During the start of 2008 make-up giants L'Oreal and Estee Lauder knew we were facing a global recession.

How they knew was because sales of lipstick over that period were on the increase.

The last time they had witnessed such a jump from normal sales figures was in the months following 9/11. The world entered recession soon after.

Ok so what's that got to do with your business?

Rather than lose the spending habit, consumers simply trade down to cheaper items during hard times to cheer themselves up. And women, when they are forced to cut back on life’s other luxuries, they feel lipsticks and other cosmetic items as a reasonable indulgence and a guilt-free pick-me-up at department stores.

There are losts of "lipstick" indicators that apply accross industry and market segments that serve to indicate changes in consumer sentemet towards thier economic situation.

Doesn't the demise of Starbucks prove that concept wrong?

Starbucks closing 70% of it's outlets in Australia recently is actually an indicator that their business model is more sesitive to tight times more than a decline in coffee sales per se.

Businesses, like Starbucks, that have high fixed expenses (the cost of real estate and labor) and much lower variable costs (the cost of the actual coffee and cups) are highly sensitive to volume. Thus, a ten percent decline in sales, for example, results in much more than a ten percent decline in profits. If customers opt for lower priced items, or alternative providers, when they actually do go buying coffee, this problem is compounded.

Ok you aren't in the cosmetic business what's this got to do with you?

Every industry has  what could be called their "alert" indicators that, like "the canary in the mine" foretell that all is not well, that something is happening that is worth a second look or that a big shift is happening.

What's your business or industry "lipstick" indicator?

Some businesses monitor three indicators, a key internal buisness indicator, an industry indicator and a national indicator.

• Internal Indicator - This could be value of an average sale and number of sales
  Industry Indicator - In the tourist sector it could be forward bookings
  National Indicator - Consumer confidence indicator reports

Natural indicators for those who observe nature are the frantic ant activity before it rains or the activity of certain birds when a storm is brewing or the unsettled behaviour that my German Shepherd dog shows about 8 hours before a thunderstorm begins.

Action:

Go back through your records and observe when things were going well, or not so well, and then dig around and find out what it was that preceded these events. Test what happened earlier and now ... then be observant of lipstick behaviour in your business.