Sustainable consumer decision-making inspired by luxurious goods

There is no doubt that globalization contributed heavily to development of modern world through increase in trades and rising importance of consumerism. Ordinary people hold great power because as consumers they decide on the path that companies follow which shapes the economy. Every day they “vote with their wallets” influencing the economic growth and therefore, shaping the world.

Humanity faces very serious threat of climate catastrophe. The structure of the economy may change due to shifts in people’s values and changing demand. Therefore, it may be beneficial to look how consumers’ choices may influence this change. I would like to describe the decision-making process that is standing behind the purchasing decisions influenced by sustainability.

Economic perspective

According to neoclassical economists the purchasing decisions are made rationally based on maximization of utility and producing the best outcome for themselves. However, modern view on economy argues that consumer behaviors are often economically irrational. Behavioral economy states that consumers’ choices can be influenced by heuristics which are mental shortcuts used to make decisions. Consumers may be using time discount rates which impact immediate costs or benefits compared to future costs or benefits. Moreover, it is crucial to notice that altruistic behavior may cause that well-being of others or interest to develop common good determine one’s action instead of selfish maximization of one’s interest (Goodwin et al., 2020). This variety of factors shows how complex the decision-making process may be.

Human needs

As Maslow indicates people have at least five sets of needs which we strive to realize (1943). They currently are shown in form of a pyramid that starts with physiological needs, safety, love and belonging, self-esteem and self-actualization. However, in the initial paper Maslow indicates that the structure may differ based on an individual. For some people self-esteem may be more important than love, or creative self-actualization may be more crucial than fulfilling physiological needs.

Personal values and their impact

Another concept that may affect decision-making process are values. Ahuvia argues that people have multiple values, that coexist on the same level and are often inconsistent with each other (2008). When a person decides, he or she must often choose to accomplish one of a few values that are on the same level of importance for people and sometimes compete. This is a simpler solution than trying to rank the values in an order based on their importance. It can also explain why it is so difficult for some people to make certain decisions. Human decisions are often fickle which may be caused by the fact that they depend on clashing values.

Moreover, it was proven by researchers that increased income does not impact happiness of an individual. Oftentimes people act as if more money would provide greater happiness whereas it does not produce significant changes in it. Once a revenue threshold that allows for meeting basic needs is achieved, the money becomes much less significant in increasing happiness and subjective well-being. Traits of happy personality such as optimism, control, and self-esteem may have much higher impact (Ahuvia, 2008).

Product functionalities

Psychology distinguishes various functions of products. Tangible products have two main functions: instrumental and symbolic. Instrumental function has five further categories. They include utilitarian function connected with accomplishing the main function of the product that respond to every-day needs. Next, there is hedonistic function that is aimed to maximize positive emotions and feelings that come from obtaining a product. Interpersonal function addresses need to establish and maintain social connections. Economic function threats products as means to ensure financial liquidity and secure funds which can be addressed by a bank account or pieces of art. Cognitive function is fifth one and allows to explore and learn about the external environment. Instrumental categories determine what are the main purposes of a product as a tool (Górnik-Durose, 2002).

Symbolic function is more abstract and can be an alternative way of social communication. Symbolic function divides into three more categories. Expressive function serves as an extension of self, display of own social identity or symbol of own personality. Sentimental function if served when an item is used to document personal history or relations. There is also social function thanks to which products become symbols of oftentimes prestigious position in society, power, or wealth (Górnik-Durose, 2002).

Lastly, next to instrumental and symbolic functions, there is also cultural aspect of products. Cultural function allows to define and stabilize the culture. They may also change it and make it more dynamic (Górnik-Durose, 2002).

Górnik-Dubrose describes that the functionalities are not constant. For example, a car with air conditioning used to be perceived as luxurious but now this is one of main functionalities in a vehicle that is demanded by all customers not just those on the high-end. She mentions that they may differ depending on the stage of life. Preferences and utility depend on variety of factors including socio-economic status. The fact that functionalities change influences perceived utility and may influence our willingness to buy a product.

Therefore, it may be accurate to assume that some functionalities could change through time, considering cultural changes, and evolving consumer values.

Discussion

Considering that human values and needs are competing with each other, it may be possible to change buying patterns. Increasing subjective importance of some values or functionalities such as impact on the environment may persuade people to choose more eco-friendly products. There is even a concept of green consumerism in the economy which means that decisions can be based on environmental criteria (Goodwin et al., 2020). However, some people argue that consumerism is harmful itself and it is not enough to switch from a harmful product to one that is slightly less harmful. The consumption should be limited because only then it will be able to make an impact. To minimize the environmental impact that comes with lifecycle of a product, a person may also not buy an item at all, ensure it is used properly, maintained, and handled with care and repaired when needed.

High consumption is not only bad to the environment but also not beneficial to people themselves. It may produce a small short-term sense of pleasure but on the long-term it may not be plausible to buy another unnecessary item. It is not enough to tell people that buying will not make them happy since consumption can also be used to influence relationships and identity. Strong focus on possibility to buy many things and fixation on high income may even lower perceived level of happiness (Ahuvia, 2008). Therefore, consumption may even be psychologically harmful.

Therefore, Ahuvia raises so called “Rolex dilemma”. A luxurious Rolex costing at least $6000 is functionally inferior to a cheaper $40 watch. There is no point to pay more for such item. However, such stainless-steel watch made by well-paid and well-threated craftspeople is more ecological. It is not outsourced to a less developed country where people are exploited and not threated well. Moreover, it can also serve more than one product function and next to standard functionality of showing time, it also may be good for allocation of money. Moreover, it boosts ego by showing a certain status of a person.

Such approach of maximization products functionalities may be considered especially valuable when it comes to electronic equipment. It may not be necessary to buy another shirt or pair of shoes, but we cannot imagine life without some electric equipment such as light, refrigerators, washing machines or currently also smartphones. Moreover, smartphones actually may have multiple functionalities including an interpersonal function allowing to contact with others, hedonistic function that allows to browse internet and play games for fun, economic function enabling access to bank accounts, and even cognitive function allowing to learn more about the word though the Internet. Phone can also have sentimental function, may be a symbol of status or be extension of self. On the other hand, it may be produced by poorly paid workers and the lifetime of a smartphone is very short. In 2020 a lifetime of a phone was less than 3 years (O'Dea, 2022). After that time a person is left with a spare phone that is not used anymore. It can be sold and therefore, the lifespan may be prolonged but once it breaks or the software is no longer updated, it is better to buy new one instead of trying to repair it. On contrary Rolex is an item that is worth repairing due to its value.

Research indicates that people use different reasoning when making sustainable decisions. Economically sustainable decisions often focus on avoiding negative outcomes of buying unneeded or unaffordable product, when purchases are associated with immediate and future happiness (Hüttel et al., 2017). This may seem contradicting with Ahuvia’s conclusions (2008), but in his research he focused on the impact of money not the purchase itself. Therefore, even if higher earnings do not contribute to happiness but purchase itself may be associated with greater happiness.

The difference between motivation to make sustainable or non-sustainable decision may explain why sustainable decisions are often associated with a sacrifice. It was indicated that it also has very weak ties with increased well-being of a person (Hüttel et al., 2017). The loss aversion which is part of prospect theory states that people perceive loss of a certain value as more painful than increase in happiness that comes with gaining the same value (Tversky & Kahneman, 1992). Therefore, I believe this is an alarming conclusion that people perceive a sustainable decision as sacrifice or loss.

It could be useful to try to change the perception of non-sustainable purchase decisions as potentially environmentally harmful. It is important to consider that potential loss would need to account for time discount which lowers the weight of potential loss in current decision as it happens for example with people who eat sweets knowing that they would regret it later. Eating sweets now is perceived as more valuable than painful is gaining weight in the future.

European Union has already changed energy labels for electric equipment to make them simpler and easier to read. The energy scale was also changed from a confusing A+++ to D scale to a simpler A to G scale[1]. It also incentivizes producers to develop more energy efficient equipment since hardly any equipment can currently be described by label A. EU promoting eco-design makes it easier for consumers to make better decisions.

Moreover, luxurious products can be an inspiration when promoting more ecological choices. Introducing new functionalities and values to existing products could swing consumers to change their purchase patterns without the need to make them feel like they lose something. Some research suggests that buying fewer high-quality luxurious products may be an alternative and good approach to promote. Changing consumer patterns and making them more aware of their purchases could show that buying a more expensive product may be better than buying several cheaper but worse quality ones. High-end products are often better quality or at least promote better quality and longer life cycle as the Rolex case showed.

Conclusions

Consumerism is a big challenge for supporters of sustainable development. Data shows that some changes must happen in the way societies operate. Institutions such as European Union already introduces some changes and legislation that promote more ecological purchases. However, some changes in consumer behavior are also needed. It may be challenging because people associate sustainable decisions with a sacrifice. However, luxury products show that when people are provided with a significant incentive to buy a product, they can pay much more for a product that can easily be bought much cheaper. Luxury items often boost ego of a client and symbolize status. They may have interpersonal function because they allow people to become a part of an elite circle of people and may have hedonistic functions that increase happiness. I believe that it could be possible for people to perceive sustainable decisions as better than non-sustainable purchases.

References

Ahuvia, A. (2008). If money doesn’t make us happy, why do we act as if it does?. Journal Of Economic Psychology, 29(4), 491-507. https://doi.org/10.1016/j.joep.2007.11.005

Goodwin, N., Harris, J., Rajkarnikar, P., Roach, B., & Thornton, T. (2020). Essentials of economics in context (1st ed., p. "Sample Chapter for Early Release"). Routledge.

Górnik-Durose, M. (2002). Psychologiczne aspekty posiadania - między instrumentalnością a społeczną użytecznością dóbr materialnych. Wydaw. UŚ.

Hüttel, A., Ziesemer, F., Peyer, M., & Balderjahn, I. (2017). To purchase or not? Why consumers make economically (non-)sustainable consumption choices. Journal Of Cleaner Production, 174, 827-836. https://doi.org/10.1016/j.jclepro.2017.11.019

Maslow, A. (1943). A theory of human motivation. Psychological Review, 50(4), 370-396. https://doi.org/10.1037/h0054346

O'Dea, S. (2022). Smartphones replacement cycle in the US 2014-2025 | Statista. Statista. Retrieved 29 June 2022, from https://www.statista.com/statistics/619788/average-smartphone-life/.

Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal Of Risk And Uncertainty, 5(4), 297-323. https://doi.org/10.1007/bf00122574

[1] About the energy label and ecodesign. European Commission - European Commission. (2022). Retrieved 29 June 2022, from https://ec.europa.eu/info/energy-climate-change-environment/standards-tools-and-labels/products-labelling-rules-and-requirements/energy-label-and-ecodesign/about_en.