Rachel Cruze: How Luxury Brands Trick You Into Spending More
Written by
Ashley Donohoe
Edited by
Jenna Klaverweiden
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Current Statista data shows that luxury goods are expected to bring in around $101 billion in revenue in the U.S. alone this year.
According to financial expert and author Rachel Cruze, some luxury products are worth buying when they’re high quality and don’t require breaking the budget. The problem is overspending on such items, which can easily lead to debt.
In a recent YouTube video, Cruze discussed how luxury brands can trick you into spending more. Here’s what to look for so you don’t fall for money-wasting marketing tactics.
Attractive Financing Options and Deals
While this practice isn’t unique to luxury retailers, some stores entice customers with attractive financing options that make expensive purchases more accessible and potentially come with deals. Cruze gave the example of a store credit card that offers money off a purchase.
The goal is to keep customers returning to spend more, benefiting the store and brands. Unfortunately, customers can end up paying high interest rates on these cards. According to a LendingTree report, the average annual percentage rate for a new store credit card is 31%. So it’s wiser to avoid opening store cards to save money.
Some related tactics that can encourage overspending, according to Cruze, include “buy now, pay later” plans, free shipping promotions and “buy one, get one free” offers.
Exploitation of Price-Value Bias
A common psychological tactic luxury brands use is making customers feel that expensive items are more worthy or appealing than lower-priced alternatives. Sometimes, the luxury items might even be of poorer quality.
“So this allows luxury brands to make more money because they can market their products as exclusive by charging more while spending less and less to make their product in the warehouse,” Cruze said.
Those who like to appear to live luxuriously are especially susceptible to falling for this trick and could end up paying continually higher prices. To avoid excess spending, follow the basic principle of living within your means and understand that price doesn’t necessarily define quality.
Broad Exposure to Luxury Products
According to Cruze, it’s common to see luxury brands and products on social media platforms like TikTok and Instagram. Seeing influencers and others online showing off luxury products can make consumers believe that the average person lives the high life.
While the algorithm might show seemingly normal people with private planes, fancy cars and designer clothes, the reality is that most don’t have the budget for these things. A Ramsey Solutions blog post mentioned that even many wealthy people avoid “keeping up with the Joneses.”
Rather than believing that luxury is the norm, understand your budget to make reasonable purchase decisions.
Products Marketed as ‘Quick’ Upgrades
Luxury brands also use emotional marketing tactics that appeal to non-rich people who want a quick way to upgrade their lifestyles. For example, they might suggest buying an expensive accessory that goes with a basic outfit and creates the impression of accessible luxury.
“People are like, ‘Oh my gosh, well I can’t afford a $50,000 down payment on a house, but I’ll get a $3,000 bag just to make me feel better, right?'” Cruze explained.
In reality, splurging on that luxury item isn’t a quick fix that improves your standard of living and could further hurt your finances.
Fake Exclusivity
“Major brands like Nike and Gucci have admitted to destroying their own products and marketing them as sold out to create this feeling of scarcity,” Cruze said.
Chasing after hyped-up, hard-to-get products could lead you to buy something you don’t even need and can’t afford. Cruze recommended holding off on such purchases and considering your actual financial situation whenever you think about spending on luxuries.
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