Luxury Cars Consumerism in the Middle East | Free Essay Example

Luxury Cars Consumerism in the Middle East

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Topic: Business & Economics
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Introduction

Modern dictionaries define luxury goods as items whose price is worth more than the functional properties of the product itself. The luxury market continues to grow exponentially. In 20 years, from 1985 to 2015, its market size grew from 20 billion to 250 billion (Global luxury good industry n.d). The Middle East also contributes to the expansion and development of luxury markets. Luxury cars remain some of the primary consumer products in the region (Global luxury car market size n.d). The purpose of this paper is to analyze consumer perceptions of luxury cars in the Middle East through a prism of historical and market developments, consumer behavior, and psychological aspects of purchase and ownership.

History of Luxury Consumerism in the Middle East – A Culture of Cars

The first issue that needs to be examined and explored in this paper is why luxury cars are so popular in the Middle East. Many nations have long-standing traditions of luxury and consumerism, but none of them is as focused on cars as the upper classes of Saudi Arabia, the UAE, and other wealthy Middle-Eastern Countries. What makes this tradition even more confusing is the fact that Islamic influences in the Middle East are strong. Islam is a strict religion, which frowns upon overconsumption of goods.

Upon investigating the available materials related to the subject, the roots of luxury consumerism in the Middle East become clearer. The Middle East and the Arabian Peninsula have long-standing equestrian traditions. Arab horses are prized across the world as some of the best in existence (The Arabian horse n.d). Some researchers make a connection between these traditions and the budding car culture that is spreading across the Middle East. Modern Arabs use cars in order to show off their status and skills as well as daring, performing dangerous maneuvers such as the Arab drift (Tafheet), which involves driving a car using only two wheels either on the right or on the left side.

The growth of luxury markets in the Middle East is attributed to its richness in oil, gas, and other materials that contribute to the nations’ wealth, enabling the upper class to purchase luxury cars and other commodities (Faust 2012). While Islam remains a very prominent factor in the Arab world, Saudi Arabia and the UAE have been undergoing a process of gradual secularization, at least when it comes to the upper class. A similar process was seen in Europe during the 19th and 20th centuries, where the ability of the Church to enforce lifestyles and moral dogmas significantly diminished (Hakeem 2013).

One last factor that influenced the appearance of car culture in the Middle East and namely the Arabian Peninsula is the geographic positioning of some of the countries. As it stands, the majority of luxury cars and car components are produced in China. Cars are shipped across the Indian Ocean and through the Gulf of Suez, where Saudi Arabia and the UAE have important trading ports (Held & Ulrichsen 2013). The proximity of the trade route and favorable import policies make luxury cars cheaper than anywhere else, making them more available to the upper-class populace.

To summarize our findings, the Middle East has a predisposition towards luxury market growth due to an emerging car culture that stems from globalization trends, religious secularization, the economic situation in the Gulf, and historical predispositions.

The observed phenomenon can be explained from the perspective of the Planned Behavior Theory. Indeed, the norm, which suggests that luxury cars should be viewed as an attribute of high social status, combined with the attitudes of the target population and the control exerted by modern media leads to shaping buyers intentions, i.e., the desire to purchase a luxurious car. The intent, in turn, informs the further choices made by the Middle East population and, therefore, defines buyers’ behavior, i.e., the propensity toward purchasing luxury cars (Wee, Ariff, Zakuan & Tajudin ‎2014).

The Current State of Luxury Car Market in the Middle East

The state of the luxury car market in the Middle East is largely defined by the countries of the GCC (Gulf Cooperation Council), which includes Saudi Arabia, the UAE, Bahrain, Oman, Kuwait, and Qatar. With Iraq, Syria, and Libya being affected by wars, along with Iran subjected to international isolation, these countries retain a reasonably high level of economic prosperity (Chalhoub Group 2014). GCC luxury market prospered the most between 2008-2012 when the rest of the world was hit by an international banking crisis provoked by uncontrolled hedge funding operations. Due to the majority of banks in the Middle East operating under the rules and customs of Islamic banking, which explicitly forbids hedge funding and loaning (Iqbal & Molyneux 2016), the GCC managed to avoid the repercussions of the crisis, which significantly improved its economic standing and contributed to an increased growth in the luxury car market (Global luxury car markets report 2017).

However, the oil price crisis that began in 2013 and continues up to this day significantly affected the economies of the GCC countries (Chandon, Laurent & Valette-Florence 2017). Low fuel prices and reduced government spending caused a decline in the luxury car market. Market share and profits of major German companies were severely diminished (Selected luxury car brands n.d). By the end of 2017, however, Middle-Eastern luxury car market started showing signs of recovery (A study of the global luxury car market 2017). Although the major luxury car producers have lost ground, other companies such as Ferrari, Aston-Martin, and Tesla started to make progress in Saudi Arabia and the UAE, claiming over 10% of the overall market share (Kane 2017).

The observed phenomenon can be interpreted based on the tenets of the Theory of Buyer Behavior suggested by Howard in 1963 (Holland, Jacobs & Klein 2016). The theory allows incorporating not only social but also economic and financial factors into account when considering the way in which consumers’ behavior is shaped (Holland et al. 2016). Implying that the extraneous variables affect the intervening variables, thus, leading to the development of specific purchasing habits, the framework shows that the propensity toward buying luxury cars among the residents of Middle East is defined by the presence of global car producing companies with easily recognizable brands such as Ferrari, Tesla, etc., and the recent recovery from a financial crisis. Furthermore, the theory suggests that the satisfaction experienced by buyers as a result of their choices contributes to the focus on luxury brands is the primary driving factor behind the development of the identified habits (Holland et al. 2016). In other words, it is the combination of socioeconomic factors that defines the propensity toward buying luxury cars that can be observed among the residents of Middle East at present.

These tendencies show that economic prosperity remains the most important factor in the Middle Eastern luxury car market. Middle Eastern upper class does not put luxury above sensibility. This trait is universal across all modern luxury markets, which includes Asia, Europe, and the USA. The emergence of new producers in the Middle Eastern luxury car market also shows that in the event of an economic crisis, customers are willing to consider less famous luxury brand names who offer comparative quality products at smaller prices.

Consumer Behavior of Luxury Customers in the Middle East

Upon investigating consumer behavior of luxury customers in the Middle East, it becomes apparent that it is motivated by a series of parameters dictated by personal experiences, societal norms, and peer pressure. Most current owners of luxury cars have experience in driving and have owned a car previously. Their attitudes and evaluating criteria are thus based on previous experiences and satisfaction derived from it. In some cases, personal biases and opinions towards particular brands are formulated by the perceptions of various brands in the marketplace. Purchasing power plays a significant role in defining the choice of model and brand for a good portion of luxury customers. These customers are influenced the most by the economic situation in the country, as they are walking on the edge between the upper and the middle class. Customers with lower purchasing power tend to prefer low luxury class models, which are commonly ignored by customers with higher purchasing power. Typically, customers in the Middle East make a decision about purchasing a luxury car with the following parameters in mind (Anurit 2015):

  • Objective qualities: Reliability, product quality, durability, safety, security, performance, technology, efficiency, and handling.
  • Subjective qualities: Value, status, style, comfort, prestige, and visual impact.

In luxury car purchases, subjective qualities of the product often outweigh their objective parameters, as the Middle-Eastern upper class often ignores robust and reliable designs over more expensive models with comparable characteristics. These trends indicate that in luxury cars, Middle-Eastern customers are more concerned with the intangible qualities of the vehicle as opposed to their physical properties.

The identified phenomenon aligns with the key tenets of the Consumer Decision Model, which suggests that the choices made by buyers are affected significantly by the necessity to locate the required information both internally and externally (Wee ‎2014). For example, the environmental influence, which is linked directly to the pressure of family members, the existing standards with which buyers feel the need to comply, etc., defines the choices of the Middle East residents just as much as personal ones, i.e., their idea of economic and social well-being, their interpretation of wealth, etc. As a result, encompassing both subjective and objective factors that shape the purchasing behaviors of the target population becomes a possibility. The theory supports the notion that people have to pass through a complex process to adjusting to a particular product being introduced into their lives, as well as gradually developing a connection to the identified item. Transferring from exposure to comprehension to acceptance and, finally, to retention of a particular service or product as part and parcel of their life, the residents of the Middle East display the behaviors that can be explained from the perspective of the Consumer Decision Model. In other words, both internal and external, i.e., subjective and objective factors, must be taken into consideration when defining the prerequisites for developing the tendency to buy luxurious cars observed among the Middle east citizens.

Psychological Aspects of Consumerism in Middle-Eastern Customers

Social Symbolism

Display of wealth is an important social symbol in Middle-Eastern societies. Upper-class customers tend to be socially oriented people, and to them, making a good impression on others is paramount (Kahle & Chiagouris 2014). They are concerned with perceptions and gaining approval from the society in order to receive feelings of personal gratification. Many customers purchase luxury cars in order to satisfy their need for symbolism. Typically, the purchase is motivated by a desire to associate with their current class position or the position above, which is a significant determinant in buying behavior. Thus, the social image of the brand in countries such as Saudi Arabia or the UAE is very important for the luxury product to see success.

It could be argued that the current perception of luxury cars in the Middle East can be observed not only due to the connection between owning a luxurious car and having a high social status but also because of the global trends. However, a closer look at the current global car market will show that these are not expensive and luxurious cars but eco-friendly vehicles that are viewed at present as a priority because of the rise in the levels of environmental concern (Wee ‎2014). Therefore, the possession of luxurious vehicles can only be explained by the need among the residents of the Middle East to maintain their social status high.

Cars as Publically Consumed Goods

Cars are considered publically-consumed goods, as in goods that are used in public view (Vel et al. 2011). They can be used as a way of projecting one’s self-perception and the consumer’s standing in the society. As such, luxury car brands are very sensitive to social influence, as they are pieces of wealth that are the most visible when compared to other luxury accessories such as watches, smartphones, and jewelry. In the Middle East, customers are concerned with self-image, status, and social perceptions of their possessions (Vel et al. 2011). These factors tie in with other psychological concepts of consumerism, such as consumer materialism and conspicuous consumption.

It should be borne in mind, though, that luxury cars do not technically fall under the category of publically-consumed goods since they can be excluded from everyday use as opposed to more humble car models. While regular cars can be termed as essential to the successful management of personal and professional issues, luxury cars belong to the realm of decorative elements, even though they do perform basic transportation functions.

Nevertheless, the attitude toward luxury cars can be altered because of the presence of a cheaper alternative. Therefore, the choices made by customers in accordance with the Consumer Decision Model can be interpreted as an attempt to gain a higher social status based on the current concept of wealth as the marker of one’s position in the Middle East society. Consequently, the desire to be ranked high in the Middle East social hierarchy must be regarded as one of the driving forces behind the decisions made by the target demographics in the Middle East car market.

Materialism as a Factor

Materialism stands for value and meaning that a customer attaches to a particular item or luxury brand. Value and money are considered important factors to personal happiness and perceptions of success. Thus, consuming globally-acknowledged brands and purchasing luxury cars contributes to the customers’ feelings of happiness and self-worth (Murray 2016). The upper classes of Saudi Arabia and the UAE are considered the most materialistic in that regard, which contributes to naturally high levels of luxury purchases in these countries.

Status and Conspicuous Consumption

Conspicuous consumption affects upper-class customers in different degrees. The definition stands for the desire to gain status in the society by purchasing and consuming luxury goods. Middle-class and low-upper class customers in the Middle East purchase luxury cars in order to affiliate themselves with higher societal classes (Wang 2015). Typically, these customers purchase low-luxury models, as others are often found outside of their purchasing range. Conspicuous consumption is prevalent among Arabs due to many of them coming from wealthy families. Thus, they feel obligated to purchase luxury cars as a means to uphold their family’s position and power.

Cultural Changes

Upon researching Middle-Eastern history and culture, it was discovered that cultural and social perceptions of wealth had changed considerably over the past 27 years (Zaharia & Zaharia 2015). Before the rise of GCC countries to economic prosperity, the psychology of the average upper-class car consumer was largely driven by the need to purchase a quality product. Thus, the customer was primarily motivated by the car’s physical qualities, which determined its status as a luxury. However, in the past several decades this perception shifted. Due to exposure to western lifestyles and the ideals of consumerism, modern upper-class customers grade cars based on westernized perceptions of status and luxury.

Social Consumption as a Motivator

Luxury labels are no longer confined to upper classes alone. Low and middle economic classes of the society have been observed to purchase luxury items in order to project a desire to belong to a higher social class and to seek out approval from peers and family. When it comes to luxury cars, however, this motivator’s effect is lessened due to the fact luxury cars are well outside low and middle classes’ purchasing power. However, the UAE demonstrates this trend on a larger scale, often taking loans from their peers and family in order to afford a luxury car (Zaharia & Zaharia 2015). This trend is contradictory in its nature, as it devolves into customers seeking approval from peers by purchasing cars for their money (Wang 2015). Therefore, the choices made by the Middle East citizens as far as the purchase of cars is concerned align with the primary tenets of two large consumer behavior theories, namely, the planned Behavior Theory and Consumer Decision Model. Particularly, both internal and external factors, i.e., the personal idea of wealth and social status combined with the pressure of the current stoical standards, determine the decisions made by Middle East citizens in the modern car market.

Recommendations for Marketing and Future Research

Theoretical Implications

This essay attempted to gather and synthesize the available information in regards to consumption of luxury cars by the Middle-Eastern upper class. The information used for analysis reflects on the situation as of the end of the year 2017. Conclusions and recommendations provided in this paper may become obsolete in the future. The available information seems to suggest that the societies of wealthy nations in the Middle East (primary consumers of luxury products) are contributing to the growth of luxury car markets in the region due to their economic prowess and exposure to western culture. Their pattern of behavior is best explained by materialism theory.

Marketing Practices Implications

As evidenced in this research, there are several factors that a new entrant must take into account when trying to penetrate Middle-Eastern luxury car markets. These factors are as follow (Writer 2017):

  • The company must possess a famous brand that is recognized both inside and outside of Middle East.
  • In order to push away existing brands, the product must possess superior or unique qualities when compared to its direct competitors in order to make up for lack of initial rapport within the country.
  • It is recommended to provide a variety of luxury cars in order to aim at the upper and lower luxury classes, thus encompassing the widest market potential.

Further Research

This paper is largely based on materials that consider countries of the GCC, which represent up to 80% of the Middle-Eastern luxury market. However, there is very little data in regards to luxury car markets in Iraq and Iran. Libya and Syria are currently engaged in military conflicts and post-civil war rebuilding processes, meaning their luxury marketing potential is extremely low. Further research must be conducted in order to fill the blanks in regards to luxury car consumption in the Middle East. In addition, existent data should be updated in order to accurately reflect the situation.

Conclusions

While luxury car consumption trends in the Middle East tend to mirror other luxury markets in many ways, they are deeply affected by the economic status of the region, religious rules and prohibitions, and common societal norms. Middle-Eastern upper-class customers are socially-oriented luxury consumers who use cars as means of projecting their status as well as for self-expression and showing off their driving skills. A new entrant to the market would need to take all of these factors into account in order for the new luxury car model to find success.

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