We typically think of the “Lipstick Index” – where lipstick is a placeholder for small, low-cost consumer indulgences – when consumers feel uncertain about the economy. But we shouldn’t stop there. How consumers treat themselves
varies by age, gender, economic position, and more, so opportunities to capitalize on splurge spending habits and trends exist far beyond cosmetics. For instance, global consumers reported spending the most money on consumer electronics splurges while food and beverages were the product consumers were most likely to report as their most recent splurge.
By understanding the factors that drive splurge spending, consumer product developers, retailers, and marketers can develop strategies to tap into this evergreen opportunity. Here are some additional tips for consumer product marketers who want to tap into splurge spending:
- Focus on quality. Consumers who are more likely to splurge are also more likely to be interested in high-quality products. This is particularly important as inflation-era consumers seek a good value in what they buy.
- Offer exclusive products and services. Marketers can offer these consumers special discounts, early access, discounts for future purchases, and other perks to entice them to spend more.
- Know your target audience. Millennials are more likely to splurge than older generations. They are also more likely to be influenced by social media and peer pressure, especially when campaigns focus on self-indulgence and experiences. Men are more interested in a spurge that communicates social status, while women find additional joy in a splurge that is also a deal.
- Create an emotional connection. Splurge spending is often motivated by emotions, such as a desire for self-indulgence or a need to feel special. Marketers can create an emotional connection with consumers by using storytelling, imagery, and other techniques to evoke emotion.
- Create a sense of urgency. A splurge is not often a purchase the consumers have put a lot of thought into or one that they have researched and planned, so splurge spenders often respond to a sense of urgency. Marketers can create that sense of urgency by offering limited-time deals, flash sales, and other promotions.
- Make it a special occasion. Splurge spending is often associated with special occasions, such as birthdays, holidays, and weddings. Marketers can encourage consumers to make even every day, no-occasion splurges into a special occasion with attractive packaging, custom notes on receipts, or other special touches.
- Make it easy to buy. Because splurge purchases are often spur-of-the-moment, low-friction purchasing options can boost spending. Marketers can act here by offering in-app shopping, integration with e-wallet one-click purchasing infrastructure, same-day delivery, and other convenience options.
Freedonia Group analysts will continue to keep an eye out for market opportunities and disruptive factors impacting sales in 2023 and the years to come.