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Lipstick Factor: Marketing Strategies for a Downturn
By: Imogen Matthews
Posted: May 4, 2010, from the May 2010 issue of GCI Magazine.
- Brands that maintain a sense of luxury will be successful.
- Skin care is one of the more resilient categories, partly because companies have continued to invest in new technologies.
- Direct sales has proven to be an area of unexpected growth.
- Savvy brands are employing a mix of complementary channels.
- Retailers may see niche as more of a risk, but there is a genuine need to have something new and interesting.
Beginning with the collapse of banking giant Lehman Brothers in September 2008, global economies have been on a roller-coaster ride. No consumer market has escaped unscathed, although the so-called “lipstick factor” may have helped cushion the beauty industry. The theory goes that the beauty industry and sale of beauty products does not suffer as severely as other industries or products when the going gets tough. As early as the Great Depression during the 1930s, while the U.S. gross domestic product nose-dived, cosmetic sales increased—suggesting that consumers were and are unwilling to give up on life’s little luxuries—regardless of how bad things may be. Further, it was Leonard Lauder who is credited with coming up with the term lipstick factor, which claims that during tough economic times sales of color cosmetics grow while consumers rein in spending on big-ticket items such as cars and electrical goods.
So, did this theory hold water during the most recent economic downturn? Well, yes and no. At the end of 2008, Euromonitor International* noted that North America and Asia (particularly Japan) had suffered the most, and that premium brands were particularly hard hit. “Globally, the industry took a knock, but we have noticed that consumers are ready to try [less expensive] brands, whereas in the past there had been a taboo about budget beauty,” said Euromonitor analyst Irina Barbalova, head of beauty and personal care, Euromonitor International. She notes the success of rock-bottom priced ranges from Primark, TK Max, Supderdrug and Aldi. However, cheapness is not enough. “Brands that can keep the luxury feel will be successful,” she claims. “Consumers want added value at lower prices, but are looking for quality.”
Another recent trend, large brands have also made efforts to launch less-expensive lines that offer some of the same R&D and ingredients as the higher-cost lines. L’Oréal’s Youth Code ($16), for example, relies on much of the same R&D and gene technologies as L’Oréal-owned Lancôme Génifique ($60). “L’Oréal’s luxury division has been suffering. It makes sense to balance it out with masstige offerings,” suggests Barbalova.
Skin care appears to be one of the more resilient categories, partly because companies have continued to invest in new technologies, especially in antiaging. “Skin care is still the engine behind the industry, and is consistently one of the better performers,” says Carrie Mellage, director, consumer products, Kline & Company.