The Lipstick Effect - Never let a good crisis go to waste
Heading into the gloomy economic outlook ahead, and as the cost-of-living crisis deepens, it would be a simple and fair assumption that reigning back on non-essential items would be top of the average household’s to-do list.?We know from reports recently published in articles such as that by The Grocer in conjunction with Salesforce that “30% of consumers said they had already begun to spend less” and that of people surveyed “29% of UK Grocery shoppers had stopped buying a particular brand or product because of increasing price’s” and 54% would or already have switched to own brand alternatives. Premium brands and certainly premium range extensions could be forecasting with extreme caution for the foreseeable.??
However, it’s the standout exceptions that can, as ever, give us an alternative perspective on what bigger picture thinking can facilitate, how some brands innovations are perhaps not letting ‘a good crisis go to waste.” Diageo recently reported +18% net sales growth for the last 6 months of 2022, and this didn’t predominantly come from cost price increases, but from premiumisation. Including acquisition of premium brands and range extensions, with 57% of their net sales coming from premium plus brands, which apparently drove “65% of organic net sales growth”.
Similarly, Molson Coors’ launch of its new premium lager Madri Excepcional initially into the on-trade channel in 2020, as the sector staggered its way out of the pandemic and subsequently into grocery last spring felt ‘brave’, however, possibly surprisingly after its first 12 months Molson Coors reported Madri Excepcional as having “one of the highest rates of sale in the lager category”.
And, it isn’t just Alcohol that seems to cause anomalies in our household savings rationale, the cosmetics industry grew by +16% in 2022 and overall predictions from insights such as IGD are that health and beauty growth will outperform that of grocery in 2023 and beyond.?
Why is this? Why might we as consumers be willing to spend on certain items and look to save on others??One popular and increasingly controversial explanation is what is known as ‘The Lipstick Effect’.
In its simplest explanation, the lipstick effect is a psychological reasoning born from the somewhat surprising fact that in times of recession lipstick sales rise.
And it’s definitely not new, in the height of WW2, the 1940s gave us the first recorded instance of a direct link between economic hardship and lipstick sales. Amidst all the needs of the war effort and the abundant domestic challenges this brought, Winston Churchill refused to ration Lipstick. Unlike what was being seen in Germany where supplies and manufacturing resources were put to use for war productions. English women were conversely encouraged to ‘Keep your Beauty on duty” and lipstick sales soared. The benefits were believed to be not only morale boosting from a male gaze perspective but more importantly linked to the demonstrative nature of ‘putting on a brave face’ and the thrill of visiting a department store to shop. It turned out not to be an isolated instance nor an imposed propaganda effect. 50 years later, in 1998, American economist and sociology professor Juliet Schor developed the link between economic downturn and lipstick sales. Schor connected the tendency to spend on small luxury items, not only as giving a morale boost because “cosmetics are an escape from an otherwise drab everyday existence” but because they are also often used and seen in public, therefore they act as a high-impact, high visibility, but relatively low-cost item. They give a personal lift and also serve as a means of demonstrative wealth that allow you to keep up appearances.
The effects have been repeated consistently since, for example, Leonard Lauder (of Estee Lauder) gave weight to the lipstick effect linking it to surges in lipstick sales in both 2001 after the 9/11 terrorist attacks and again through the 2008 recession.
The flip side of the Lipstick effect is, arguably, that whilst we may be more inclined to spend on morale-boosting, high-visibility items, we look to save on more mundane ‘behind closed doors’ purchases. For example, cosmetically we’ll look to save on face creams or base products and from a grocery FMCG perspective this may translate to the switch to own brand basics like baked beans. As whilst we might invite friends round to share a bottle of branded Tanqueray, we’re very unlikely to serve up beans on toast (especially straight from the can) and the kids will probably learn to accept own brand beans vs Heinz.?(In 2022 Heinz reported a 0.9% decline in net sales).
What’s truly fascinating about the lipstick effect, for me, is that it serves as a ‘smack on the kisser’ reminder that despite the unprecedented nature of the events of the past 5 years, the way we found ourselves unable to refer to year on year trends and every statistic needing to be analysed for compound factors, an almost a certainty that old data is useless data, we potentially can still learn something from macro-historical trends seen repeated over long periods of time.?
It's therefore also potentially interesting to consider what other insights we might garner from historical trends and psychological reactions that impact our retail economics.
For example, in the 2008 downturn, there was a direct link between interest rates and birth rates, global trends saw that as the economic crisis deepened fertility rates declined, then in 2009 as we eased out of recession in the UK, and consumer confidence grew, for every % drop-in interest rates, birth rates increased by 2%. I’m not quite sure what this means for Durex, Clear blue and Pampers over the next 2 years but it’s an interesting one to watch!!
How we can help
Cosine connected provides in-house utilisation of our global insights partner Axis. Every outsourced agency can sell to brands their claims of big data access and subsequent deployment but data without insight is meaningless. We often hear the term ‘data is the new oil’ but just like oil, data is a raw resource that requires expert assistance and skill to drive a return. Cosine, as part of the CPM group, has been delivering best-in-class returns for brands for over 80 years. Cosine offers brands dedicated ‘small agency’ true partnership and prioritisation with the backing and experience of one of the biggest marketing groups in the world. Get in touch to find out more.
领英推荐
Contact:
Rhea Ratcliffe, Business Development Manager
07545701715
References:
https://www.diageo.com/en/news-and-media/press-releases/2023/2023-interim-results-half-year-ended-31-december-2022
https://www.statista.com/topics/3137/cosmetics-industry/#topicOverview
https://www.retail-week.com/people/who-will-be-retails-winners-and-losers-in-2023/7042884.article?authent=1
https://www.foodbev.com/news/kraft-heinz-posts-moderate-net-sales-decline-for-q2/#:~:text=Kraft%20Heinz%20has%20reported%20a,to%20mitigate%20rising%20input%20costs.