By Donna Schenk, Vice President Marketing Services

Columbus Life Insurance

My favorite National Public Radio station had an interesting news story last month. They reported on a New York Times article¹ that suggested the current increase in sales of lipstick is an indicator of a shaky economy. The article went on to refer to a theory once proposed by Leonard Lauder, the Chairman of Estee Lauder Companies. Mr. Lauder had noted an increase in his company’s sales following the 2001 terrorist attacks. He speculated that lipstick purchases are a way to gauge the economy. When it’s shaky, he said, lipstick sales increase as women boost their mood with inexpensive lipsticks instead of $500 luxury handbags.

I was curious if serious economists shared Mr. Lauder’s theory, so I contacted Nick Sargen, Senior Vice President and Chief Investment Officer of Fort Washington Investment Advisors, for his input. Nick had heard that same NPR story and very graciously gave me the following reactions to the Lipstick Economics theory:

1. American consumers currently are experiencing a painful squeeze as their houses decline in value, their incomes grow only modestly, and surging food and energy costs rob them of purchasing power on other items.

2. With women controlling or influencing most of the purchasing decisions, the challenge they face is how to get more satisfaction with less to spend after paying for the necessities of life.

3. How have they adjusted? Answer: By curbing purchases of expensive luxury items and shifting to less expensive items such as lipstick that still make them feel special.

Nick went on to say, “The story about lipstick economics would gladden any economist; it demonstrates vividly how women adjust very rationally to tough times.”

Whether or not you believe that lipstick sales make a good economic indicator, it is a fact, as Nick alluded to above, that women influence most purchasing decisions in American households. Women are an economic force to be reckoned with and should be a focus in your marketing plan.

The perception that women are hesitant to buy is perhaps better stated as they don’t want to be sold. They want to be educated. They are more likely to seek a long-term relationship with their advisor, not just a transaction, so they want to learn as much as possible and feel comfortable with what they know prior to making a purchasing decision.
¹ “Hard Times but Your Lips Look Great,” Kayleen Schaefer, The New York Times, May 1, 2008

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