During times of financial difficulty, women apparently still want to treat themselves to the odd extravagance and so top-end cosmetic sales soar while bigger designer purchases plummet. For men, the equivalent is a new tie rather than a new suit. Interestingly, it is perhaps the purchase of ridiculously expensive accessories, encouraged by a nation’s obsession with celebrity that has created some of the financial mess in the first place. But I digress.
It seems that whatever the crisis, we still want to look good, which is why women in World War Two dyed their legs with gravy browning and painted on stocking seams.
The cosmetics industry has bucked the trend against previous stockmarket downturns right back to the Great Depression when make-up sales rocketed as manufacturing crumbled. The same thing happened in the 1970s, and also during the post-September 11 downturn.
Consumers today are economising in all areas, yet still seek quality. The effort to look good and still indulge ourselves perhaps gives confidence to deal with other more serious issues.
How does the lipstick effect translate to financial services?
Perhaps we are buying into the illusion of vanity. Mr Madoff traded heavily on his exclusivity and yet there was no justifiable substance behind the luxury.
The lipstick effect can relate to the service that we provide to our clients. When consumer confidence is low and when there is not much spare cash floating around for new investment or property purchase, I figured that I need to add value in small ways.
As well as concentrating on our higher-net-worth clients for obvious reasons, we tend to ignore smaller, transactional clients, those who quietly sit in the background not causing any harm, who generate little in the way of recurring income, and who may send us the odd email if something is worrying them.
While I was snowed in recently, with a bit more time on my hands, I created an experiment. I remembered that early on, one of my wealthiest clients was a referral from a lady who was less well-off so I searched through my deferred client list and carefully selected some who had been dormant.
I spent an hour updating some marketing material and my top 10 tips and sent this to 10 clients. One hourly rate, divided by 10 clients equals the cost of a luxury lipstick.
Sometimes people just need to be reminded we are there to help. Despite all the financial chaos, the world is still turning. Babies are still being born, university fees need to be paid, couples marry and divorce and sadly people still die. The need for quality advice rather than aggressive sales is prevalent.
So far, my exercise has generated two very good referrals. We should not always dismiss those whom we deem to be our lowest priority because they can be worth it.
Fiona Sharp is senior adviser at M2Finance4Women