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Beyond the Lipstick Effect: Unveiling Modern Splurge Behavior

In times of economic uncertainty, managing finances becomes a priority for individuals. However, the desire to indulge oneself occasionally remains strong.

The "Lipstick Effect," initially coined by Juliet Schor in her book "The Overspent American," highlighted the tendency of women to splurge on luxury lipsticks during tough economic times [Forbes]. But recent insights from Deloitte's new research study (Apr 2023) debunk this notion and reveal that splurges extend far beyond lipsticks. This intriguing consumer behavior offers a wealth of opportunities for brands to tap into the motivations of their target audience and align their offerings accordingly.

Understanding the Motivations behind Splurge Spending:

✨The Craving for Comfort and Self-Indulgence:

  • At the core of splurge spending lies the innate human desire for comfort, relaxation, and self-indulgence.

  • Despite economic uncertainties, over one in four consumers have recently made a purchase to treat themselves.

  • Notably, this trend is not confined to those with abundant financial resources. Only 42% of these global consumers reported being able to comfortably afford such purchases, suggesting a powerful emotional drive behind splurge spending (reaching around 80% in the USA).

The Splurge Landscape: Categories and Spending Patterns

🍽️ Splurging on Food and Beverages:

  • Deloitte's study introduces the "bourbon barometer" as a more accurate indicator of consumer splurges during challenging times, as consumers are more likely to splurge on food and beverages.

  • In the United States, consumers are four times more likely to splurge on food and beverages compared to personal care items, with men accounting for 57% of these global splurges.

  • Globally, the median spend on a splurge purchase stands at $32, although this figure is likely higher in the US due to higher average income and spending levels.

💲 Factors Influencing Product Choice and Price Points:

  • Consumers tend to view less expensive items as practical and long-lasting, while pricier options are associated with self-expression.

  • The ideal splurge products combine practicality, longevity, and a touch of luxury.

  • Understanding the shifting motivations based on price points is crucial for different categories:

👗 Apparel: Clothing purchases below $100 are often justified as practical and comfortable additions to a wardrobe, while self-expression becomes increasingly important for purchases above $100.

💅 Personal care: US consumers prioritize wellness over glamour for splurge purchases, but at higher price points, there is a shift towards novelty and self-expression.

📱 Electronics: With a median spend of $182, electronics have emerged as a favorite splurge category.

🌍 Splurging across Demographics:

  • Splurging is a universal phenomenon, transcending age, income groups, and gender.

  • Men account for 57% of global splurges in food and beverage, outspending women by 60%.

  • Splurging occurs across income groups, with 72% of low-income, 77% of medium-income, and 81% of high-income consumers globally indulging themselves.

  • Younger and wealthier consumers exhibit a higher propensity for indulgence, and men globally spend almost 40% more than women on average per splurge purchase.

  • Among millennials, men outspend women by an average of $20 per splurge purchase

Leveraging Insights for Retailers and Manufacturers

🔓 Seizing the Opportunity:

  • These invaluable insights present a golden opportunity for retailers and manufacturers to tailor their strategies and tap into consumer preferences, fostering increased spending.

  • Aligning product offerings with the characteristics valued by consumers at different price points is crucial, as is effective marketing to both men and women across various age groups.

  • By understanding the motivations that drive the "splurge occasion," retailers can capture new sales from consumers seeking to treat themselves.

  • Personalized messaging content that caters to consumers' desires can further monetize the demand. For instance, marketing efforts for a scarf may focus on its fashionable attributes but could be more effective by highlighting the practicality of the purchase when priced under $100.

  • In the personal care space, splurges are primarily driven by wellness, but emphasizing newness and novelty can incentivize higher-priced purchases.

Embracing Consumer Understanding for Success in Today's Market

In conclusion, comprehending consumer behavior and motivations is more critical than ever. Even in times of economic uncertainty, indulgence remains a prevalent desire among many individuals. By adopting a holistic approach and understanding what drives the "splurge occasion" across different price points and categories, businesses can unlock new avenues for sales and profitability.

In today's fiercely competitive business landscape, understanding the consumer is not merely beneficial—it's an absolute necessity. As companies strive for growth and profitability, a profound understanding of consumers and their purchasing journeys becomes the roadmap to success.


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