What is the "lipstick effect", and why is it important?

[kpalmquist]

Having worked for several manufacturers and done lots of consulting for others, I have always experienced "sales" as a purely dollar (or pound, etc.) figure -- not units. Without the derived revenue figure, sales numbers are meaningless. For example my company sold 5 billion screws two years ago. Last year we sold 4.99 billion screws and two Boeing 747s. Sales units are down, but sales dollars are way up. But until we calculate our cost for the 747 (and the screws, too) we really don't know if we had a relatively good year (revenue) or not.

So without revenue numbers, the other figures are less meaningful.


- Kevin