Imagine you want to buy a new car. Since you like the brand Audi you consider purchasing the their A3 Sportback model. Given your budget you have two options. First, you could buy the conventional powered A3 with the ambiente luxury interior package, the strongest available engine (2.0l TDI) and a high-end Bang & Olufsen sound system for € 37.580. Second, you could purchase the A3 e-tron with basic interior, a 1.4l hybrid engine that is beneficial for the environment and a basic sound system for € 37.900 (Prices: Audi, 2015). Which model would you choose?
Using a similar example, research by Griskevicius, Tybur, & Van den Bergh (2010) showed that when status motives were activated, more than half of the consumers (54.5%) chose the proenvironmental green car. They did so despite the fact that the hybrid version of the car was inferior in terms of performance, features and comfort, indicating that consumers engage in self-sacrificing behavior in order to gain status through proenvironmental behavior.
The example above shows that when status motives are present, consumers engage in a tradeoff between the benefits of signaling proenvironmental behavior and increased performance or luxury. Despite these results, it would be interesting to know whether in a status seeking setting there are other cognitive factors that increase the likelihood of overspending on hybrid & electric cars by motivating them to add additional performance and comfort features to their car configuration that offset the tradeoff mentioned above.
Licensing theory provides such a cognitive factor by maintaining that expressing the intent to engage in behavior that fosters an altruistic self-concept leads consumers to subsequently choose indulgence over non-indulgence Khan & Dhar (2006). By integrating licensing motives as a moderator on status seeking behavior regarding willingness to pay for hybrid/electric cars, this thesis intends to advance the theoretical literature on conspicuous conservation and overspending. The aim is to challenge the conclusion of previous research on conspicuous conservation where consumers were willing to sacrifice performance, features or comfort for a green signal. With this thesis I want to advance theory by showing that when status motives are coupled with licensing motives one can observe increased willingness to pay for hybrid/electric cars. If the theory proves to be correct, consumers may actually want to purchase hybrid and electric cars that have a positive effect on the environment while providing them with additional luxury and comfort.
The research question is as follows: What are the effects of licensing motives on willingness to pay for additional performance, luxury and comfort in a conspicuous conservation setting?
Answering this question will provide additional insight for marketing professionals in the automotive industry to tailor their car configurators and advertisement messages for hybrid and electric car models.
Overconsumption and Cars
In today's world we are confronted with the question of how much and how often to spend money on consumer goods on a daily basis. While spending money can provide us with happiness through the consumption of goods and services, it reduces our ability to spend in the future. Overconsumption is therefore an important research topic that affects consumers, researchers, public agents and marketers alike. In literature overconsumption is most commonly defined as the consumption of hedonic or vice goods that consumers do not necessarily need (Håkansson, 2014). Even though they are an extremely quickly depreciating asset, one of the areas consumers overspend on is cars. One can argue that all consumers need is a reliable and safe vehicle that get's them from A to B. A common rule of thumb for car purchases says that consumers should not spend more than 10% of annual gross income on transportation costs (Guillot, 2012). Nevertheless, it appears that when it comes to buying cars, financial sensibility becomes secondary for a lot of consumers and they tend to overspend on cars.
Traditionally, consumer behavior research has focused on the concept of conspicuous consumption in which status is achieved through the ostentatious display of wealth (Veblen, 1899/1965). Especially with regards to cars, conspicuous consumption is a strategy employed by men to signal their status by driving prestige cars (Saad & Vongas, 2009). Given the rapid growth of the market for hybrid and electric cars in recent years it is essential to understand why consumers might be willing to spend a premium of € 13.000-25.000 on these cars compared to conventionally powered models.
Fundamental human motives, which allowed our ancestors to survive, influence consumer behavior even in our modern times (Griskevicius & Kenrick, 2013). One of these evolutionary motives is status seeking behavior. Accordingly, being respected by others brings with it certain benefits, such as greater interpersonal influence, more material resources, higher self-esteem, and better health (Marmot, 2004).
Today, status seeking behavior can even be observed as motivation to purchase environmentally beneficial products. According to Sexton & Sexton (2014), conspicuous conservation is a phenomenon where “consumers seek status by undertaking costly actions to display prosocial behavior”. They found that consumers are willing to pay a premium for the unique green signal provided by the Toyota Prius hybrid car.
In line with this research, Griskevicius, Tybur & Van Bergh (2010) argue that consumers are willing incur higher costs to signal their altruistic behavior when purchasing a hybrid car. By considering costly signaling theory they show that environmentally conscious consumers are willing to sacrifice performance, features or comfort to buy cars that are more beneficial to the environment. They tested whether consumers were more willing to buy a more luxurious, higher performing car that has a traditional more-polluting engine or a less luxurious, lower performing, energy efficient hybrid car. The results show that when consumers are primed with status motives, they prefer the green vehicle over the more luxurious brown (conventional) vehicle given a similar price.
Sometimes consumers engage in activities that are inconsistent with their own interest. Indeed, Feiler & Soll (2010) conducted two empirical studies showing that consumers neglecting costs in their decision making tend to make unnecessary trips with their cars, thus damaging the environment and failing to serve their own self-interest. Similarly, improved fuel efficiency in cars has been proven to cause additional travel that offset the benefits to the environment (Small & Van Dender, 2007). Furthermore, academic work by Khan & Dhar (2006) has shown that when consumers make a choice that is related to a positive self-concept, it increases the likelihood that the subsequent choice will be governed by a more self-indulgent motive. Experiments by Catlin & Wang (2013) provide support to this idea of licensing behavior by showing that paper towel usage increased when a recycling bin was present in a public restroom compared to when the recycling option was not available. Accordingly, a prior environmentally responsible choice licenses less environmental behavior in subsequent choice.
In this thesis I want to apply the concept of licensing to the willingness to pay for additional features in a conspicuous conservation purchase scenario for hybrid/electric cars. Buying a green car under a status seeking motive is a choice that reinforces a positive self-concept. In fact, the community values this altruistic behavior and thus the intend to buy a green car is expected to make consumers feel positive about their choice. When faced with the subsequent choice of selecting additional features for their hybrid/electric car, the aim of this thesis is to show that a licensing effect leads to an increased willingness to pay, as consumer's reward themselves for their positive behavior by selecting indulgent features.
The aim is to build a model that explains how licensing motives increase consumer's willingness to pay more for hybrid/electric cars. In the scope of this thesis I hypothesize that indeed status motives lead to a higher willingness to pay for hybrid/electric cars, but licensing motives can moderate this relationship by increasing consumer's willingness to pay for performance, features or comfort when purchasing hybrid/electric vehicles. This hypothesis advances the research of Griskevicius, Tybur & Van Bergh, by including a moderating factor in the analysis that weakens the self-sacrifice motive. In short, consumers might be willing to pay for the green signal and increased performance and comfort.
The relationship of the independent variables (Status motive, and licensing motive) on the dependent variable (willingness to pay for performance and luxury features) can be investigated by designing a survey accordingly. First, respondents are primed with a short story on how environmental conscious behavior increases the status of the person engaging in this behavior. Then a choice scenario similar to the one described in the introduction section can elicit the amount that respondents are willing to pay for additional performance and luxury features. In a second scenario respondents are primed with a status motive and a licensing motive and are again asked to reveal the amount they are willing to pay for additional features. Survey data can then be analyzed using statistical methods to test the hypothesized relationships between the variables. The predicted result would then show that in the condition where status and licensing motives are coupled, respondents are willing to spend more on additional performance and luxury features.
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