Cashing in on COVID: ‘Reward spending’ post-lockdown represents a big opportunity for brands
We’re all about to fall off the shopping diet bandwagon with a thud, and binge ourselves silly.
As we emerge from lockdown in many states, there is a lot that has changed. But one thing that remains ever constant is our innate behaviour as humans.
Think about the last time you went to the gym or did a tough workout. Did you later reward yourself with a ‘treat’ because you worked hard and deserved it? This kind of behaviour is known as the ‘Licensing Effect’ – a cognitive bias that refers to our core desire to maintain balance between our indulgent and our virtuous selves – and is a phenomenon well-known to us in the world of behavioural economics. In layman’s terms it might be referred to as “balancing things out”.
Psychologically, we work on an internalised bargaining system as our mind tries to constantly offset our positive acts against our negative ones to create equilibrium. Essentially, it’s the “because I did X, I deserve Y” mentality.
The past 18 months have seen us enter a ‘licensing deficit’. Many of us have not been able to socialise, spend or even send our children to school. Lockdown has chipped away at our ability to balance things out, and as a result we’re on the cusp of a massive overcorrection in the form of treating ourselves.
There’s a new term that’s being bandied around to capture this sentiment and this desire to balance things out: ‘Revenge Spending’. As restrictions ease, consumers will be looking to balance out the deficit scorecard.
Our splurging may be in the form of travel, buying that once-in-a-lifetime-but-imagine-the-cost-per-compliment handbag, or simply going out for dinner and having that cocktail, a starter and a dessert, whereas pre-lockdown it may have been only one of those.
Savvy marketers have seen this coming and are leaning right in, creating a small but mighty chorus of ‘treat yo’ self’ messaging we’re seeing in the marketplace. For instance:
- Webjet are urging us to ‘book the holiday you deserve’
- Menulog wants you to ‘Treat Yo’ Self’
- Westfield is telling us to ‘discover the perfect pick me up with Westfield Direct’, and
- Sapporo Beer is pitching itself as ‘an act of rebellion’.
We’re re-emerging into the world and its novel, we’re excited and primed to spend. Consumers will be back with a vengeance and brands need to act now to take advantage of this once-in-a-lifetime opportunity.
Understanding the core principles of behavioural economics will give brands a major competitive advantage in understanding the ‘why’ behind our decision making. You see, our evolutionary journey started around 300 million years ago, we became ‘human’ around 200,000 years ago and have been working within what we’d consider modern capitalism for around 500 years.
So, while the world may have changed considerably in recent months, it’s a mere blip on the radar of humanity – and the underlying motives, emotions and biases that drive our decisions-making muscles have remained consistent over thousands of years. These behaviours are deeply entrenched and highly predictable and are unlikely to be impacted by the lockdowns and changes in day-to-day living we’ve all experienced in the last 18 months.
Take for example a study by Wen-Bin Chiou (2011) that looked at the impact that a small, virtuous act could have on people’s subsequent choices. In this experiment, one group of participants were given a multivitamin each morning, while a second group were not. The group that received the multivitamin ended up being more susceptible to a wide variety of bad decisions including smoking, drinking to excess and turning away from healthy activities like walking and yoga – simply because they felt that the multivitamin was countering the effects.
So how can marketers make the most of this innate desire to treat ourselves after a period of deprivation?
- Watch for clues. Listen carefully at the start of the sales process for any signs that this purchase might be a treat, rather than a pragmatic, rational purchase. If so, there’s a good chance you’ll have more success with ‘cherry on top’ items like upgrades and optional extras than usual.
- Lead with the treat. Look out for ways to weave the idea of ‘a treat’ into your marketing messages.
Go on, you deserve it.
Dan Monheit is a behavioural economics expert and the co-founder of Hardhat.
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