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Little luxuries console consumers

By Ian Wylie, FT.com
May 27, 2009 18:20 IST

When lipstick and other cosmetics were exempted from rationing during the Second World War, it was hoped they would provide the public with an affordable boost to morale.

Consumers have traditionally sought solace in life's little low-cost treats during hard times. Lipstick, lingerie, sunglasses and watches are some of the usual "affordable luxuries" people have turned to in recessions. And each downturn throws up fresh examples. Cinema admissions have hit a five-year high, according to the UK's Cinema Advertising Association. L'Oreal says sales of hair-colouring kits for use at home have risen 7 per cent since the start of the global financial crisis.

"We've seen quite a few companies capitalise on this need to treat ourselves but not be extravagant," says Jeremy Baker, affiliate professor at ESCP Europe business school. "Cut-price supermarket Lidl is selling lobster at an affordable price. Thornton's chocolate sales are up 11 per cent since Christmas."

Likewise, McDonald's has embarked on a $100m (Pound 63m) advertising campaign in the US to convince coffee drinkers that its McCafe range of cappuccinos, iced coffees and frappes are affordable luxuries.

Meanwhile, with "staycationers" choosing to holiday at home more, Susan MacDonald, buying and merchandising director at Dobbies, an out-of-town garden centre chain, says bay trees, bamboos, Japanese acers, olives and tree ferns -- plants that are "a bit special" but, at Pound 30 ($48) a time, "affordable" -- are proving particularly popular.

Nevertheless, marketing experts say it has been much more difficult in this recession to promote a product as an affordable luxury. "Many of our 20th century marketing concepts simply don't work the way they used to," says Paco Underhill, consumer psychologist and author of Why We Buy: The Science of Shopping.

John Quelch, marketing professor at Harvard Business School, thinks that, in this recession, the luxury half of the equation has become tainted. "The breadth, depth and length of this downturn has put the affordable luxury category under pressure as never before," he says. "Lipsticks were always said to be immune from recession. Not this time. Buyers are trading down from luxury brands to mid-market price points as never before."

Mr Quelch suggests that consumers are becoming more discerning and dissociating themselves from the extravagance and conspicuous consumption of the boom years.

"Instead, marketers need to emphasise the affordable, not the luxury. And the luxury component must be seen as a personal treat, not a function of ostentatious consumption," he says.

Some even suggest that, during this recession, we are witnessing the creation of a category. Seth Godin, a marketing trendspotter, calls this the "affordable premium" product, which, like a McDonald's coffee, is deemed to be worth more than it costs.

"In tough times, premium products can do very well because people care a lot about value," says Mr Godin. "So people might buy a BMW because it's worth the money but not a Bugatti Veyron."

Too many brands, he says, cannot make up their minds which category they represent.

"There's a flight to quality but marketers need to show why their products are better," says Mr Underhill. "They might need to spin their products as being better tasting, organic, locally produced, fair trade."

He adds that the internet has helped drive the new emphasis on value by making it more difficult for brands to control pricing.

"If you want to cheer yourself up buying a Coach handbag, you can go to Ebay and pay a fraction of the price you might in the stores," he says. "And customers now have web-enabled mobile phones so they can do comparison shopping while they're going from store to store."

Copyright: The Financial Times Limited 2009

Ian Wylie, FT.com
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