TODAY, OVER 40 PERCENT OF CONSUMER SPENDING IS DISCRETIONARY


TODAY, OVER 40 PERCENT OF CONSUMER SPENDING IS DISCRETIONARY

While one can convincingly argue that a significant share of medical care is discretionary in nature, for purposes of this exploration we consider medical care, housing, and household operations essential expenditures in the services category. In the nondurable category, we categorize food and clothing as essential. Finally, among durables, we classify only spending on furniture and household equipment as essential, though, like medical care, a significant portion of spending in that category is discretionary in nature. Excluding consumer spending that is allocated to essentials, over 30 percent of consumer spending in 2000, or $2,812.5 billion, was discretionary spending. That is more than gross private domestic investment ($1,767.5 billion) and government consumption expenditures and gross investment ($1,741 billion), the other two segments that make up the national gross domestic product.



UNDERSTANDING THE DISCRETIONARY SPENDING EQUATION OR WHAT YOU WILL LEARN FROM READING THIS BOOK

In sum, consumers and their discretionary spending—on wants, not needs—make a surprisingly large contribution to the nation's overall economy. If consumer marketers can harness the power of Americans' need to consume, they can gain market share, build brand recognition, and increase profitability. In later chapters, we will explore the whys that propel consumers in their search for emotional satisfaction through the things they buy. We will also examine distinctions among four types of consumer discretionary spending, and how the consumer perceives each. The four types of discretionary spending we will study are:

  1. Utilitarian purchases. These cover discretionary purchases that people don't necessarily need, but which they perceive as making their lives better in meaningful, measurable ways. Usually, these purchases have a practical or functional component. Consumers will often leap from what is considered an essential purchase to a more highly discretionary one, thus spending more money and gaining more emotional satisfaction from the purchase.

  2. Indulgences. These are life's little luxuries that consumers can buy without guilt. Primarily, they bring emotional satisfaction to the consumer by being frivolous, somewhat extravagant, but not so expensive that the consumer feels remorse.

  3. Lifestyle luxuries. These luxuries are more than is needed. Lifestyle luxuries have a practical aspect to their purchase, such as a car, a pen, fine china, or a watch. While they fulfill a practical need, lifestyle luxuries are a quantum leap beyond the basic item needed to effectively serve the essential purpose.

    If consumer marketers can harness the power of Americans' need to consume, they can gain market share, build brand recognition, and increase profitability.

  4. Aspirational luxuries. Unlike lifestyle luxuries, which have a practical component, aspirational luxuries are purchased largely for the pure joy that owning them brings, such as original art, antiques and vintage collectibles, boats and yachts, and fine jewelry. As with lifestyle luxuries, aspirational luxuries usually are tied to a "brand." When consumers buy aspirational luxuries, they are making a statement about themselves—who they are, their aspirations, and what they stand for.

Through research, we will delve into the purchase incidence for 37 different categories of discretionary purchases—what consumers look for in these purchases and what they get out of making them.

As we probe discretionary purchases, we discover that in order for consumers to buy things they don't need, they use justifiers as excuses and reasons that give them permission to buy. Some consumers and some purchases need more powerfully charged justifiers, while other consumers and purchases require little in the way of an excuse to buy something not needed. Sometimes these justifiers are fairly mundane; other times they are elaborate fantasies consumers conjure up to give them license to make the desired purchase. We have identified 14 distinct justifiers consumers combine and manipulate to give them the permission they need to buy.

We'll also explore how consumers' need for discretionary purchases impacts their shopping behavior, such as where they shop, how they research the planned purchases, and how they discover new things that will satisfy unfulfilled emotional needs.

Finally, as we build our understanding of the emotionally motivated consumer, the ultimate goal is for marketers to learn innovative ways to apply their new insights into dynamic, fresh marketing strategies. Marketers can use these insights to position their products strategically along the discretionary purchase continuum, playing to the various justifiers that consumers use to make a discretionary purchase. Throughout this book, we will bring the discussion back from the conceptual to the practical by profiling outstanding marketers and the best marketing practices that help them sell more things that people don't need, but want.