Little indulgences such as lipstick, nail polish, ice cream, and chocolate sales are rising during economic downturns as people seek small luxuries to get them through hard times. Even in countries facing austerity measures or economic crises, indulgent foods and personal care items are increasing in popularity. However, companies need to balance adding value to products through innovation with maintaining or growing profit margins over time. Pushing average prices up too quickly on treat items can reduce sales forecasts if consumers feel prices have become unreasonable.

1. Little indulgences:
10 Insights on where to grow business

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3. Compensation theory
“Individuals invest more heavily in one domain to make up
for what is missing in the other domain” (Staines,1980)

4. the dipstick is lipstick
Estee Lauder coined the recession-proof 'lipstick index'
'Small luxuries' are things to get you through the bad
times as well as the good
Today, nail polish also qualifies: up 65% '08-'11 (source:NPD Group)

5. against all odds
Ice-cream sales are rising in Greece
In Britain, M&Ms sales were up
12% in 2010
(source: Euromonitor)

6. out with small austerity
Rise of small luxuries means declines in small austerities
Example: Danone's Activia creamier yoghurts are
booming but health-focused Actimel struggles

7. trend is global
Nestlé Eclairs are a recent hit in India: “with an
irresistible outer layer of caramel and a yummy milky
filling, you will not find a better temptation”

8. for all pockets
Royal Salute costs upto $600 a bottle
As the brand says: “it's a bottle you need not mortgage
the family home for” (!)

9. products > services
Surge in sales of pricier Unilever shampoos as
compensation for fewer visits to the salon
Expensive food ingredients get a boost as people cut
down on eating out

10. focus on NPD
London Tea Company's recent launch of a white tea in
silk bags swiftly overtook staples like Earl Grey

11. problem with profits
Adding value can come at a cost. It takes six times as long
to make silk tea bags; toothpastes which whiten cost more
to make
As Unilever's Polson reminds us: “good innovation over time
should be margin-accretive”

12. getting it wrong
Padora's charm braclets took the market by storm: an ideal
'pick-me-up' product
Then it pushed up the average price of these 'treats' by 40%
in 18 months to $40
Result: the 2011 revenue forecasts were cut from 30% to 0

13. Acknowledgement

These insights are drawn from The Financial
Times article of August 6, 2011 “In the age of
austerity, indulgence is back”

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