Why Consumers Splurge on Small Indulgences, Even in Tough Times
Valentine’s Day isn’t just about grand romantic gestures. It’s also a time when consumers justify small indulgences, especially in uncertain economic times. This behavior is rooted in the lipstick effect, a well-documented psychological phenomenon in which consumers continue to purchase affordable luxuries during times of financial or economic uncertainty. In this CMO Minute, we dive into the psychology behind this trend to help marketers craft compelling campaigns that tap into consumer desires while positioning their products as the perfect treat for Valentine’s Day and other special occasions.
The Psychology behind the Lipstick Effect
The lipstick effect was first coined by economist Juliet Schor and later explored in research which suggests that during economic recessions and financial uncertainty, consumers tend to prioritize small luxury purchases as an effective way to boost confidence and maintain a sense of normalcy. While high-ticket discretionary spending may decline, affordable indulgences, such as gourmet chocolates, premium skincare, and limited-edition themed items, often thrive.
Key psychological principles driving this behavior include:
- Emotional Compensation: Consumers seek comfort and pleasure through small indulgences when larger expenses feel out of reach.
- Scarcity and Exclusivity: Limited-edition or seasonal products create urgency and make small luxuries feel more special.
- Social Signaling: Gifting remains an important way to express love, appreciation, and status, even when budgets are tighter.
How Brands Can Leverage the Lipstick Effect
- Position products as “affordable indulgences.” Consumers may skip an expensive dinner, but they’ll treat themselves (or loved ones) to a premium chocolate bar or a scented candle. Brands like Lindt and Godiva leverage this by offering themed packaging for their premium chocolates, making them feel luxurious yet accessible.
- Leverage seasonal and limited-edition packaging. For example, creating exclusive Valentine’s Day flavors, packaging, or bundles plays into the scarcity effect, making products more desirable. Starbucks successfully does this with heart-themed tumblers and seasonal drinks like the “Pink Drink,” driving impulse purchases.
- Tap into the self-gifting trend. Valentine’s Day is no longer just about couples. With the rise of self-care culture, brands can position their products as the perfect “treat yourself” purchase. Lush Cosmetics has capitalized on this by promoting its bath bombs as self-care indulgences rather than just gifts.
- Bundle small luxuries for gifting appeal. Offering curated gift sets enhances perceived value. Sephora’s “mini must-haves” gift sets bundle best-selling items into a premium yet affordable package, making it easy for consumers to justify the purchase.
Economic uncertainty doesn’t mean consumers stop spending; it just means they are shifting their priorities. By understanding the psychological drivers behind the lipstick effect, brands can position their products as meaningful, affordable luxuries that bring joy, comfort, and connection during Valentine’s season and throughout the year. Whether it’s through limited-edition packaging, self-gifting messaging, or exclusive bundles, tapping into this trend can help drive sales while creating lasting brand affinity. This Valentine’s Day, and for all of the other special occasions in your customers’ lives, the little luxuries matter more than ever. Is your brand ready to make an impact?
