Embracing the Lipstick Theory

When times are tough, customers substitute bigger purchases for more inexpensive, feel-good items.

By Jim Callahan.

According to economists the lipstick theory works like this. You’re in the store, checking out some new gear. Then you check your finances and think, “No, better not.” You buy a new lipstick instead.

The theory is that if real retail therapy is out, women look for simpler, more affordable ideas. Lipstick is a happy alternative. Therefore, rising cosmetic sales are a sure sign budgets are squeezed and families are tightening belts.

The phenomenon was also apparent in the Great Depression. Even though people were struggling to pay for food and housing, they would indulge in small things—cologne, perfume, makeup.

The effect even exists for men, typically revealing itself in purchases of small electronics, rings, cufflinks or hair dyes.
The lipstick theory gained significant momentum following the 9/11 terrorist attacks. The chairman of cosmetics giant Estee Lauder noticed that the sale of many of its beauty items, led by lipstick, had increased significantly following 9/11. At the same time, sales of more expensive items decreased.  He theorized that people are greatly comforted by even small luxuries during times of high stress and anxiety.

Not only is the lipstick theory plausible, “it’s perfectly consistent with all kinds of economic theory,” said Richard DeKaser, the chief economist with National City Corp., a financial holding company and bank in Cleveland.

A Nielsen survey concurred, finding that 75% of women listed beauty supplies as one of the very last things they would slash from their budget. Furthermore, Victoria’s Secret revolutionized the lingerie industry by creating high-end, provocative clothing for women. And despite the ongoing economic problems facing consumers, the company continues to find ways to generate very impressive sales.

C-Store Connection
Now, you might think, that’s some pretty interesting information, but what does it have to do with convenience stores?  Well, let’s think about adapting the lipstick theory for convenience store use.

As we approach the holiday season, the Christmas selling season is the perfect time to engage in the upscale items that help people feel better. Consider high-end chocolates, for example. Placed right by the cash register, they will surely drive impulse sales and customers will walk away happy, remembering your store provided them a great shopping experience.

Remember, chocolate is virtually recession-proof and finding premium chocolate in a place you were not looking for it could help generate a renewed interest in your merchandise. That could lead to word-of-mouth advertising and attract a steady stream of new and repeat customers.

Another item to consider is flowers. Whether it’s Christmas or Valentine’s Day, flowers are almost universally accepted as a feel-good gift. There are many distributors in the industry that sell roses by the dozen and many others that sell single roses. And if you really want to push the envelope, combine the flowers with the chocolates and create a higher-ticket item. If spending $2 on a chocolate bar will make a customer feel good, spending $5 on chocolate and a rose will make them feel great!

Another category where customers have been known to seek some comfort is ice cream. Pints of Haagen-Dazs or Ben & Jerry’s superpremium—15% or above butterfat content—is the very definition of a ‘guilty pleasure.’ Work with your distributors to get some promotional dollars around ice cream and then tie in other categories like coffee and bakery. What goes better with a pint of chocolate ice cream than a cup of coffee and a brownie?

If you can get customers turned on to this sort of offering during the holidays, there is a very good chance that you can keep them coming back throughout the year.

After all, customers enjoy indulging on themselves. Be the store they want to go to when they are looking for a special treat.
Jim Callahan has more than 40 years of experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at jfcallahan502@msn.com.

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