from 87.9 in January to 75.0, according to the Conference Board Consumer

Confidence Index (www.conference-board.org). Yet during the summer of 2008, “…despite high

gas prices and swings in the real estate market, consumer confidence edged upward to hover at a

fairly strong level, considering the mounting bad economic signals” (Kukis 2008). The economic

crisis really hit its peak in September-October 2008, when several institutions including Lehman

Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, and AIG either failed, were acquired under

duress, or were taken over by the government. The bottom fell out during the first week of

October 2008 when the stock market plummeted and the Dow fell from 10,850 to 8,579 (see

Figure 1). Thus, we believe it is safe to say that product offerings collected in January 2008 are

representative of a pre-recession mentality while offerings collected in May 2009 reflect what

companies believed their customers desired in the midst of a recession.

We should point out that the lead times for high-end hand-made bags are typically four to

six weeks (Blaise Kramer 2008), while third-party suppliers are able to take a handbag from

concept to the sales floor in 60 days (e.g., www.launchbags.com). In 1999, production time for

Gucci’s leather goods was 68 days from prototype to warehouse (Thomas 2007). This means

product offerings in May 2009 were not the result of long-term plans made two years prior and

these manufacturers were caught off-guard by the recession. Both Gucci and Louis Vuitton could

have toned down their product line, altering or adjusting their designs as they wished in response

to the changing economic environment. Significant increases in brand prominence would suggest

they believed it was the appropriate reaction to changes in consumer demand; they fully intended

to offer more conspicuously branded products.

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In order to assess brand prominence, each bag was individually evaluated and coded

according to the brand’s conspicuousness on the item. The notion of “brand prominence,”

introduced by Drèze, Han, and Nunes (2009), is intended to mark the variation in the extent to

which each item displays the brand logo or identifying marks conspicuously to observers. Three

independent judges were trained as to the standard identifying marks of the two brands (e.g.

Gucci’s interlocking Gs) before rating each bag on a series of measures intended to capture

brand prominence. Intra-rater reliability was high (Cronbach α > .99 for all three judges). Inter-

rater reliability was also high (Cronbach α = .98 across all raters). Therefore, we combined the

judges’ ratings into a composite measure of brand prominence ranging from 1 = Quiet to 7 =

Loud. The data also include the prices posted online by the manufacturers for each purse.

Results

We find the product lines for these two luxury brands changed significantly between

January 2008 and May 2009 (see Table 2); Louis Vuitton eliminated 60% of its existing product

line, while Gucci eliminated 93%. Fewer products were added than removed, resulting in a net

reduction in the product line available online of 17.4% for Louis Vuitton and 61.6% for Gucci.

As a brand, Gucci is widely known as being much more fashion-oriented, although this is

reported to be changing as a result of the recession (Matlack 2009). Louis Vuitton has

traditionally offered more classic designs. Hence, the bigger change in product offerings for

Gucci is not unexpected.

More interesting is how the conspicuousness of the brand changed. Products added were

much louder than those deleted. For Louis Vuitton, brand prominence for those items introduced

during that time period was significantly greater than for those items deleted (MLVadded = 5.32 >

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MLVdeleted = 4.63, F = 5.81, p < .05). Similarly, for Gucci, brand prominence for new items added

was significantly greater than for those items deleted (MGadded = 5.20 > MGdeleted = 4.52, F = 4.52,

p < .05). Figure 2 and 3 reflect the change in products based on brand prominence for Louis

Vuitton and Gucci respectively. If we compare the distributions for brand prominence before and

during the recession for Louis Vuitton, the Kolmogorov-Smirnov test rejects these being the

same (p = .0014). We get the same result when comparing distributions for Gucci (p = .0040).

The changes in brand prominence were accompanied by uniformly higher prices (see

Table 2). These companies were charging consumers more to flaunt their brands during the

recession. Louis Vuitton raised prices on individual products that remained in the product line

from 10% to 14%, resulting in an average increase of 12.1%. More dramatic was what occurred

with new product introductions. Prices for newly introduced products were 47.7% higher than

prices for those products that were removed (MLVadded = $1,873 > MLVremoved = $1,268, F = 21.67,

p < .01). More simply put, Louis Vuitton replaced products with more expensive ones in the

midst of an economic crisis. The overall result was a new product line priced an average of 31%

higher than the product line in place almost one-and-one-half years earlier. We should note that

Louis Vuitton never puts its products for sale at a discount. It prefers destroying stock instead

(Economist 2009).

Gucci, which kept only a handful of the products available in January 2008, raised prices

on 50% (8 of 16) of those products not removed, with increases ranging from 1% to 5%. The

overall effect was an average increase of 0.5% across what remained in the product line. Like

Louis Vuitton, prices for new Gucci products introduced in May 2009 were higher. The average

price increase for new products was 16.8% or roughly $200 above those products removed.

While directional, this difference is not statistically significant (MGadded = $1,695 > MGremoved =

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$1,451, F = 2.31, p = .13). In short, during the recession, we find two of the world’s most famous

luxury brands increased both the conspicuousness of their brand and the prices across their

product lines.

Utilizing the same data from January 2008, Drèze, Han, and Nunes (2009) explored the

relationship between brand prominence and price. Those authors report that luxury brands Gucci

and Louis Vuitton charged less on average for louder handbags within their product lines. The

implication is that lower-priced luxury goods that prominently display luxury brand names and

logos are targeted toward a more price-sensitive segment. Thus, one might suspect that the

changes that occurred from early 2008 to mid-2009 altered the relationship between brand

prominence and price. The relationship between prominence and price, however, has not

changed. We find the correlation between price and brand prominence to be consistent. For LV,

the correlation in January 2008 was -0.29, while for Gucci it was -0.51. In May 2009, the

correlations were -0.22 and -0.55, respectively, and did not differ significantly (Fisher’s Z

transformation = -1.06 and .71 respectively, n.s.). Quiet bags continued to cost more, on average,

than loud ones.

Skeptics might argue that while prices and brand prominence increased, these actions

may not have been prudent—a recipe for financial failure during a recession. The publicly

available evidence suggests otherwise. Overall, the divisions of these two companies responsible

for leather goods report having done fairly well during the recession given what one might

consider counter-intuitive changes. Profits for LVMH’s fashion and leather goods rose from

€814 million in June 2007 to €815 million in June 2008 and on to €919 million in June 2009,

according to the company’s 2009 first half interim report. The percentage of LVMH’s revenues

coming from the U.S. did not change between 2008 and 2009, remaining at 28%. Gucci Group is

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part of France’s PPR SA. According to PPR’s 2009 first half interim report, EBITDA for the

luxury goods division increased from €363 million in June 2008 to €377 million in June 2009.

The percentage of PPR’s revenues coming from the Americas increased from 13.6% in the first

half of 2008 to 15.4% in the first half of 2009. Retail sales by Gucci, the division’s flagship

brand, were reported to be up 2.4%, led by an “extremely robust showing from leather goods.”

The report goes on to say that “The Leather Goods business delivered a strong performance,

driven by the success of the New Jackie shoulder bag and a good start-up for new items such as

the New Pelham and the Secret. This testifies to Gucci’s sound strategy of aiming to position the

brand as a trendsetter that meets the high expectations of the Luxury Goods sector.”

General Discussion

The goal of this research was to document a real consumer psychology-relevant

phenomenon concerning consumers’ relationships with luxury brands. As a field, marketing

academics generally, and consumer psychologists more specifically, have little understanding of

how buying behavior with respect to conspicuous consumption changes during a recession. Our

results imply that those consumers who do not exit the luxury goods market during a recession

are still interested in logo-laden products, and perhaps even more so, which contradicts the

conventional wisdom declaring luxury brands tone things down. In this work, we present

empirical evidence based on activities by the firm but do not offer a refined explanation with

respect to consumer psychology. That is the obvious next step. Why do certain consumers favor

more conspicuously branded products during a recession? What determines who continues to

buy products as status symbols and what determines which brands they buy? In what follows, we

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offer our theorizing with regard to the phenomena we observed, but we leave it to future

researchers to substantiate or refute our explanation and deepen our understanding of the topic.

We studied two companies with two very different pricing strategies (LV does not offer

sales, Gucci has sales) and two different general design strategies with respect to aesthetics (LV

historically carries more classic designs, while Gucci tends toward being more fashion forward).

Both firms, widely considered leaders in the industry, exhibited the same strategies during the

onset of the recession—turn up the volume with respect to brand prominence on new product

introductions and raise prices. What explains the seemingly counterintuitive behavior involving

brand prominence?

One explanation relies on segmenting consumers based on their consumption related

need-for-status (Eastman, Goldsmith, and Flynn 1999). The logic is as follows. Wealthy

consumers who have a low need-for-status do not need to show off. They bought quiet goods

before the recession began, and they can reduce or postpone consumption without feeling their

status is threatened. They didn’t use luxury goods to dissociate themselves from less well-to-do

consumers (Drèze, Han, and Nunes 2009), so they can tone down without risk of damage to their

elite identity. Perhaps they are indeed being empathetic to the middle class (Batson 1987).

Perhaps they worry that such conspicuous consumption would draw undue attention to the rich-

poor gap and have unfavorable consequences (e.g., a tax targeted at the rich). No matter what the

reason is, they tend to postpone purchases or exit the market.

Conversely, high need-for-status consumers, who are also wealthy, are still concerned

with status signaling. They use luxury as a mechanism to dissociate themselves from the have-

nots. They still feel a need to do this even in recessionary times, perhaps even reinforcing that

they are not impacted as much by the recession. Their wealth allows them to keep purchasing.

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This would lead to a relative shift in demand for luxury goods toward those products favored by

this segment. As this segment is interested in loud products, it would be prudent for a manager

who understands her customers to alter the product line accordingly. Also, it may be that this

high need-for-status segment feels more deserving of their wealth and their right to spend it as

they please (Clee and Wicklund 1980). In turn, they are more likely to be insensitive to the plight

of the middle class. Or they may take the moral high ground, convincing themselves that

productive countries need consumers to keep consuming (Borgmann 2000) and that they are

simply doing their part.

In a similar vein, one explanation for the price increases is that they are the result of

effective segmentation—price insensitive consumers remain in market while price sensitive

consumers exit. The manufacturer can then either drop their prices to try to regain the price

sensitive segment or focus on the price insensitive segment and raise prices. Either strategy

might be the right one depending on the size of the two segments and pre-recession margins.

However, in their book on luxury strategy, Kapferer and Bastien (2009) proposed 18 “anti-laws

of marketing peculiar to luxury” that include making the product difficult to buy for clients (#7)

and raising prices over time to increase demand (#13). As they wrote, a “reasonable” price is a

price that appeals to reason, and thus to comparison shopping, which reduces the product to its

tangible qualities and reduces its intangible allure. While they did not address pricing during a

recession per se, Kapferer and Bastien made it clear that competing on price or fostering price

comparisons is unadvisable for a luxury brand. Prices “need to keep going up” (anti-law # 14).

It appears that Gucci and Louis Vuitton sought to replace eroding margins from lost sales

with increased margins from higher prices. The price increase was larger for Louis Vuitton than

Gucci: the former raised prices an average of 12% while the latter raised prices an average of

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2.5%. This is in line with basic economic principles. Retailers who run promotions will have

higher base prices than retailers who do not (Hoch, Drèze, and Purk 1994). Thus, when raising

prices to focus on the relatively price insensitive, promotions-oriented retailers will not need to

raise their prices as much as retailers who espouse a constant price policy. As a price setter that

follows a high-low strategy (Gucci), the regular price is on average relatively high. A price

increase would raise the base level but more so for the firm with the high-low pricing strategy

(Gucci) than for the firm that does not lower prices (Louis Vuitton). This is what we observe.

Conclusion

All of the hype about wealthy consumers turning away from conspicuous consumption

during a recession appears to come from self-reports and expert opinion, both of which appear to

involve significant impression management (Goffman 1959). Who wants to admit they are

turning it up rather than toning it down, or essentially showing off, when others are suffering?

Our data support the notion that those who are still in the market for luxury goods still like the

loud products and are willing to pay a hefty sum for them. Product lines of two of the largest,

best known, leading luxury goods manufacturers seem to have shifted toward catering to these

consumers. Consequently, new product introductions during the recession are louder and more

expensive than what was sold before.

This work is not without its limitations. Our findings are based solely on the products that

these two manufacturers sell online at their own company web sites. While they are two of the

leading names in luxury goods, and these products are representative of their catalog, a richer

picture could emerge from a more comprehensive examination of different brands across

numerous products lines over time. It was not prescience but good fortune that enabled us to

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possess comparable data from both before and during the recession. It would be useful for

researchers to explore how brand prominence changes in differing economic climates in other

categories. That would require identifying the appropriate data sets, or anticipating the next

recession.

At the time of writing this manuscript, the recession was certainly bad, but it could have

been much worse. Many indicators suggest it is about as bad as originally anticipated. In fact,

according to the Associated Press, buoyed by federal spending and programs like Cash for

Clunkers, the U.S. economy began growing again by the third quarter of 2009 slightly stronger

than expectations but well after our second data collection. We do not know what would have

happened if things had been expected to be worse, had gotten worse, or both. How luxury

consumers respond to various expectations and outcomes in the business cycle warrants further

study.

As with most platitudes, 2008-9 is not the first time that observers have predicted the

downfall of conspicuous consumption and a rise in “conservative consumption” (Shipchandler

1982). A general sentiment oft described is that consumers will economize out of necessity, but

as incomes rise and frugality gives way to profligacy, consumers will eschew their wasteful ways

of the past (Veblen noted it was not the display of wealth but its wasteful display that constituted

conspicuous consumption). Our findings suggest consumer researchers need to be certain

conspicuous consumption has declined before saying it will never reclaim its previous place in

consumer decision-making.

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Table 1: Change in Product Line from January 2008 to May 2009

Louis Vuitton Gucci

Number of

SKUs % of original product line

Number of SKUs

% of original product line

January 2008 236 100.0% 229 100.0% During Recession

Removed Products 142 60.2% 213 93.0%

Kept Products 94 39.8% 16 7.0% Added Products 101 42.8% 72 31.4% May 2009 195 82.6% 88 38.4%  

 

   

24  

Table 2: Change in Prices from January 2008 to May 2009

Louis Vuitton Gucci

Brand

Prominence Price 2008

Price 2009

Brand Prominence

Price 2008

Price 2009

January 2008 4.73 $1,238 4.53 $1,448 During Recession Removed Products 4.63 $1,268 4.52 $1,451 Kept Products 4.89 $1,205 $1,351 4.60 $1,420 $1,455 Added Products 5.32 $1,873 5.20 $1,695 May 2009 5.10 $1,622 5.09 $1,647

 

   

25  

Figure 1: Dow Jones Industrial Average

 

 

 

0

5000

10000

15000Pre‐Recession Data Collection

Post‐Recession Data Collection

26  

Figure 2: Loudness Distribution Across Louis Vuitton Handbags in January 2008 and May 2009

0%

10%

20%

30%

40%

50%

1 2 3 4 5 6 7

Brand Prominence

January 2008 May 2009

27  

Figure 3: Loudness Distribution Across Gucci Handbags in January 2008 and May 2009

 

0%

10%

20%

30%

40%

50%

1 2 3 4 5 6 7

Brand Prominence

January 2008 May 2009