The lipstick effect: a guide for beauty supplies

How to sell luxury hair products during recession

The lipstick effect is a term of art in economics. It refers to the phenomenon where consumers will spend money on less costly luxury goods when they face an economic crisis. In times of economic crisis, you would normally think that female consumers would buy a more affordable lipstick product. However, lipsticks from luxury brands sell better during tough time. Why? We will be discussing the cause, and things beauty suppliers can do to benefit from the phenomenon.

Luxury goods over travel

When the pandemic restricted people’s freedom to travel, women looked elsewhere and spent on luxury brands. Exotic scenes of women who lined up in front of luxury retail stores like Louis Vuitton and Chanel made the news headlines, and the sales revenue for global luxury brands spiked while some luxury handbags quickly went sold out and were sold at higher prices than retail prices in the secondhand market.

To explain the situation with the lipstick effect, consumers tend to look for an escape from their worries about financial difficulties in tough times. When you cannot spend big money, travel cost becomes too much of a burden. Instead, you would settle for watching a movie or dining at a restaurant.

In other words, when consumers have less disposable income, they would give up expensive luxury goods but look for a luxury they can afford to satisfy their desire.

Consumers take more time during economic hardship

As the economy gets worse, more consumers start to consider the durability and practicality of items they want to purchase. This makes them think twice before making a purchase. “If you don’t know what to buy in America, just grab the most expensive one,” people say. Although it sounds like an exaggeration, there is always a reason why something is more expensive than others.

Sometimes, it is even better for you to buy an expensive product instead of buying a cheaper, inferior one, throw it away quickly, and keep getting new ones. During the recession, you should emphasize the quality and durability of your merchandise for a better sales outcome. For example, synthetic hair products and Remy hair products have a wide price gap between them. However, if consumers were to consider durability and practicality, then Remy hair products could ultimately save money in the long run.

Persuasion for high-end hair products

If you want to persuade your customers to buy high-end products, you should back your claim of saving money in the long run with supporting materials. A simple statement of “it saves money” is not enough to open the purse of consumers living in an economic downturn.

You need actual numbers and materials to back your claim for the customers and hair stylists who often buy luxury hair products including remy hair. Your customers will make purchases with confidence and trust you when they are assured of a prospective high return for the investment.

You should have confidence in explaining why luxury products are a better choice for the long run and always add the following statement to your sales pitch: “to avoid this and that problem after purchasing cheaper products, you can invest extra money for better value and quality.” Of course, you need not make every customer who looks for less expensive goods buy expensive ones. You should figure out the individual’s purpose of the purchase and help them find their best fit.

Practical luxury is the mainstream now

People say, “in business, you do not get what you deserve but what you negotiate.” Consumers not only take packages and brand names into account but also consider the value of more expensive goods. Especially, a customer who looks for luxury goods during an economic downturn is likely to be aware of the products even better than the retail business owner. They must have seen the reviews on social media and visited the store with a firm decision already made.

An owner of a beauty supply business that carries a lot of high-end hair products should have comprehensive knowledge about the hair products to persuade customers.

Avoid selling at a lower price

Luxury goods should not be discounted unnecessarily. Rather, you need to deliver proper and extensive knowledge of products to customers for a better sales number.

Seasonal promotion and discount are great ways to attract new customers and show thanks to loyal customers, but the price of luxury goods reflect the value customers seek. Slashing the price might coincidentally damage the reputation of the brand and product.

That is why Louis Vuitton and Chanel do not run outlet stores. They are providing assurance to the customers who bought their products.

If hair companies start to sell their high-end human hair weaving products at a substantial discount to fight off the recession as low as those of mid-range products, the sales of mid-range products would suffer at the same time. This is a polar opposite of a win-win among the various product categories and will lead to decreased revenue across the board.

Providing identity to individual customers

Some luxury brands hike their prices despite the economic downturn. In Particular, the price of Chanel bags gradually goes up, so purchasing a Chanel good is not just an expense but also an investment. This is a good example of marketing strategies based on the Veblen effect.

The principal demand for luxury goods comes from high-income earners, and when the price of luxury goods goes lower or on sale, the products will no longer be considered luxury. Hence, raising prices might bring more prestige to the brands and their goods and better appeal to the target customers.

Target consumers for Remy hair or Brazilian hair products are usually those who can afford the luxury. For your customers who typically buy those high-end products, you should not give discounts and promotions that may devalue the products but have a marketing strategy to provide more distinction for purchasing and wearing those products.

Strategic pricing

Lately, for products in any given price range, you would find 99 cents after the decimal point. For example, you could sell a $5 product at $4.99 just to give the impression of affordability.

When it comes to human hair products priced over $200, the price tag of $199.99 can rather give the products a cheap feel. You would rather round up the decimal points to give a luxurious feel while deducting a cent can still appeal to customers who look for deals. Luxury brands like Burberry and Prada stick to rounded prices for this reason.

If the product is high-end, you should consider simply rounding up the price even if decimal points are there for other reasons. The order of shelf display can make a difference too, so more expensive hair weaving products should be shown first. When a customer sees the most expensive one and then moves on to the lower-priced items, the second or third products would seem more affordable.

However, when a customer sees the cheapest products first and later the high-end products, they would perceive the cost of high-end products as a bit too much.

The appeal of limited availability

The snob effect is a phenomenon described in microeconomics. According to the theory, when demand for a good increases, the number of customers who want to purchase the good decreases. Even if it was an expensive luxury brand product, customers would not want to be just one of so many people who already have it.

As a snob has an exaggerated respect for high social position or wealth, they want to buy stuff to make a statement. Piled-up merchandise that can be seen everywhere is not a great appeal to those customers who want to distinguish themselves from others.

As luxury brands release limited editions to generate the snob effect among a certain consumer group, high-end hair product lines can try a marketing strategy where they appeal to a small group of customers rather than filling the entire store with their branded products.