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Elon Musk on The Importance of Reading Books

The lipstick effect states that people tend to buy certain premium quality products even when the economy is undergoing a crisis. This can be reframed as people remaining ‘loyal’ to the brands. It is all about priority. Some brands have been successful in getting connected directly with the customers’ hearts. The products, even though are expensive, will be bought because they are what the customers have become accustomed to. They are what makes the customers happy.

What is the lipstick effect?

ust like any great invention is named after its discoverer or the era it was discovered in, this effect is named the way it is because: This behavior was observed for the first time in the American economy during the Great Depression when a reduction in industrial production by half and even more was witnessed but the cosmetics industry reported a 25% increase in sales. This rise in sales occurred during the recession of 2008, cosmetics behemoth L’Oréal experienced a sales growth of 5.3% during the first half of the year.

Why is this effect called ‘the lipstick effect’ 

There are claims that the lipstick effect has helped brands to survive the crisis and the economy to trigger growth when all hopes were lost. Lipstick is said to be a significant economic barometer that can indicate how the customers might behave in a wounded economy.This phenomenon not only challenges the brands' image but also the marketers on how they succeed in getting cash out of the customer’s hands when they are very low on cash.The more the brands’ products are closer to the customers' hearts, the more loyal the customers will be.

What does it mean for the brands and economy? 

Have you bought something expensive during this lockdown when the economy was undergoing a financial crisis? Why does the demand for certain luxurious products go up during a crisis instead of going down? Isn't it normal for the demand for luxurious products to go down during depression or during times of crisis? Well, there is a term for this behavior. It is called ‘the lipstick effect’ The lipstick effect states that people tend to buy certain premium quality products even when the economy is 

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Why people buy expensive things during recession? : The Lipstick Effect

A famous example of changing people was when the Cisco board of directors replaced the then-husband-and-wife team who founded the company. In other cases, new team members are brought in to supply new skills instead of replacing people; Eric Schmidt being recruited to Google is a famous example of that approach.

Elon Musk on The Importance of Reading Books

Why people buy expensive things during recession? : The Lipstick Effect

12 Things about Product-Market Fit - Andreessen Horowitz

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