Finding happiness by trading up

Consumers get emotional payoff from splurging

ST. LOUIS -- Public-relations executive Kristin Dormeyer works hard for her extra cash, but some people might say she doesn't spend it wisely. She buys face cream that costs $50 for two ounces and splurges on all-inclusive vacation packages in the Caribbean.

During a recent visit to Three Dog Bakery in Ladue, Mo., she bought $40 worth of gourmet dog treats for her Italian greyhound.

''I know people might think it's a little strange," said Dormeyer, 34. ''[But] it makes all the hard work feel like it's worth something on a personal level."

Experts on consumer behavior say Dormeyer's spending isn't strange at all. She's part of a growing group of middle-market consumers who trade up, spending more in certain product categories in return for an emotional payoff: comfort, a boost in self-image, or a feeling of closeness with a loved one.

''One way to look at this is, consumers are idiots," said James Twitchell, author of ''Living it Up: America's Love Affair with Luxury."

''Another way to look at it is that we're quite rational. . . . The reason these seemingly ridiculous products from seemingly ridiculous places command the prices they do is that when we get near them, we feel powerful feelings."

And for Dormeyer, who has no children, pampering her dog is worth the money. Besides, she's not a big spender across the board. She clips coupons for laundry detergent, and she won't buy a box of cereal unless it's on sale.

''It's the products I have an emotional connection to that I don't mind paying more for," she said.

Companies like Panera Bread Co.; Limited Brands Inc., which owns Victoria's Secret; and Callaway Golf Co. prosper by selling higher-priced goods -- from sexy lingerie to technologically superior golf clubs -- to customers who are trading up, said Michael Silverstein, coauthor of ''Trading Up: The New American Luxury."

''Consumers live today under pressure in terms of time, job performance and family," Silverstein said. ''They have turned to goods . . . to help them feel better."

Ron Shaich, chief executive of St. Louis-based Panera Bread Co., said part of the demand for this new luxury is rooted in baby-boomer nostalgia for a time when more goods and services were produced at a local level.

''[Baby boomers] grew up in a mass-marketed society in which every [product] was the same," he said. ''Now, we want to feel special in a world in which nothing is special."

Shaich said trading up isn't driven by advertising, but by the quality and experience of a product. ''The most important marketing is what happens over the counter every day," Shaich said of Panera Bread, which sells lunches and breakfasts made from fresh-baked breads and natural ingredients. ''The trick is to hold their confidence and their trust."

Shaich points to Boston Beer Co., which makes the Samuel Adams brand, as a good embodiment of a company that, early on, did not rely on marketing. When it first came out with the Samuel Adams brand, it relied on word of mouth, or ''apostle marketing," to compete with bigger brewers like Anheuser-Busch Cos. and Miller Brewing Co.

''The best customer was, like, a stockbroker, because they talk to people on the phone all the time, and they need something to talk about," said Boston Beer's chief executive, Jim Koch. Now, the company advertises its product in television commercials as beer that will make businessmen seem more sophisticated when they order it. Personal branding, as Silverstein calls it, is another important component to new luxury.

''People are interested in being more individualistic and making a statement about themselves," Silverstein said. ''It's not about tattoos or body piercing; it's about having a fantastic kitchen that says you're a serious cook."

Paul MacFarlane, cofounder of the Experiment, a downtown St. Louis advertising and marketing agency, doesn't see the trend as particularly positive.

''The idea of defining who you are by what you buy is one of the saddest commentaries on our modern culture," MacFarlane said. ''If people think buying something is going to tell them who they are, what they need to do is sit in some place quiet, unplug their TV and work their way through that."