When economic conditions tighten, consumer behaviour doesn’t simply stop. It adapts.
This is where a phenomenon called The Lipstick Effect come into play. Rather than cutting spending altogether, people become more selective. They trade down on big-ticket items such as holidays, tech or major purchases, while continuing to spend on smaller, emotionally rewarding treats. This has led to another name for the concept: Treatonomics
These smaller purchases play a different role. They are not about necessity or long-term value. They are about how they make people feel. A coffee, a lipstick, a meal out or a small personal reward can provide a sense of control, normality and comfort at a time when larger financial decisions feel uncertain or out of reach.
Research consistently supports this behaviour. A significant proportion of consumers say that small indulgences help them cope with financial stress. It is not simply about spending less, it is about spending differently.
For marketers, this shift is critical.
In challenging economic environments, the instinct is often to lead with price. Discounts, promotions and cost-saving messages dominate. While these tactics have their place, they can overlook a more important driver of behaviour: emotional justification.
Consumers are not only asking “can I afford this?” They are also asking “is this worth it for me right now?”
The brands that perform well during these periods understand that value is not purely financial. It is emotional. They position their products as accessible rewards rather than unnecessary expenses. They frame purchases as small, justified moments of enjoyment rather than indulgences to be avoided. Whilst recruiting in marketing we come across a variety of tactics. Many businesses cut costs and figuratively run for the hills. Others see the opportunity and build their brand’s appeal to try and gain market share.
This is where strong brand and messaging come into their own. A product positioned as a “little luxury” or a “well-earned treat” can outperform one framed purely as a cheaper alternative. The former taps into emotion and permission, while the latter risks becoming a race to the bottom on price.
It also reinforces the importance of understanding real consumer behaviour, rather than relying on assumptions. On paper, it might seem logical that consumers would cut all non-essential spending during tougher times. In reality, behaviour is far more nuanced. People may reduce overall spend, but they rarely remove the things that make them feel good altogether.
For businesses, this creates both a challenge and an opportunity. The challenge is to move beyond purely transactional messaging. The opportunity is to align more closely with how consumers actually think and feel.
Ultimately, the brands that succeed in these conditions are not necessarily the cheapest. They are the ones that understand the balance between rational and emotional decision-making. They recognise that even in uncertain times, people still seek moments of enjoyment, control and reward.
And those brands position themselves as the ones that can provide it.
