"The Lipstick Effect" and the Recession

In a recent interview, Nancy Upton, assistant marketing professor at Northeastern University College of Business Administration and an expert on hedonistic spending, provided a rundown on "The Lipstick Effect" and how what it means for low-cost retailers in a recession.

Basically, during the Great Depression, there was a surge in cosmetics sales because it is a low-cost way for women to feel good about themselves. Now, of course today there are a bevy of high-priced cosmetics on the market - I should know, I spent a ridiculous amount on my favorite mascara yesterday - but apparently that high end option plays an important role in influencing spending. Making the choice to seek out a savvy, low-cost option for splurge purchases gives a warm, sunny feeling of instant gratification while also making women feel clever for scoring a great deal.

Small items like cosmetics or McDonald's burgers are low-anxiety purchases that are easy for consumers to handle even in tough times. Upton predicts that this new frugality will last - "People are learning new skill sets, and those will stick. Now that they're learning how to do extreme comparison-shopping, people won't go back to careless spending," she says.

Looks like "The Lipstick Effect" is here to stay.