Lipstick Effect: Must-Have Items Even in a Bad Economy

Lipstick Effect: Why We Still Buy Even in Tough Times?

When the global economy faces uncertainty, including declining GDP growth rates, rising unemployment numbers, or even constantly increasing prices of goods and services, consumers should realistically reduce spending on luxury or non-essential items. However, there is a fascinating marketing phenomenon that explains the opposite of what should be happening. This is known as the "lipstick effect" theory, which describes the tendency of consumers to continue purchasing small luxury items even during poor economic conditions.

What is the Lipstick Effect?

The lipstick effect is an economic theory that explains consumer behavior during economic downturns. It observes that consumers, especially women, tend to continue buying affordable luxury items such as lipstick, cosmetics, accessories, etc., even when they have to economize in other areas. This phenomenon demonstrates that even during tough economic times, people still desire small pleasures and positive feelings from purchasing items that make them feel better about themselves.

The History of the Lipstick Effect

The concept of the lipstick effect was first introduced by Leonard Lauder, the chairman of Estée Lauder Companies, in 2001. He observed that the company's lipstick sales increased significantly after the 9/11 events, a period when the U.S. economy was facing difficulties. Subsequently, this concept gained widespread attention and was subjected to in-depth studies by economists and marketers worldwide.

However, a similar phenomenon had been observed even earlier. During the Great Depression in the 1930s, lipstick sales also increased surprisingly. This demonstrates that the phenomenon is rooted in deep-seated human behavior and has recurred throughout history.

Reasons Behind the Lipstick Effect

Need for Confidence

During times of economic uncertainty, people often feel insecure and seek ways to boost their confidence. The solution lies in purchasing affordable cosmetics or beauty products, as these can help elevate self-worth and increase confidence without spending as much as on larger luxury items.

Changing Spending Patterns

When the economy is poor, consumers tend to reduce spending on large, expensive items such as houses or cars. As a result, they turn to small luxuries for happiness, as these provide a sense of fulfillment without requiring significant expenditure.

Increased Emotional Value

During difficult times, small items like lipstick or perfume may have a greater emotional impact. They help consumers feel better when facing stress from economic uncertainty. Purchasing these items is like giving oneself a reward at an affordable price.

Social Mimicry

Even in tough economic times, people still want to maintain their social image. Therefore, buying affordable beauty or fashion items allows them to feel part of social trends and fashion without overspending.

The Impact of the Lipstick Effect on Economy and Business

Business Adaptation

Companies, especially in the beauty and fashion industries, often adjust their marketing strategies to respond to the lipstick effect. They may focus on producing smaller or more affordable items to attract consumers seeking small pleasures during economic downturns.

Business Risk Diversification

Companies with diverse product lines may leverage the lipstick effect by emphasizing the marketing of more affordable products to compensate for declining sales of expensive items.

Creation of New Business Opportunities

The lipstick effect may lead to the emergence of new businesses that focus on producing small luxury items or affordable luxuries to meet consumer demands during economic recessions.

Maintaining Economic Stability

Although small in scale, the lipstick effect can help maintain money circulation in the economic system, potentially alleviating some impacts of economic recession.

Long-term Changes in Consumer Behavior

The lipstick effect may result in long-term changes in consumer behavior, with consumers tending to place more importance on the value and cost-effectiveness of products, even after the economy recovers.

Examples of the Lipstick Effect in Thailand

• During periods of economic difficulty in Thailand, such as after the Tom Yum Kung crisis in 1997 or during the economic slowdown from 2017-2019, it was observed that female consumers showed increased interest in beauty products. According to a 2017 report by Kasikorn Research Center, the value of the cosmetics market in Thailand continued to grow by 6.5%, amounting to 168 billion baht. The facial product group, including lipsticks, had a high growth rate of 8%.

• During the COVID-19 pandemic in Thailand, which severely impacted the economy, many consumers chose to invest in skincare products for face and body, even while being more cautious about spending in other areas. Data from Euromonitor International reported that in 2020, the skincare product market in Thailand was valued at 47,700 million baht, growing 1.8% from the previous year, despite the overall economy contracting by 6.1%.

The lipstick effect is considered an interesting and important phenomenon in economics and marketing. Although it occurs during economic downturns, it demonstrates that consumers still desire small luxury items that can make them feel better. Understanding this phenomenon helps businesses adjust their marketing strategies and operations to align with consumer behavior in uncertain economic conditions. It also serves as a reminder of the importance of happiness and confidence in consumers' lives, which should not be overlooked even during economic recessions.