Bring out the cliches- It's the Lipstick Effect

Tweet

In the months following the Sept 11 attack in 2001, Leonard Lauder, chairman of Estee Lauder noticed that sales of Lipstick were increasing. The reason he surmised was that women traditionally cut back on luxuries in tough times but turn to little luxuries like lipstick as a pick-me-up. Lauder hypothesized that the Lipstick Index was a good way to gauge the economy.

This is the so-called "Lipstick Effect." Not to be confused with last year's brouhaha "Lipstick on a Pig."

What is it about lipstick and coloured lips?

According to some accounts, Cleopatra may have been the first to use a form of lipstick made of henna and carmine. Victorian women would kiss rose coloured crepe paper for a touch of colour. And the Gibson Girls of the 1900s would bite their lips and suck on cinnamon to make their lips swell. Symbolically lipstick signifies a bit of glamour. During the depression women bought lipstick as their one luxury item.

Nancy Upton, assistant marketing professor at Northeastern University College of Business Administration believes consumers are being more discriminating with some higher priced items. For example a customer may check the ingredients of a higher priced cosmetic and a more reasonably priced one. If they both appear to have the same ingredients, the consumer may choose the lower priced one. This makes the consumer feel smart.

She does however point out that during tougher times we often see people make irrational decisions to lift their spirits, "Some cosmetics offer a discreet opportunity for conspicuous consumption. So a consumer may very well pay more for a Chanel lipstick, which she can put in front of other people. But will she pay more for Chanel nail polish when no one will be able to tell what the brand is?"

A quick Google search of the Lipstick Effect will yield a plethora of hits. Every blip in the economy seems to bring out the Lipstick Effect.

And if it's not Lipstick, it's hemlines. With hemlines, you can have it either way. One legend says that skirts get shorter when the economy gets tighter. Clothing makers save on fabric, and short skirts make some people happier.

The other hemline theory says the opposite. According to Barron's Finance & Investment Handbook, hemlines falling mean a sinking economy and bare knees mean rising stocks. Short skirts in the 1920s and 1960s correlated with boom times, while longer dresses in the 1930s and 1940s matched a bear market bring rising stocks, they say.

Which is true? Depends how you spin it.

If you really want to know how the economy is doing, you sure don't need to look at skirts or lipstick sales.
But if you want your product in the news and to get people talking about it and buying it, then pucker up and bring on the Lipstick Effect.