INDULGENCES ARE LIFE S LITTLE LUXURIES BOUGHT WITHOUT GUILT


INDULGENCES ARE LIFE'S LITTLE LUXURIES BOUGHT WITHOUT GUILT

Offering high emotional gratification but being low on the extravagance scale, indulgences are described as "little" luxuries, something you can indulge in daily, without guilt or recrimination. One consumer, who collects, describes an indulgence this way: "Luxuries make me feel guilty. It's totally different to spend $25 to $50 on a 'Clark Gable' collector plate than to spend hundreds of dollars on a luxury. There is a difference in how much you spend." Another says: "An indulgence is something in excess of what you need, but not too much in excess." Unlike other discretionary purchases, which may demand more of a financial commitment, an indulgence is an everyday affair that involves spending only pocket change.

An indulgence pampers the individual. While it provides some physical satisfactions (e.g., features and benefits), its primary satisfaction is emotional. What kinds of products constitute an indulgence? Here are some examples taken from our research:

  • "An expensive bottle of wine is an indulgence."

  • "For me, candles are my indulgence."

  • "Bath salts from the Dead Sea."

  • "I buy lots of books. I have a friend who thinks my books are a luxury. She says, 'That's what a library card is for.' But they are my books. There is a thrill in acquiring them. I don't read all of them, but I think someday I will have time and will be able to."

  • "Every week my husband buys new DVDs. He likes to say he has them."

  • "I just spent $400 on plants for my front porch and the fence. I love showing off my garden."

  • "I bought a bottle of perfume for $75. I'm a woman, I have to smell good."

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Getting It Right

YANKEE CANDLE

Nobody holds a candle to Yankee.

Holding the number-one position in the premium candle segment of the $2.4 billion retail market for candles, Yankee Candle benefited from "exploding growth in the candle category from 1994 to 1999, but that is only part of Yankee Candle's success story," explains Craig Rydin, president and CEO of Yankee Candle.

Since its founding over 30 years ago, Yankee Candle has been able to execute a brand-building strategy that resonates with the consumers. "Consumers today are getting more 'home-centric,' and what is more central to the home than the warmth and comfort a fragranced candle represents," Rydin says. "We have built the brand around the importance of fragrance in the home." Joining Yankee Candle after serving as president of Godiva Chocolatier, Rydin is no stranger to building a brand around "affordable indulgences that give the consumer a feeling of being special."

Along with the allure, romance, and emotional appeal that Yankee's core fragranced-candle products represent, the company has built a business on a commitment to strong financial fundamentals and business execution. "Yankee manages three core channels of distribution: captive retail, traditional wholesale distribution, and consumer direct marketing through the Internet and catalogs. This gives us key advantages so that Yankee outperformed its competitive set in the very challenging macroeconomic environment it faced the fourth quarter of 2001," Rydin notes.

Key to building Yankee Candle's nationwide reputation as a premier candle brand is the company-owned chain of nearly 250 specialty retail stores. These stores, mostly mall based, are the "gold standard" for presenting the brand and the products to the consumer. "Our brand and its dominance [are] being driven by our captive-retail footprint," Rydin says. "Our strategy is not very different from many other national brands, like Godiva, that built an identity through multiple channels, especially captive retail."

The migration to company-owned-and-operated retail, while critical for the strength and continued growth of the brand, is a fairly recent development for the company. "Yankee Candle started in traditional wholesale distribution. Today we have some 13,000 stores that are our wholesale accounts," Rydin explains. "As we manage these two channels of distribution, the challenge is to present the same brand strategy in both places. We are moving toward a 'store-within-a-store' concept for our wholesale accounts. We want to present the essence of our brand consistently in our wholesale accounts as in our captive-retail stores. Communicating and building the brand is our priority."

The business of selling consumer indulgences has been good to Yankee Candle. Its business has more than quadrupled since 1996, rising from $115 million to $509 million in 2003, with significant growth tracked at the company's retail stores.

How will Yankee Candle continue its growth trajectory? "Home fragrance is what resonates with the consumer. Fragrance is the emotional bond that links Yankee Candle with our consumer and what brings them back again and again to our brand," Rydin says.

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Items that exemplify the indulgence category include candles, higher-quality "lotions and potions," bath accessories, costume jewelry, collectibles, stuffed animals, toys and games, hobbies and crafts, sporting equipment, fresh flowers, gourmet foods, tabletop gifts, books, CDs, DVDs, and other entertainment products.

In the consumer's mind, indulgences, because they are not bought for functionality, always fall somewhere above utilitarian purchases, and below luxuries, which carry a heftier price tag. That's why we call indulgences "little" luxuries. They are those little purchases that give utmost gratification without guilt.

How much money people can spend without guilt varies from person to person and from item to item. For example, I feel guilty if I spend $300 on something for the home, such as a piece of furniture, a framed print (one of my weaknesses), or dinnerware (another weakness), because my husband views home-related purchases as decisions we should both make. On the other hand, I will spend $300 for a suit coat or blouse and skirt without thinking twice, not feeling guilty and never having to worry about spousal "approval." Yet I hesitate to spend $300 on a piece of jewelry, but it won't necessarily stop me if I have a "need" for it, such as buying a fabulous pin to accessorize the new $300 jacket I just bought. For another person, my $300 indulgence expenditure might be $30 or $3,000. The absolute dollar value is a function of income level and demographics, but that's not all. It is linked intimately to individual passion, value, and personal tastes for specific products. Because it is so highly individualized, consumer passion for indulgences needs to be carefully researched through psychographic analysis.

Discover the Underlying Passion that Drives Indulgence Purchases

Unlike demographic research, which focuses on quantifiable facts about consumers, such as income levels, marital status, household composition, age, and gender, psychographic studies survey motivations, drives, and passions. When you undertake a psychographic market study, you try to quantify and document the inner workings of the consumer's mind and heart. In effect, you turn the unspoken, unrealized, unconscious, imaginative right-brain drive for a product into data that you can analyze with the business executive's left-brained mentality.

Spending is linked intimately to individual passion, value, and personal tastes for specific products.

Sounds like so much hocus-pocus? Maybe, but psychographic market research helps uncover the interior emotional life of the consumer and can ultimately make sense of it so that marketing strategies can be devised, products competitively positioned, and advertising messages persuasively crafted. Psychographic studies often start with focus groups. Selected for these groups are consumers who have an interest in, or proven history of, buying a particular product. They are usually paid a fee for two hours of their time to sit around a table and talk about themselves and their desire for the product. A professional moderator keeps a focus group from descending into chaos and getting out of "focus." The moderator asks the right questions, probes further when a particular response suggests that more lies beneath the surface, and manages dichotomous voices who try to dominate the group or get off subject. These groups generate many pages of thorough, professionally written analysis of the major findings. We call them hypotheses theories to be tested in subsequent quantitative numbers-oriented research. Just as important are verbatim quotes from consumers about what does and doesn't excite them about the product in question.

Then comes the fun part where the hypotheses from the focus groups are tested and the dominating psychographic characteristics of the consumer target market are measured and quantified. Taking the exact same phrases and wording used by the consumers, the market researcher goes to the field with a questionnaire to which hundreds, even thousands of potential consumers can respond. A battery of attitudinal statements is presented to the target market asking them to what extent they agree or disagree with the statement. With a sufficient number of respondents (usually somewhere between 200 and 2,000), the results of the attitudinal questions can be grouped and classified according to the similarities or dissimilarities of responses. Using a cluster analysis program, market researchers can segment the target market into discreet groups or clusters based upon their attitudes, motivations, feelings, and emotions about the particular product. What is the right number of clusters? There is not a right or wrong number, but cognitive research has shown that the human mind is incapable of simultaneously maintaining a list of more than nine individual items—thus our seven-digit telephone numbers. Moreover, if you are like me, you are seriously challenged with keeping a list of seven in mind at one time. In most psychographic studies I conduct, a four-to five-cluster solution is best. On a few occasions, I have found only a single cluster, which means that the target market is remarkably homogeneous in its attitude and feelings about the product. In others, I have gone to seven distinctly defined market segments.

Besides discovering the core motivations and emotions that drive different types of consumers to specific products, there are usually demographic differences among the clusters as well. These demographic differences provide marketers with measurable market segments to target through advertising-media selection.