Economics and human psychology are co- related when it comes to evaluating and understanding various trends in consumer market . Many times it goes the other way round as well when the psychology is used by consumer business to predict certain purchasing behaviour and trend. One such relationship can be seen in the “LIPSTICK EFFECT” OR “LIPSTICK INDEX”.

The lipstick effect is a theory where the consumer during recession tend to indulge in buying budget friendly luxury items like an affordable branded lipstick instead of buying expensive purses and fur coats etc so that it doesn't cause any problem to their already limited income. Such purchases during the economic distress times are made to uplift their moods and morale while they continue to cut back on more expensive purchases to save money, it is a way of treating themselves . Items like lipstick, coffee, and even movie theatre tickets are less costly but still provide that same sense of indulgence.

The Lipstick Effect — first posited in 1998 by economics and sociology Professor Juliet Schor — refers to the idea that, when faced with economic uncertainty, while people tend to cut back on their spending and become more cautious about their expenses they also still indulge in small, affordable luxuries instead of splurging on big-ticket items.

In other words, they may be hesitant to buy expensive cars or go on fancy holidays, but they still treat themselves to little luxuries like cosmetics, chocolates, or even a cup of coffee.

You must have definitely gone through the stats mentioned in the start , now going by them one can conclude about lipstick effect really holding the grounds of being an important criterion but let’s first understand what an economic indicator actually is.

In simple language economic indicators are sources of valuable data that help analysts to understand the economy some common examples are GDP(Gross domestic Product), Stock market, CPI(Consumer Price Index) and more , they provide valuable information about the overall health and direction of a country and include things like people’s spending habits, the number of jobs available and the prices of goods and services . Now what needs to be considered that these indicators are projections of future therefore rely on to some degree of assumptions therefore their predictions may not come true all the time and fetch you the desired results .

A lipstick effect testing was done by economists in 2009 using statistical analysis. A conclusion reached, based on the data collected by Kline & Company, the effect was overestimated. According to Mintel, a marketing research company, the lip products fell by 3% during the great recession. Undoubtedly, lipstick probably isn’t a reliable recession indicator — many examples can be seen where the cosmetics industry has noticed increase in their sales irrespective of economic prosperity or recession. However, as discussed earlier it can surely give insights into consumer psychology and behaviour during uncertain times — and when used in conjunction with another economic indicators helps provide a clearer picture of consumer sentiment in an economy.

As a well know fact that this industry has grown at a very faster rate and is predicated to grow even more , surely such consumer psychology indicators can boost its reach and lets find out how it can be done.

Growing focus on sustainability and ethical consumption, consumers may be more likely to prioritize affordable luxuries that align with their values and beliefs.

To go for products that are exclusive to launch and sale only on online platforms.

This effect can be used to guide pricing strategies and position products as affordable options for self-care or indulgences.

Intertwining top customer reviewed products with the best prices to offer, because only online selling sites provide these features to customers.

It will be interesting to see how the consumer behaviour shapes the market trends and businesses in the future but surely such insights helps to look into the society with a completely different perspective.