Influence Of External Cues On Luxury Price-taking Behavior

With an increasing and enormous population, the middle-class has become one of the most attractive target group for luxury in the booming Chinese luxury market. On the one hand, these consumers are limited in spending power; on the other hand, they largely rely on the external cues to make purchase decisions. Thus, it will be of great importance to find out how external cues influence price-taking behavior. By means of ERP experiment we explored the underlying neuro-psychological mechanism of the impact of external cues on price-taking behavior.In study one, two experiments were conducted focusing on country-of-origin cue: one explored the influence of uni-/bi-national cue on luxury price-taking behavior; the other explored the influence of macro/micro-image on luxury price-taking behavior. Study two comprises two experiments focusing on logo cue:one explored how logo/no-logo affects luxury price-taking behavior; the other explored how logo types affect luxury price-taking behavior.Main findings and innovation points are as follows:(1) The "ideal country-of-origin effect" and the "loud logo effect" are found in luxury price-taking decisions. It reveals that the middle-class consumers are willing to exchange "wealth" for "social prestige signals". The closer the country-of-origin cue is to "the most ideal country-of-origin" (e.g., in the experiment of watches "Swiss brand Swiss production"), the more price-taking behaviors are motivated. The easier the logo cue is recognized, the more price-taking behaviors are motivated. Both of these two effects reflects the pursue of social recognition and the consumption conception of "spending money on prestige".(2) The effect of external cues on price-taking is driven by both cognitional and emotional factors. The neuroscience indicators of price-taking cognitive conflict and price-taking affect are found. Country-of-origin and logo cues induce consumers to make heuristic judgement about functional value and conspicuous value. In consumers’ conscious and subconscious mind, the closer the country-of-origin image is to the ideal country-of-origin, the higher perceived functional value is attached to the luxury good; the more easily brand logo will be recognized, the higher perceived conspicuous value is attached. Both of them leads to a good match of product value and its price, so the cognitive conflict of price-taking behavior is low, and thus the probability of making price-taking decision is high. Meanwhile, higher anticipatory value exerts higher emotional arousal, which makes consumers more likely to take the price, and vice versa. Low cognitive conflict and high price-taking affect arousal promote the price-taking behavior together. N2 reflects the price-taking cognitive conflicts; high cognitive conflicts are measured by large N2 amplitudes. LPP reflects the arousal of price affect; high arousals are measured by large LPP amplitudes.(3) Different types of external cues (country-of-origin cue or logo cue) lead to the same speed of cognitive and emotion processing process. Perceived price-taking cognitive conflicts are detected around 300 ms after stimulus onset and price affect arousals are detected around 500 ms after stimulus onset, regardless of which kind of external cue is used as stimulus. This finding indicated that the types of external cues do not affect the speed of brain processing process of price-taking cognitive conflicts and emotion arousal. Both logo cue and country-of-origin cue have the features of unconscious starting and fast processing, which may be taken as the automatic process of cognitive processing.