The Lipstick Effect: Do we need to be wary of ‘treating’ ourselves to little luxuries during a recession?

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The Lipstick Effect (or Lipstick Index) was a idea first posited by, unsurprisingly, a purveyor of lipstick. In 2001, within the aftermath of 9/11, Estée Lauder chairman Leonard Lauder observed a marked uptick in gross sales of lipstick. He got here to the conclusion that merchandise like lipstick had been a good gauge of the economic system: in occasions of hunch, purchases of smaller luxuries get a enhance, he proposed. A proportion of society will nonetheless need to deal with themselves, however cash’s too tight to splurge on life’s larger aspirational objects. Designer purses might be out, however having an immaculate face is inside attain.

It would possibly be greater than 20 years previous, however the idea captured the patron consciousness to such an extent that it’s been wheeled out as a marker during subsequent financial downturns, most notably after the banking crash and international recession of 2008. A flurry of articles appeared, together with a New York Times piece known as “Hard Times, but Your Lips Look Great”. The idea resurfaced once more as just lately as 2022, when market analysis agency Kantar Worldpanel discovered that UK gross sales of lipstick had been practically 10 per cent larger year-on-year within the 12 weeks main up to 18 September.

Several research and observations have supported the existence of the Lipstick Effect, in accordance to Zubin Sethna, professor of entrepreneurial advertising and client behaviour at Regent’s University London and creator of Consumer Behaviour. Although he warns that it’s “not a universal law and may not apply in all situations or for all consumer products” – elements similar to cultural norms and the character of the financial downturn will have an effect – Professor Sethna says it gives “an interesting insight into how consumer behaviour can adapt during challenging economic times”.

It’s an intriguing speculation given the information that the UK has slipped into a recession. The idea “does have some merit”, agrees Philip Graves, a client behaviour advisor and creator of Consumer.ology, who sums it up thus: “People still want to satisfy psychological desires when times are hard, so will look for ways to spend that make them feel good. But they will recalibrate this spending to adapt to the economic situation and – perhaps just as importantly – the economic sentiment, which provides social proof of what other people are doing.”

Richard Shotton, creator of The Choice Factory, a bestselling e book on how to apply findings from behavioural science to promoting, concurs that “what other people are doing” has a huge influence on our spending habits. “We are a herd species that’s deeply influenced by what other people do – so if we see that a particular product is popular, we are more likely to consider buying it ourselves. That means a small increase in popularity can actually lead to a product becoming much more successful.”

So, is the Lipstick Effect taking place during our present monetary squeeze? Looking purely at cosmetics, a third (32 per cent) of UK make-up patrons declare they’ve bought a product to “treat themselves” within the final 12 months, in accordance to information evaluation from international market intelligence company Mintel. The proportion of girls shopping for lipsticks additionally didn’t dip in 2023, regardless of cost-of-living belt-tightening, whereas spend is equally up – projected to have risen by 12.3 per cent final 12 months.

Purchases of color cosmetics – the umbrella time period for make-up merchandise designed for pores and skin, cheeks, eyes and lips – additionally climbed in 2023, with market spend projected to have grown by nearly 8 per cent to £1.84bn.

Although Lauder initially coined the time period primarily based on lipstick, it would be higher rebranded because the “indulgence index”. After all, if the development is monitoring spending on smaller indulgences, it certainly encapsulates greater than make-up – fancy chocolate, barista-made coffees and takeaways might all be included within the “life’s little luxuries” portfolio.

“During difficult economic times, consumers are on the lookout for products that can give them a taste of luxury without breaking the bank,” says Francesca Smith, senior client life analyst at Mintel. “This manifests in different ways across a range of categories, but there’s always a strong emotional drive behind these purchases, whether that’s providing a much-needed mood boost, escapism from daily stresses or some light-hearted fun. Chocolate is an affordable way for consumers to treat themselves, providing an instant pick-me-up, with 68 per cent of chocolate buyers agreeing that eating chocolate is an affordable way to boost your mood.”

She additionally highlights an uptick in underwear purchases, which “provide that feel-good factor and a boost to confidence, particularly among women”. In October 2022, 35 per cent of adults had bought underwear up to now three months – this had risen to 41 per cent by October 2023.

Although current traits during the price of dwelling disaster within the UK have mirrored the traditional Lipstick Effect, with shoppers gravitating in direction of reasonably priced luxuries, the specifics of these purchases have advanced, agrees Professor Sethna. “Technology, wellness products and sustainable goods have gained prominence alongside traditional luxury items like cosmetics,” he says, giving the instance of success tales together with Hotel Chocolat, Craft Gin Club and Nespresso. “This shift reflects broader consumer values and the digitalisation of comfort and convenience.”

There’s priority to again up the idea that folks swap to cheaper indulgences when occasions are robust – Graves says that, traditionally, we’ve seen folks change from consuming out to having takeaways, as a result of “they still want the indulgence of not cooking but want to substitute it for a cheaper (but not cheap) alternative”. He provides: “As a consumer psychologist I would expect to see this type of framed behaviour, meaning choosing something less expensive than a current choice, rather than absolute behaviour, which means choosing the cheapest option. The latter is too cognitively demanding.”

Shotton cites a number of research that again up the concept that folks select the “cheaper” center choice during occasions of recession. Officially termed “extremeness aversion” however generally referred to because the “Goldilocks effect”, it was first confirmed by cognitive and mathematical psychologist Amos Tversky within the Nineties. He arrange an experiment wherein a group of folks had been instructed to select between shopping for a low-cost digicam and a dearer one with extra options – the outcome was an nearly actual 50/50 break up. He did the identical factor once more however added in an excellent pricier premium choice. Few folks picked the costly digicam, however the quantity of individuals who selected the mid-range slightly than the most cost effective variant shot up to three to one. Brands have even cynically cottoned onto this: it’s why, in occasions of recession, they’ll seemingly counter-intuitively launch a super-premium model of their product. They realize it received’t promote, however extra folks will go for the perceived “middle” choice – shoppers unconsciously imagine they’re saving cash by swerving the dearer selection.

A pal just lately talked about to me how inconceivable it was to even think about saving up for a home deposit or different huge purchases. As price of dwelling rises proceed to undermine monetary safety, she mentioned, the very notion of accumulating tens of 1000’s of kilos felt laughable. Instead, she spends the little disposable revenue she has on having fun with herself within the right here and now, indulging in takeaways, drinks out, good hand soaps and candles. It’s been compounded by the information that the retirement age is continuous to go up; “Clearly I’m never going to be able to stop working,” she mentioned, “so I’d rather spend my money on things that make me feel good. Ironically, I think I’ve gotten worse at saving since the cost of living crisis. It feels pointless.”

Evidently, this isn’t essentially the most accountable behaviour – however it is comprehensible. The psychological underpinnings of the Lipstick Effect are deeply rooted in how shoppers search emotional gratification and luxury during nerve-racking occasions, says Professor Sethna. “Indulging in personal rewards, such as small luxury purchases, during periods of financial strain, offers an accessible form of temporary escapism and a tangible sense of pleasure without the financial burden of larger investments and can trigger a dopamine rush and provide a psychological lift.”

There’s additionally sturdy analysis to show that burying our heads within the sand when occasions are robust is human nature. Shotton tells me concerning the “Ostrich Effect”, greatest demonstrated in a Carnegie Mellon examine that discovered folks checked their shares and shares portfolios far much less after they weren’t performing nicely. This behaviour isn’t rational – information pertaining to how nicely your investments are faring is equally worthwhile whether or not they’re rising or falling – but when one thing causes us pleasure, we do it extra, and if it causes us ache, we do it much less. If your private funds trigger you ache, there’s a tendency to undertake a fatalistic method, cease checking your accounts, and buy one thing that makes you’re feeling good within the quick time period.

To counteract the urge to splurge, Graves advises creating one or two cash saving guidelines of thumb. For instance, don’t purchase something on-line during the week; any time you spend cash on one thing discretionary, put the identical quantity of cash into a separate financial savings account in order that it feels prefer it’s costing you twice as a lot; and unsubscribe from any emails from retailers and types, particularly those that publicize gross sales.

“It’s interesting that in times of economic uncertainty, the great allure of small indulgences can often hold a mirror to the resilience of the human spirit,” concludes Professor Sethna. “However, it’s important to recognise that relying solely on retail therapy or indulgent purchases as a coping mechanism for financial strain may not be sustainable in the long term and could potentially exacerbate financial difficulties. It’s essential to practise responsible spending habits and seek healthier coping mechanisms, such as engaging in hobbies, exercise, socialising, or seeking support from friends and family, to manage stress and maintain overall wellbeing.”

The ethical of the story? If you end up ostrich-ing, it would be time to get your head out of the sand and begin changing into extra intentional in the way in which you spend. While cash can’t purchase you like, a lipstick actually can’t purchase you long-term happiness.