The Lipstick Effect and Consumer Buyer Habits

The Lipstick Effect is an economic term referencing the trend in which women, the primary shoppers in the home, would spend their smaller discretionary funds on luxury lipsticks during times of economic hardship. And as we are already seeing the current economic climate from the long-term consequences of COVID on the global supply chain, inflation, and now the war in Ukraine, consumers in the United States and abroad are beginning to make purchasing decisions due to the rising cost of goods and little change in their household incomes.


And how are consumers dealing with these changes in their home economics?


Historically during times of economic and political turmoil, consumers change their spending habits from large luxury items such as trips and expensive jewelry to smaller less expensive items such as candles, makeup, at-home beauty and skin care products, alcohol, specialty coffees drinks from their favorite coffee shops, a new pair of shoes, or an evening at the movies.


These smaller less expensive items allow the consumer to fulfill a need for an emotionally positive moment in an uneasy or emotionally stressful time. As an example, Estée Lauder’s sales of lipstick almost tripled following 9/1 and then again saw strong sales during the Great Recession in 2008. But, even further back in history, people flocked to see Charlie Chaplin’s movies during the Great Depression.


How can companies help maintain their margins with the cost of inflation?


If you fall in one of these categories that fair well during times of economic hardship there are plenty of opportunities to see a growth in brand share and loyalty. Reassessing and modifying your messaging to encourage a warm emotional connection with help the consumer choose you at the checkout counter. A great example of this is the Christmas Polar Bears and Coke®. We know polar bears do not drink coke and don’t go together but they do remind us of happier times of the holidays with our friends and family.


It is also important to use a data-first approach when choosing who and where to target your advertising dollars. Make sure that your analytics are set up properly and that you are focusing on your target buyer, not the specific ad platform.


Concentrating on the target audience will result in a stronger Return on Ad Spend by creating smarter media buy when you reduce your wasted spending by ineffective targeting!

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