License to Thrill

January 1, 2011

An estimated 2 billion people around the world watched the modern day fairy tale wedding of Prince William and Kate Middleton. The sumptuous ceremonies were telecast live in many countries around the world. While the British Royalty was displayed in full regalia, it may not have been as clear that the bride and groom had previously made an important choice. “No gifts, please” they said directing all well wishers to a set of favored charities. Those charities are said to have received a significant financial boost in their efforts to make the world a better place.  Good for them, right? But there is also an important psychological effect at play here.

“When individuals have had a chance to boost their self-image by, for example, a virtuous act, they are subsequently more likely to engage in self-indulgent consumption” says Ravi Dhar Professor of Marketing at Yale School of Management. He and Uzma Khan of Stanford have studied what happens when consumers make sequences of choices in the market place. In particular they were interested in understanding if an altruistic choice made earlier allows a consumer to indulge later. They call this the “Licensing effect”. 

Over the course of several experiments they were able to show that indeed such an effect does exist. In a sample study, participants who were asked to imagine donating time to charity were more likely to subsequently choose a luxury item (designer jeans) over an utilitarian item (vacuum cleaner). Several experiments were run to rule out other possible explanations. Effectively, people think better of themselves and therefore feel free to splurge. This is technically known as priming the self-concept. What is really interesting here is that simply imagining an altruistic act seems sufficient for consumers to give themselves the license to indulge later.

How could this work in the real world and what can marketers of luxury goods do? Anything that would make consumers think better of themselves could work. This doesn’t have to take the form of luxuries being framed as necessities. Information on charities and sign-ups at the entrances to luxury-goods stores could be one option. This could be accomplished even more easily online. Since the effect happens unconsciously it may be better not to draw an explicit connection between the altruistic act and the subsequent indulgence.

Did luxury good manufacturers get hurt by the Royals refusing gifts? Possibly. An even more intriguing thought is that they were actually helped by wedding invitees contributing to charity and hence feeling licensed to indulge a bit more. One could even argue that reading about the charitable contributions may have influenced many others around the world to splurge at some level, so it could have been a net positive for makers of luxury goods.

What about William and Kate? Did they effectively “license” themselves to a Royal wedding by first engaging in a substantial act of charity? We’ll never know for sure, but it is likely that their charitable act had some effect on their subsequent choices. Perhaps it led to that indulgent honeymoon in the Seychelles.

Rajan Sambandam is a Knowledge Partner of the Yale Center for Customer Insights and Chief Research Officer of TRC Market Research, new product development firm located in suburban Philadelphia.

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