Lipstick effect helped brands survive crises before. It can now aid Covid-hit companies

A lipstick is not an inferior or trivial good, but a significant economic barometer that can indicate how consumers might behave amid a bruised economy.

Representational photo of a lipstick | Pixabay

Will the Covid-19 pandemic, which has resulted in massive job losses and a badly bruised economy, make for The Lipstick Effect in India?

The Lipstick Effect occurs when consumers continue to spend their money on small indulgences during recessions, economic downturns, or when they have very little cash in hand. They may not have enough to spend on big-ticket luxury items. However, most still find the money to purchase small luxury items, such as premium lipstick.

Leonard Lauder, the chairman of make-up company Estée Lauder, noted
noted that following the 9/11 attacks in the US in 2001, his company sold more lipsticks than usual — not double, but significantly more. As a result, he theorized that lipstick sales are a contrary economic indicator.

That is how The Lipstick Effect came about.

Lipstick as an economic barometer

Who would ever think of lipstick as an economic barometer? Lipsticks and other small-ticket beauty items are not inferior or trivial goods; they are the little treats that consumers use as substitutes for the big treats they’re unwilling, or unable, to buy.

The ‘lipstick’ in the above explanation of the psychology of consumers does not literally have to be a lipstick. Indulging in the purchase of a Starbucks White Chocolate Mocha Venti Frappuccino for Rs 315 when a Nescafe from the coffee vending machine would have cost a mere Rs 10, or splurging on Nike Air VaporMax Flyknit running shoes when Nike Joyride ones are available at a much lower cost, yet perform the same function equally well. Such examples , too, are part of The Lipstick Effect — the small acts of self-indulgence that tells you life is still good.

So, what lies in store for brands and marketers now that the consumers do not have extra cash to spare, and will indulge themselves only on a rare few occasions? Vanilla ice-cream will still sell. The question is whether it will be Amul, or consumer will a switch over to a local brand.

The interesting learning from the lipstick analysis is that even during a downturn, brands that families trust are not jettisoned. In fact, they end up being treasured and looked at with more love and nostalgia. But in troubled times, such brands need to remain visible. In fact, gain market share during bad economic patches. The smart ones, knowing that the consumer trusts and values them, invest more in advertising to appear more reassuring, comforting and desirable.

As a result of the The Lipstick Effect, the lady of the house will always show loyalty to a loved brand on an occasion like a family anniversary dinner, and is likely to pick Amul Mawa Malai or Caramel Cookie at Rs 400 a brick as opposed to the usual vanilla at Rs 250. Such small indulgences are meant to make the family happier. Thus, in times of economic distress, good brands can actually expect to up-sell, despite the strong headwinds.

 

Change in consumer behaviour

Given the growing fear of eating out, and the reluctance to spend at costly restaurants, The Lipstick Effect will unveil itself in India in more ways than one. Since entertainment for family and friends will largely be at home, a part of the money saved from eating out may be deployed in beautifying the house. A fresh coat of paint in the living room, a new lamp, some potted plants — small acts to signal that one is home-proud and life is still good. Vacations overseas are highly unlikely this year, but money saved may be used on a weekend at a 5-star hotel relatively close to home, which may have otherwise been out of budget. A new car purchase will most likely be postponed, sending off one’s son to a University abroad may also be shelved. But small pleasures every now and then will remain, like the purchase of an expensive lipstick.

In Harry Potter and the Prisoner of Azkaban, Dumbledore says, “Happiness can be found in the darkest of times, if one only remembers to turn on the light.” Despite the morbidity of the Covid crisis, consumers will still display streaks of seemingly irrational and contrarian behaviour, like small expenses for self-pampering or enhancing their self-esteem. For brands, there is a big opportunity in these small apertures. But as Dumbledore says, they need to remember to turn on the light. Create advertising that is endearing. Use warmth, family togetherness for creative themes. Celebrate life. Dispel darkness. Kindle hope. Smile, laugh and get the consumer to see more of your brand — as a supporter, a friend and a well-wisher.

The Lipstick Effect offers a glimmer of positivity. Honest to God, today we all need it, more than ever before.

The author was Group CEO of Zee Telefims & Founder Chairman of Dentsu India. He is currently Chairman of Mogae Media.

Views are personal.