Symbolic Consumption in Upscale Cafés

Abstract

The growth in premium coffee consumption in South Korea along with increased incomes and lifestyle changes has created important opportunities for marketers to target customers in the international market. To take advantage of these opportunities, it is critical to understand the underlying factors that motivate Gen Y coffee consumers in Korea in order to provide guidance for international food and beverage businesses. This study investigates three possible mechanisms in terms of the individual, social, and functional evaluations of customers with respect to coffee consumption in upscale cafés. The results of this study provide empirical evidence that the basic motivational drivers of Korean Gen Y consumers’ premium coffee consumption in cafés are similar to dimensions of luxury value such as materialism, conformity, conspicuous tendencies, and functional dimensions. Moreover, this study discovered the moderating effect of income source according to the context in which it is obtained (gifted money or earned money) in terms of young consumers spending habits.

Keywords

luxury foodservice materialism conformity conspicuous consumption café quality income source mental accounting Generation Y

Coffee is one of the most widely consumed beverages and internationally most traded commodity in the world (Weinberg & Bealer, 2001). In recent years, consumer demand in Western developed markets has declined under the pressures of the economic recession (Miller, 2009). However, a new coffee culture is growing substantially in emerging markets such as South Korea, China, and India (Gasparro, 2012; Isidore, 2012). The tea market has fallen by approximately half over the past 7 years in Korea, which has long been a nation of tea lovers (Han, 2012). Conversely, Korea’s coffee industry has dramatically increased over the past 10 years, seeing an explosion in terms of both imports and consumption. Figure 1 presents coffee bean imports to South Korea from 2007 to 2011 (Korea Customs Service, 2012). Moreover, the import of relatively cheap coffee beans from Vietnam has dropped, whereas the import of expensive Colombian beans has increased 47% (Korea Customs Service, 2012). With demand surging among Koreans for high-quality coffee, the dramatic rise of coffee indicates not only a change in tastes but also a cultural shift where Korea is more interested in global trends (Vaidyanathan, 2012).

Figure 1

Coffee Bean Imports of South Korea

As the demand for coffee grows, Korea appears to be becoming overcrowded, with more than 12,000 coffee shops across the country (Yoo, 2012). In the 5 years between 2006 and 2011, the number of coffee shops in Korea has risen by 887%, with sales climbing a 1,598% in the same period (Korea Customs Service, 2012). Seoul has the one of the highest concentrations of coffee shops in the world, with more than 4,200 cafés (Davis, 2013). Seattle, which is the city with the highest concentration of coffee shops in the United States, has 1,640 coffee shops (“America’s most caffeined city,” 2011). There are many brand coffee shops in Korea, including international brands such as Starbucks and Coffee Bean & Leafs and local brands such as Café Bene, Angel-In-Us, and Twosome Place (Yoo, 2012). Moreover, as consumers’ tastes become more sophisticated, independent upscale coffee shops have evolved into a highly specialized profession in recent years. For example, in the highly specialized coffee market in South Korea, consumers pay more than 10,000 Won (equivalent to about $8) to 40,000 Won (equivalent to about $34) for a high-quality cup of coffee at upscale cafés in Seoul (Kim, 2011).

The surging demand for coffee in Korea has been fueled in part by young urban professionals (Korea Custom Service, 2012). Despite evidence that the price of a cup of coffee is relatively expensive, young Korean consumers are willing to, and even enjoy paying for, a premium cup of coffee at a Western style café. Paradoxically, many young Korean consumers still rely on their parents for financial support (Fingerman, Miller, Birditt, & Zarit, 2009). In Korea, there is a “Little Emperors” syndrome where parents exclusively financially support their children (McNeal & Yeh, 1997). Globally, these “Little Emperors” can be considered equivalent to Generation Y born between 1980 and 1994 because many Asian Gen Y have exclusive financial and emotional support from their parents (McNeal & Yeh, 1997). Tracking where their discretionary income is obtained is important because their spending is shaped by “mental accounting,” which is associated with a different marginal propensity to consume (Thaler, 1985). The origin of young adult consumers’ incomes, whether it is gifted money (pocket money) or personally earned, is an interesting and important issue to explore in terms of their spending at upscale cafés.

Growing coffee consumption in Korea is an outstanding phenomenon and is worth investigating in an attempt to understand the underlying factors that motivate Gen Y coffee consumers. Little empirical research, however, has examined the factors underlying this phenomenon, particularly those driving consumers’ behaviors in the global foodservice industry. It is critical to determine how these preferences for premium coffee are initiated and persist in order to provide guidance for international food and beverage businesses that can benefit from these preferences. We investigated three possible mechanisms proposed in the previous literature to explain such desires. Customer value perceptions in terms of the individual, social, and functional evaluations of customers with respect to upscale coffee house were examined. First, in terms of individual values this study included materialism, which has been connected to consumer responses to globalization (Alden, Steenkamp, & Batra, 2006). A linkage between Western-controlled mass media and the natural desire of individuals to improve their lives materially is relevant to the current research because it implies that materialistic tendencies will drive certain consumption behaviors. Second, susceptibility to reference groups and conspicuous tendencies are included in the current study in terms of social values. Social values refer to the values that are recognized within a social group or the general public, which may significantly affect the interdependent culture that is dominant in East Asian countries (Wong & Ahuvia, 1998). Third, functional values address core quality, such as product quality, service quality, and atmosphere, which influence consumes postconsumption behaviors (Jang & Namkung, 2009; Tan & Lo, 2008).

Thus, the authors find it academically stimulating and useful for marketers to better understand why Korean consumers consume coffee, especially those who make purchases for the sake of status, and how those behaviors affect marketing systems. Therefore, this study is unique in the sense that it examines Korean Gen Y consumers’ desires and the influential factors behind their behavioral intentions in café culture. More specifically, the objectives of this study were (a) to examine the motivational drivers of individual and social related values on consuming high-cost specialty coffee at upscale cafés and on behavioral intentions, such as revisit intentions and eWOM (electronic word of mouth); (b) to investigate which functional values of cafés (product quality, service quality, and atmosphere) are significant to behavioral intentions; and (c) to test the moderating effect of income source on the relationships between psychological aspects, café quality attributes, and behavioral intentions.

Literature review

Drivers of Upscale Café Consumption

Considerable research has examined why consumers purchase luxury products. Luxury products are used to convey a person’s level of prestige and signal status (Belk, 1985; Richins, 1994). However, little research has examined why consumers go to luxury restaurants or upscale cafés. It is important for foodservice marketers and researchers to understand what consumers believe about upscale cafés, and whether their perceptions of café values directly explain why consumers are willing to pay for premium priced coffee. To acquire information regarding Gen Y consumers in an emerging market, the sole consideration of functional value motives is not sufficient to explain customer perceptions of and motives for going to cafés. To capture a holistic picture of symbolic consumption in the foodservices, we adopted a value-based segmentation of luxury consumption behavior in terms of socially oriented consumer motives, individual aspects, and functional aspects (Wiedmann, Hennigs, & Siebels, 2009). The psychological benefits of social and personal values are considered the main factors that affect Gen Y consumers and distinguishe them from other cohort consumers.

Materialism

Today, materialistic value is regarded as significant in shaping consumer behavior. In consumer research, materialistic value has been defined as “the importance a consumer attaches to worldly possessions” (Belk, 1985). More specifically, materialism can be described as the degree to which an individual assigns high priority to material possessions (Chang & Arkin, 2002). With globalism and Westernization, newly affluent Asian nations are imitating images of Western lifestyles and becoming more consumption oriented (Belk, 1985; Ger & Belk, 1996). American pop culture, particularly movies and television, has had a profound influence on Gen Y perceptions of gourmet/specialty foods and beverages as “luxury style” rather than “just food” (Danziger, 2005). Motivated by the desire to improve their lives, non-Western consumers tend to pursue an image of Western consumption. A study of materialism in this context is important because an upscale café may be a venue for appealing to materialistic Korean Gen Y consumers in order to fulfill high lifestyle standards (Wong & Ahuvia, 1998). The desire of individuals to improve their lives materially leads them to seek upscale restaurants and cafés. The more materialistic consumers are, the more likely they are to have positive attitudes related to spending time at luxury cafés. Thus, we expect that Korean Gen Y consumers visit luxury cafés. Moreover, consumers can communicate about their consumption experiences and possessions via the digital world (Schau & Gilly, 2003). Materialistic consumers who perceive material possessions as central in their lives may be more likely to post online reviews about their experiences at upscale cafés.

Susceptibility to Reference Groups

Social values significantly affect the desire to consume symbol products (Vigneron & Johnson, 2004). Reference groups are defined as social groups that individuals compare themselves to in order to form attitudes and behaviors (Escalas & Bettman, 2005). Peers are representative of a normative reference group that has a significant influence on young adult consumers’ decision-making processes. Specifically, reference group influence is stronger for publicly consumed and luxury products (e.g., fine dining) than for privately consumed products (Lascu & Zinkhan, 1999). This finding may be explained by the fact that individuals compare themselves with other people to show they are trendy or keeping up with peers. We assume that individuals want to display their consumption behaviors to their reference group to signal that they belong. Such social comparisons can lead to status-driven expenditures (Lea, Webley, & Walker, 1995). Young consumers may visit cafés because spending time in a luxury café serves as a symbolic marker of group membership. Furthermore, the spread of electronic technologies allows individuals to share their experiences through virtual interactions with group members in cyberspace (Goldsmith & Horowitz, 2006). In this sense, we proposed that reference groups could trigger young consumers’ intentions to visit a luxury café and, consequently, to disseminate eWOM about the café they visited.

Tendency Toward Conspicuous Consumption

Thorstein Veblen (1899) coined the term conspicuous consumption to describe the acquisition and display of possessions with the intention of gaining social status. Generation Y are more driven by prestige seeking consumption as a means of displaying wealth and purchasing power (O’Cass & Lim, 2002). Understanding conspicuous tendencies is important in creating relationships between consumers who possess such characteristics and specific types of services and products that yield status. The driving force behind conspicuous consumption in cafés has roots in a desire among some Gen Y consumers to emulate prestigious images of Western culture through consumption. In the foodservice context, spending time at the luxury café is an affordable way of presenting their wealth and prestige. In this sense, this conspicuousness, which signals wealth and infers power and status, can explain young consumers’ willingness to visit upscale cafés. They may also view posting their Westernized symbolic consumption through social networking websites or blogs as a form of conspicuous self-presentation (Schau & Gilly, 2003).

Functional Values

In recent years, the café industry has rapidly grown across the globe (Tan & Lo, 2008). Cafes are a venue where consumers experience pleasure, personal satisfaction, mood transformation, and social interaction. Thus, based on earlier studies, this study used the three key service elements for restaurants: food quality, atmosphere, and service quality (Jang & Namkung, 2009; Tan & Lo, 2008).

Product Quality

Some café consumers that are likely to pay premium price expect high quality coffee. Previous studies have confirmed that the most critical part of the foodservice experience is product quality (Namkung & Jang, 2007). Upscale cafés often serve high quality of coffee with tasty flavor, freshness, and appropriate temperature and have reported that these attributes serve as product quality cues of service quality in cafés (National Coffee Association, 2007).

Service Quality

Specific to the luxury restaurant industry, customers expect high-quality service via courteous and knowledgeable employees (W. G. Kim, Lee, & Yoo, 2006). When serving high-quality specialty coffee, the service dimension is an influential factor in determining customers’ functional value assessments of the luxury café (National Coffee Association, 2007). Service providers are required to have social interaction skills, as well as the technical skills, to make perfect specialty coffee. Expert service providers need to develop a deeper understanding of coffee, which results in satisfied customers who return again for their particular specialty coffee (Bove & Johnson, 2000).

Atmosphere

Another important factor of the café experience is atmosphere, particularly in a luxury restaurant or café setting (Wakefield & Blodgett, 1996). Spending time at an upscale café is usually hedonic or emotion oriented (Lin, 2004; Wakefield & Blodgett, 1996). Since young adults often visit luxury cafés with friends to socialize, the atmosphere of the café may also have a significant impact on their future behavioral intentions. Stevens, Knutson, and Patton (1995) developed dimensions of atmosphere in restaurants and emphasized the importance of physical facilities, equipment, and décor.

Behavioral Intentions Toward Luxury Cafés

eWOM

Although eWOM has long been central to foodservice marketing scholars and practitioners, major gaps exist in our understanding of its underlying mechanisms. Most studies have examined the relationship between functional qualities/satisfaction and word-of-mouth (Jeong & Jang, 2011; Litvin, Goldsmith, & Pan, 2008). However, the relationship between psychologically driven motivations and the eWOM they generate is still an open question.

With the advancement of Internet technologies, consumers have the opportunity to share their consumption experiences as a form of self-presentation (Schau & Gilly, 2003). Gen Y consumers are described as technology savvy (Paul, 2001; Strauss & Howe, 2000) and thus can be potential online buzz marketers on social networking sites such as Facebook, Myspace, and Twitter. Web space is another way for young consumers to interact with others to fulfill their psychological needs: conformity, materialism, and a conspicuous presentation. In a collectivistic culture, people are more likely to use the Internet as mean of social interaction, whereas people in individualistic cultures tend use the Internet for information seeking purposes (Chau, Cole, Massey, Montoya-Weiss, & O’Keefe, 2002). This cultural difference may suggest that Asian young adults may be more likely to engage in eWOM to fulfill their own needs, such as self-enhancement, conformity, and conspicuous tendencies (Schau & Gilly, 2003).

Revisit Intentions

Brehm’s (1966) theory of psychological reactance explains that high prices are a barrier to gaining and experiencing luxury consumption. However, this barrier could also make consumers desire the consumption experience even more because it captures both exclusivity and conformity at the same time (Leibenstein, 1950). Therefore, consumers may desire to revisit a luxury café even if they must pay a premium price for a symbolic marker of group membership. Therefore, in addition to the functional quality of cafés, the psychological desire “to impress others” should be considered to understand consumers in upscale cafés. It is essential to know which luxury café qualities and psychological values attract them to revisit and spend extra money. With regard to consumption values that directly explain why consumers pay extra for particular products (Sheth, Newman, & Gross, 1991), understanding consumer motives and value perceptions in the context of luxury brands is important from a managerial viewpoint. Therefore, the present study examined café-related qualities, psychological aspects, and behavioral intentions in relation to Korean Gen Y consumers to determine the appropriate means of satisfying this lucrative consumer group.

Based on the above rationales, we proposed the following hypotheses:

Hypothesis 1: Positively perceived coffee quality has a positive effect on (a) revisit intentions and (b) eWOM intentions.

Hypothesis 2: Positively perceived service quality has a positive effect on (a) revisit intentions and (b) eWOM intentions.

Hypothesis 3: Positively perceived atmosphere has a positive effect on (a) revisit intentions and (b) eWOM intentions.

Hypothesis 4: Susceptibility to reference group influence is positively related to (a) revisit intentions and (b) eWOM intentions.

Hypothesis 5: Embracing materialistic values is positively related to (a) revisit intentions and (b) eWOM intentions.

Hypothesis 6: A tendency toward conspicuous consumption is positively related to (a) revisit intentions and (b) eWOM intentions.

The Moderating Role of Young Consumers’ Income Sources

To further examine the relationship between individual, social, and functional values and behavioral intentions, we retested the relationship for two different income source groups because consumers typically differentiate their spending according to where their money was obtained (Arkes, Joyner, Pezzo, & Nash, 1994). Young consumers’ spending activities vary across different money sources, for example, pocket money/allowance versus earned money. Subsequent work reveals that people spend relatively more when they have gifted money (Keasey & Moon, 1996; O’Curry, 1997; Thaler & Johnson, 1990). Therefore, this study uses the concept of mental accounting to explore the effect of origin of income for Gen Y consumers. Recent news indicates that young adults today remain dependent on their parents for material support (Belkin, 2010). Their financial help may shape the attitudes of grown adult children toward money (Furnham, 2001). Yet, there is little research specifically examining parental financial support and young adults’ spending behaviors. Therefore, we focused on the moderating effect of two sources of income (gifted money and earned money). O’Curry and Strahilevitz (2001) showed that people are more likely to purchase hedonic products with easy money than with ordinary income. That is, mental accounting research indicates that easy money is often spent frivolously, which reduces the pain of paying that arises from hedonic purchases. In this sense, some young adults who still rely on pocket money from their parents may feel relatively less pain paying for hedonic purchases compared with those earning their own income. Thus, some young adults who still rely on pocket money from their parents may spend money more recklessly compared with those earning their own income.

In this respect, this study suggested potential differences in consumer spending behaviors between groups with different income sources. We hypothesized that the “gifted income source” group may be more likely to revisit luxury cafés or talk about their consumption experiences online in order to achieve material desires, conspicuousness, and conformity. But the “earned income source” group may spend money at luxury cafés for more utilitarian benefits, such as highly perceived café quality (see Figure 2). Thus, this study proposes the following hypotheses:

Hypothesis 7: Café qualities, including coffee, service, and atmosphere, have a stronger effect on the (a) revisit intentions and (b) eWOM intentions of customers in the “earned income source group” rather than the “gifted income source group.”

Hypothesis 8: Psychological values have a stronger effect on the (a) revisit intentions and (b) eWOM intentions of customers in the “gifted income source group” rather than the “earned income source group.”

Figure 2

Conceptual Framework

Methodology

Sample

During the past decade, café business has become an increasingly important sector of the foodservice industry in Asia. Since coffee is seen as a Western concept to most Asian consumers, it appeals to adventurous, open-minded, young, affluent, urban consumers (Euromonitor International, 2004). Among Asian countries, the Korean market is becoming attractive as a testing ground for many global companies to predict whether their business can succeed before their world debut (Lee, 2010). Using a convenience sampling approach, our data were collected from two upscale cafés named “Coffee Smith” between June 14, 2011, and June 30, 2011. “Coffee Smith” has become representative of the European style upscale café segment: both are located in Gangnam in Seoul, South Korea. The “Gangnam” district is often called the “Beverly Hills of Seoul” for its high-end fashion, fine dining, boutiques selling luxury brands, and crowded cafés where young people tend to gather. The average price of a cup of coffee at the selected cafés was US$8. Self-administered questionnaires were distributed by the café staff to randomly selected customers who were spending time in the café. Every fifth customer entering the café was asked to complete the survey on a voluntary basis. At the beginning of the questionnaire, participants were provided with a clear definition of the term upscale café as follows: An upscale (luxury) cafe refers to a café operation that promises excellent coffee prepared by a barista; menu options that may include expensive dessert items and exquisite drinks; high service quality; and a superior physical environment (atmosphere, decor, lighting, furniture, etc.). A luxury café generates an average cup of coffee that costs more than US$8, compared with the Starbucks menus at US$4. Out of 380 collected responses, 330 young adult customers (17 to 33 years old) were used for analysis after deleting the incomplete responses.

Measurement Items and Analyses

Based on earlier studies (Jang & Namkung, 2009; Tan & Lo, 2008), we developed a questionnaire regarding coffee quality in cafés. Before the questionnaire was finalized, an expert panel of two faculty members specializing in foodservice management and two practitioners in the upscale café sector further reviewed the questionnaire to ensure how well the items matched and to evaluate the content validity. The questionnaire included customer perceptions of coffee attributes, service quality, and atmosphere, measures of psychological values (reference group, conspicuous consumption, and materialism), and behavioral intentions in relation to the café experience.

The perceived quality of the café experience included three constructs: coffee quality (six items), service aspects (four items), and atmospherics (four items) operationalized by Jang and Namkung (2009) and Tan and Lo (2008). Each construct of perceived quality was measured using a 7-point scale: “How much do you agree or disagree with these statements?” (1 = extremely disagree and 7 = extremely agree). For example, as shown in Table 1, the coffee quality attributes included “The café offers high quality coffee” and “The café serves tasty coffee.” Reference group was measured using five items. The tendency to conform measure was derived from Moschis’s (1976) group influence measure. Conspicuous consumption was operationalized using a 7-item scale developed by Eastman, Goldsmith, and Flynn (1999) to measure the extent to which individuals strive to improve their social status through conspicuous consumption of consumer products that confer or symbolize status both to the individual and to surrounding significant others. For materialism, four items were adapted from Wald and Wackman (1973). Behavioral intentions were operationalized with three items developed by Zeithaml, Berry, and Parasuraman (1996). Table 1 displays the measurement items used in this study and the means and standard deviations.

Table 1

Descriptive Information and CFA for Measurement Items

Construct	Mean	SD	Standardized Factor Loading	Cronbach’s Alpha	AVE
Coffee quality				0.92	0.80
The café offers high-quality coffee	4.84	1.10	0.83
The café serves tasty coffee	4.92	1.03	0.92
The coffee served has a good aroma	4.94	1.76	0.88
The café offers fresh coffee at an appropriate temperature	4.95	1.66	0.84
The café offers a variety of quality beverage options	5.00	1.09	0.74
The café offers a variety of quality of dessert options.	4.79	1.16	0.66
Service quality				0.81	0.53
The café serves my food and beverages as ordered	5.39	0.95	0.58
Employees are always willing to help me	4.78	0.99	0.73
The café provides prompt and quick service	5.40	0.95	0.76
The café employees can answer my questions	5.01	0.95	0.82
Atmosphere				0.87	0.61
The interior design is visually appealing	5.59	0.91	0.76
The exterior design is visually appealing	5.69	0.90	0.73
The decorations are visually appealing	5.39	0.94	0.83
The colors used in the café create a pleasant atmosphere	5.40	0.92	0.81
Conspicuous				0.91	0.62
People visit luxury cafes and consume specialty coffee to enhance their image	4.73	1.03	0.65
Consuming specialty coffee at a luxury café is a social status symbol	4.51	1.17	0.80
Consuming specialty coffee is a symbol of success and prestige	4.19	1.25	0.77
People visiting luxury cafes and consuming specialty coffee look more attractive	4.42	1.29	0.84
People visiting luxury cafes and consuming specialty coffee increase their own value in the eyes of others	4.10	1.29	0.84
Consuming specialty coffee increases popularity among friends and colleagues	4.24	1.27	0.79
Consuming specialty coffee induces envy in others	3.99	1.37	0.80
Reference group				0.87	0.59
I often visit luxury cafés that friends have told me about	4.31	1.22	0.87
I place a lot of confidence in friends’ opinions regarding visiting luxury cafés	4.41	1.11	0.80
I often decide to visit luxury cafés that I see my friends visit	4.27	1.12	0.88
After visiting cafés similar to those my friends visit, I want to let them know	4.48	1.17	0.63
I am often concerned with the impression friends may form of me because of the cafés I visit	4.49	1.19	0.60
Materialism				0.84	0.42
I admire people who own expensive homes, cars, and clothes	4.75	0.98	0.75
The things I own say a lot about how well I’m doing in life	4.89	1.01	0.77
I like to own things that impress people	4.72	0.99	0.74
I like a lot of luxury in my life	5.09	0.91	0.92
Revisit intention				0.96	0.86
I would like to come back to this café in the future	5.03	1.01	0.96
I desire to visit this café in the future	4.95	1.00	0.91
I probably will revisit this café in the future	4.96	1.05	0.89
eWOM				0.98	0.65
I would like to post about this café on a social networking service or website	3.93	1.42	0.95
I would like to add information about this café to my blog	3.98	1.41	1.00
I would like to update about my blog about this café in the future	3.96	1.39	0.98

Note: CFA = confirmatory factor analysis; eWOM = electronic word of mouth; AVE = average variance extracted. χ² = 1467.485, p = .000, χ²/df = 2.602; incremental fit index = .906; comparative fit index = .906; root mean square error of approximation = .07.

p < .1. **p < .05. ***p < .01.

Structural equation modeling with a maximum likelihood method was used to test the relationships among constructs, following the two-step approach recommended by Anderson and Gerbing (1988). A confirmatory factor analysis was first conducted to determine whether the manifest measurement items reflected the hypothesized latent constructs.

Results

Sample Profile

Table 2 presents the profile of the study sample. Descriptive information revealed that 42.2% (n = 139) of the sample were male and 57.8% (n = 190) were female. The majority of respondents were between 20 and 33 years old (mean = 26.2), highly educated (above a bachelor’s degree, 94.2%, n = 316), and mostly single (96%, n = 316). More than half (50.8%) of the respondents relied on someone else for their discretionary money. In addition, Table 2 shows the demographic profile of participants in each income source group. The gender distribution is pretty even (male = 93, female = 73) for the earned income source group, whereas more are female (male = 46, female = 121) in the gifted income source group. Most of the participants who had their own income were currently employed (employed for wages = 37.4%), whereas the majority who received money from someone else were students (a student = 65.9%).

Table 2

Demographic Profile

	Earned Income Source (n = 163)		Gifted Income Source (n =167)		Total (N = 330)
	n	%	n	%	n	%
Gender
Male	93	57.1	46	27.5	139	42.1
Female	70	42.9	121	72.5	191	57.9
Age
18-21	11	6.7	38	22.7	49	14.8
22-25	51	31.2	78	46.7	129	39.1
26-29	76	46.6	49	29.3	125	37.8
30-32	25	15.3	4	2.3	29	8.7
Average	28.47		24.02		26.22
Education
High school graduate	1	0.6	2	1.2	3	1.0
Some college	12	7.4	4	2.4	16	4.8
Bachelor’s degree	101	62.0	120	71.9	221	67.0
Graduate degree	37	22.7	40	24.0	77	23.3
Professional degree	12	7.4	1	0.6	13	3.9
Occupation
Employed for wages	62	37.4	13	7.8	75	22.7
Self-employed	32	19.6	11	6.6	43	13.0
A student	30	18.4	110	65.9	140	42.4
Out of work and looking for job	5	3.1	7	4.2	12	3.6
Out of work but not currently looking for job	1	0.6	2	1.2	3	0.9
Housewife	1	0.6	6	3.6	7	2.1
Other	3	18.4	9	9.0	12	3.6
Marital status
Single	156	95.7	161	96.4	317	96.0
Married	5	3.1	6	3.6	11	3.3

In terms of consumer drivers, the demand for coffee consumption in upscale cafés is relative to the demographic profile. The increasing number of single individuals indicates that the amount of disposable income for luxuries has grown substantially and the amount of money spent on the individual has increased (Yeoman & McMahon-Beattie, 2006). In the same context, interestingly, the average frequency for visiting upscale cafés was 12.9 times a month, with a majority (50.1%) of respondents frequenting cafés 10 to 20 times a month.

Reliability and Validity

A confirmatory factor analysis was conducted to assess the overall fit of the measurement model. Details of the properties of the measurements are presented in Table 1. The level of internal consistency for each construct was acceptable with Cronbach’s alpha estimates ranging from .81 to .98 (Nunnally, Bernstein, & Berge, 1967). The result of the reliability test indicated that multiple measurement items were highly reliable for measuring each construct (Hair, Anderson, Tatham, & William, 1998). Convergent validity was also assessed with the factor loadings in the measurement model. All confirmatory factor loadings exceeded .60, and all were significant at the alpha level of .01 (Anderson & Gerbing, 1988). Furthermore, average variance extracted (AVE) for all constructs ranged from .53 to .94, exceeding the recommended .5 threshold (Hair et al., 1998). Discriminant validity was also assessed by comparing the AVE with the squared correlations between constructs (Hair et al., 1998). All of the squared correlations between the two constructs were less than the AVEs, ensuring the discriminant validity of the constructs.

Results of the Structural Model

A structural model was estimated to test the proposed hypotheses. The goodness-of-fit statistics of the proposed model showed that the model reasonably fits the data (χ² = 1486.834, p = .000, χ²/df = 2.636, incremental fit index = .905, comparative fit index = .907, root mean square error of approximation = .70). The structural results of the proposed model are shown in Table 3 and Figure 3. Table 3 illustrates that among the 12 relationships tested, five were found to be significant at the alpha level of .01 and two were significant at the alpha level of .05. Coffee quality had a significantly positive impact on both revisit intentions and eWOM, with β = .256, p < .001, and β = .231, p < .001, respectively. This indicates that coffee quality is an important antecedent of upscale café customers’ behavioral intentions to both revisit and spread eWOM. Appealing visual atmosphere had a strong positive effect only on revisit intentions (β = .124, p < .05), but not on intentions to spread eWOM. However, service quality had an insignificant effect on both behavioral intentions and eWOM. Overall, in the café quality concept, coffee quality is a crucial factor for both behavioral intentions and eWOM, which means Korean Gen Y consumers seriously consider coffee quality in exchange for price at upscale cafés. Our findings about service quality reflect that a basic requirement in the luxury segment is high service quality. Customers may regard high quality of service as a prerequisite and, thus, expect it. Accordingly, additional performance may not be sufficient to lead to postconsumption behavioral intentions.

Table 3

Structural Parameter Estimates

Hypothesized Path	Unstandardized Coefficients	SE	Standardized Coefficients	Result
Hypothesis 1(a): Coffee quality → Revisit intention	0.286	0.065	0.256***	Supported
Hypothesis 2(a): Service quality → Revisit intention	0.086	0.093	0.054	Not supported
Hypothesis 3(a): Atmosphere → Revisit intention	0.17	0.08	0.124**	Supported
Hypothesis 4(a): Conspicuous → Revisit intention	0.162	0.071	0.122**	Supported
Hypothesis 5(a): Reference group → Revisit intention	0.034	0.045	0.042	Not supported
Hypothesis 6(a): Materialism → Revisit intention	0.331	0.091	0.234***	Supported
Hypothesis1(b): Coffee quality → e-WOM	0.394	0.091	0.231***	Supported
Hypothesis 2(b): Service quality → e-WOM	0.002	0.131	0.001	Not supported
Hypothesis 3(b): Atmosphere → e-WOM	−0.249	0.112	−0.119	Not supported
Hypothesis 4(b): Conspicuous → e-WOM	0.298	0.101	0.147***	Supported
Hypothesis 5(b): Reference group → e-WOM	0.456	0.066	0.370***	Supported
Hypothesis 6(b): Materialism → e-WOM	0.017	0.122	0.008	Not Supported

Note: χ² = 1486.834 (df = 564), p = .000, χ²/df = 2.636; incremental fit index = .905; comparative fit index = .907; root mean square error of approximation = .070.

p < .1. **p < .05. ***p < .01.

Figure 3

Structural Results of the Proposed Model

In addition, different psychological values stimulated revisit intentions and eWOM. Considering Korean Gen Y consumers’ psychological values, a tendency toward conspicuous consumption had a significant effect on revisit intentions (β = .122, p < .05) and eWOM (β = .147, p < .01). Materialism revealed a significantly positive relationship with revisit intentions (β = .234, p < .01), while reference group had a significantly positive relationship with eWOM (β = .307, p < .01). When Korean Gen Y consumers consider making conspicuous consumption choices, they are likely to upload their experience on the web. Korean Gen Y consumers may perceive the upscale café experience as a signal of their wealth and status. They display their consumption by revisiting the café, as well as uploading their experience on websites. However, unlike conspicuous consumption, materialistic consumers care about the upscale experience itself rather than displaying it to others. Accordingly, materialistic individuals significantly tend to revisit upscale cafés but not display their experience on the Internet. Consumers influenced by reference groups are likely to let people know how they compare with their peers and are highly motivated to spread eWOM.

Moderating Effect of Income Source

To investigate the moderating effect of income source, a multiple group analysis was performed. Before conducting multiple group analysis, the respondents were split into two groups: earned income source and gifted income source. Respondents who earned their own income were assigned to the earned-income source group (n = 163, male = 57.1%, mean age = 29.47) and those with gifted income sources were assigned to the gifted income source group (n = 167, female = 72.5%, mean age = 25.02).

To statistically test the differential effects between earned income source and gifted income source, the chi-square difference (Δχ²) between constrained and unconstrained models was assessed with the difference in degrees of freedom (Δdf; Anderson & Gerbing, 1988). The constrained model sets each of the 12 structural coefficients to be equal between the groups, whereas the unconstrained model allows this parameter to vary across groups. Thus, to statistically test the differential effects between earned and gifted income, the chi-square difference (Δχ²) between constrained and unconstrained models was assessed with the difference in degrees of freedom (Δdf). Overall, the chi-square difference, Δχ²(Δdf = 12) = 20.374, between the constrained model (χ² = 2425.79, df = 1,152) and the unconstrained model (χ² = 2405.42, df = 1,140) was significant (p < .05). The result indicated that the relationships between café quality, psychological values and behavioral intentions (revisit and eWOM) were significantly different between the income source groups. To identify where the statistical differences exist, coefficients for each path were compared between the two groups.

As shown in Table 4, statistical tests revealed that the moderating role of income source existed at only three hypothesized paths. First, the difference in the coefficients between coffee quality and revisit intention was significant at .05 level, χ²(Δdf = 1) =3.72, p = .000, between the constrained model (χ² = 2409.14, df = 1,141) and the unconstrained model (χ² = 2405.42, df = 1,140). This finding supported that high-quality coffee was more effective in facilitating revisit intentions in the gifted income source group rather than in the earned income group. Also, the difference in the relationship between reference group and revisit intentions across income sources was identified: the chi-square difference, χ²(Δdf = 1) = 5.52, p = .000, between the constrained model (χ² = 2410.95, df = 1,141) and the unconstrained model (χ² = 2405.42, df = 1,140). Last, the differential relationship between tendencies toward conspicuous consumption and eWOM across income sources was found: the chi-square difference, Δχ²(Δdf = 1) = 4.89, p = .000, between the constrained model (χ² = 2410.31, df = 1,141) and the unconstrained model (χ² = 2405.42, df = 1,140). The statistical result does not support our hypotheses that the “gifted income source” group may be more likely to be motivated by the desire to obtain psychological benefits. The insignificant results may have been due to social comparisons in consumption decisions (Duesenberry, 1969). The finding indicates that social comparisons during the consumption process are more of an issue for the “earned income source” group rather than the “gifted income source” group. The “earned income source” group is likely to be sensitive to their reference group and make comparisons to keep up with their referents. It could be inferred that those people with their own discretionary income sources may be more likely to spend money in order to achieve their material desires (Watson, 2003). Furthermore, their strong desire to be conspicuous is more likely to lead to engaging in eWOM. Luxury consumption may be especially appealing to those with a higher socioeconomic status than their referents.

Table 4

Comparisons of Path Coefficients (Earned Income Source vs. Gifted Income Source)

	Standardized Path Coefficients		Δχ² (Δdf = 1)	Significance of Δχ²
Path	Earned Income Source	Gifted Income Source	Δχ² (Δdf = 1)	Significance of Δχ²
Coffee quality → Revisit intention	.069	.388***	3.725	Significant
Service quality → Revisit intention	.177**	−.046	2.434	Not significant
Atmosphere → Revisit intention	.226***	.018	1.719	Not significant
Conspicuous → Revisit intention	.036	.147**	0.855	Not significant
Reference group → Revisit intention	.232***	−.041	5.528	Significant
Materialism → Revisit intention	.131*	.327***	1.747	Not significant
Coffee quality → eWOM	.206***	.272***	0.036	Not significant
Service quality → eWOM	.012	.004	0.003	Not significant
Atmosphere → eWOM	−.064	−.120	0.672	Not significant
Conspicuous → eWOM	.284***	.010	4.893	Significant
Reference group → eWOM	.291***	.434***	0.714	Not significant
Materialism → eWOM	.034	.031	0.001	Not significant

Note: eWOM = electronic word of mouth.

p < .1. **p < .05. ***p < .01.

Furthermore, to draw more practical implications this study examined the path coefficients of the two income source groups in more detail. As displayed in Table 4 and Figure 4, service quality, atmosphere, reference group, and materialism had significant effects on revisit intentions for the earned income group. Also, coffee quality, tendency toward conspicuous consumption, and influence of reference group significantly influenced eWOM. For the gifted income source group, coffee quality, tendency toward conspicuous consumption, and materialism affected revisit intentions. Coffee quality and reference group had a significant impact on eWOM. Those who earn their own income are motivated to revisit based on café experiences with careful service quality and an appealing visual atmosphere, whereas consumers with a gifted income source may revisit based on high quality specialty or gourmet coffee. Conspicuous tendencies and materialistic desires affected revisit intentions for the gifted income group but not for the earned income group. The influence of reference groups leads the earned income group to revisit, but not the gifted income group. Both groups are talking about their café experience and writing reviews online when the coffee quality is superior and when they want to let their friends know. Accordingly, café managers who seek positive eWOM to increase business should ensure high quality, fresh coffee. The café should facilitate psychological drivers to motivate eWOM, such as defining the experience as Western.

Figure 4

Structural Results for the Earned Income Source Group and the Gifted Income Source Group

Conclusions

The rise of emerging markets for coffee consumption, shaped by a diffusion of American popular culture and advances in communication technologies, presents opportunities for cross-national marketing. The present study addressed an Asian market perspective that is lacking in related research (Steenkamp, Hofstede, & Wedel, 1999). It is critically important for foodservice researchers and marketers to understand why consumers go to cafés and drink premium coffee, what they believe about the upscale cafés, and how their perceptions of values affect their behavior, as well as considering and distinguishing cultural influences. We found three possible mechanisms in terms of the individual, social, and functional evaluations of customers with respect to upscale cafés. Moreover, their source of discretionary income could explain different habits and have a moderating effect on the relationships between perceived values and behavioral intentions.

These findings provide new insights with regard to the role of symbolic consumption in upscale cafés for Gen Y consumers. Our finding showed that café consumption in Korean Gen Y consumers is affected by both individual materialistic desires and social influences, such as susceptibility to reference group influence and conspicuous tendencies. The findings of this study suggest that Asian consumers are going to cafés not only due to functional values (coffee quality, service quality, and atmosphere) but also psychological satisfaction. A more notable finding, however, is that symbolic attributes are more important determinants of behavioral intentions than are functional attributes. The result implies that the café culture in South Korea is distinguished from the culture in the West. For example, Asian coffee drinkers regard consuming coffee at the café as Westernized culture that symbolizes global or affluent consumption, which is highly desirable (Alden et al., 2006). The significant relationships between individual and social values and behavioral intentions at luxury cafés imply that Korean Gen Y consumers express their values through spending time in upscale cafés, which in the Asia are regarded as a new social place.

This study makes a contribution to the academic literature from several perspectives. First, this research enriches our understanding of Korean Gen Y consumer preferences for premium foodservices from an individual and societal perspective. We suggested a framework for explaining increased Korean coffee drinking in light of globalization. In an effort to explain the underlying dimensions of the growing popularity of coffee consumption in South Korea, the major forces that drive Gen Y consumers to drink coffee are identified in conjunction with the individual, social, and functional values of customers. By identifying the major forces of materialism, susceptibility to reference groups, and conspicuous tendencies, it might be possible to predict future Asian coffee drinking markets and trends.

Second, this study is unique in that it proposed and tested the moderating role of income source for a deeper understanding of Gen Y consumers’ behaviors. It could be helpful to determine Korean Gen Y mindsets and why shortages in their income do not hinder them from pursuing upscale lifestyles. Some young adults, by virtue of their rich parents, get to drive imported cars, wear luxury imported branded clothes and bags, and drink imported coffee or wine. Prior research findings suggested that people’s food consumption choices are shaped by social and interpersonal influences (Herman, Roth, & Polivy, 2003). Young adults, who are very sensitive to their reference peer groups, may have a strong desire to convey a certain impression or social norms. That is, one might expect a number of consumers from the gifted income group to actively seek a Westernized lifestyle. Furthermore, we examined price perceptions at the cafés young consumers visited. Table 5 indicates that perceived price toward luxury cafés significantly differs across the two income groups.

Table 5

Comparison of Price Perception Regarding Income Source

	Mean (SD)		t	p Value
	Earned Income Source (n = 163)	Gifted Income Source (n = 167)	t	p Value
Price perception	3.12 (0.97)	3.79 (0.94)	−6.40	.000***

***

p < .01.

Interestingly, as presented in Table 5, young adults who are still financially dependent on their parents are less likely to perceive the price of coffee (average 8$) as expensive as compared with someone who earns his or her own income. The results are consistent with the house money effect, which argues that people are likely to spend easy money recklessly. The group who relies on financial support from others may not realize how difficult it is to earn money.

Third, less attention has been paid to eWOM’s psychological drivers and why consumers talk and share online. The study proposed and confirmed that Korean Gen Y consumers share their consumption experiences as a form of self-presentation via web space. Web space is another way for young consumers to interact with others to fulfill their psychological needs: conformity, materialism, and a conspicuous presentation.

This research also has practical implications regarding the importance of the Gen Y market in the foodservice industry. The present findings have practical value for marketers looking toward emerging markets for future growth. A preference for a Western-lifestyle among Korean Gen Y consumers has provided huge opportunities for global foodservice marketers to expand their outlets as high-tier brands in Asian markets (Lee, 2009). Increasing numbers of Asian consumers have traveled and studied abroad as the economies in many Asian countries grow. Thus, Gen Y are more willing to adopt Western food culture, as compared with older generations who are more likely to have conservative attitudes and remain attached to their traditional culture.

The results regarding demographics offer a clearer profile of Korean Gen Y consumers who could be marketing targets for international foodservice businesses. For example, those affluent consumers who are single, live in urban environments, and are highly educated could be an excellent target market for luxury cafés, bars, or restaurants. Half of the respondents still rely on financial support for their discretionary income. They are relatively affluent with wealthy parents who will continue to support the further growth of the premium foodservice market as their purchasing power grows with age. Insights from this study regarding the determinants of consumption and psychological needs may be helpful in forecasting market potential, international market-entry, and pricing strategy decisions to expand into emerging markets. We suggest that international café management needs to develop a relationship between consumers and such places to build a feeling of place attachment. Practically speaking, foodservice operations may need to catch trending information for new and emerging young adult lifestyles. More important, by doing so, marketers can expect the electronic word-of-mouth effect since young consumers like to talk about their experiences through social networking services. Therefore, marketers can build new Internet-based platforms such as social media to attract and keep up with affluent young adults and market to them effectively. To prepare for the future, the results of this study add insights regarding consumer psychology and behavioral intentions.

However, it is difficult to avoid study limitations entirely. First, the study findings may not be fully generalizable. Data from the current study were collected from South Korea. If the survey were expanded to include more Asian countries, the magnitude of the relationships among constructs may differ. Thus, future studies could include other countries and compare cultural differences between young consumers. For future research, other variables that are relevant to desires or values can be considered to provide deeper insight for foodservice marketers. Inclusion of more exogenous variables such as a tendency toward self-consciousness and self-expression may be necessary for future research to assess premium foodservice spending and behavioral intentions. Furthermore, future studies could identify behavioral intentions in various restaurants and café segments. Restaurants and cafés provide different services and values and, in turn, influence customers’ desires and behaviors. A particular level of restaurant/café, such as lower, middle, and upscale segments, may affect different aspects of consumers’ behavioral intentions. Findings of this kind of research would be useful for restaurant/café operators of each segment to target customers.

Footnotes

DongHee Kim, PhD (e-mail: dkim5@memphis.edu is an assistant professor at the Wilson School of Hospitality and Resort Management at the University of Memphis. SooCheong (Shawn) Jang, PhD (e-mail: jang12@purdue.edu), is Professor in the School of Hospitality and Tourism Management, Purdue University in USA. His research interests are twofold: hospitality finance/strategic management and hospitality/tourism marketing. Dr. Jang has more than 150 published articles in refereed top-tier HTM and business journals and has received numerous accolades including the W. Bradford Wiley Memorial Best Research Paper of the Year Award 2009 and the Michael D. Olsen Research Achievement Award 2015. In addition, he was recognized as the top-ranked author in HTM academia during the past decade (Journal of Hospitality and Tourism Research (2011), 35(3)). Dr. Jang is frequently invited as a speaker for academic research or interdisciplinary research by many universities as well as international conferences.

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