Podcast: Consumer behaviour and Covid-19 during holidays

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After almost a year since the appearance of a virus that has transformed every aspect of our lives, we've reached the first Christmas holidays during the pandemic. Traditions and security measures clash with consumer trends and growing fears of a third Covid-19 outbreak following family meetings and an increasingly harsh economic crisis. In this podcast, Esade experts in behavioural economics Pedro Rey and Kate Barasz discuss how customers may behave during the Christmas holidays and the impact the vaccine will have on consumers.

PODCAST TRANSCRIPT:

Pedro Rey: Welcome to Esade Do Better podcast, I’m Pedro Rey, professor of behavioural economics at Esade. I’m here with Kate Barasz, who has recently joined us in the department of marketing. She has a PhD from Harvard Business School, she has worked at Harvard and also at IESE, and she is now at Esade. Welcome Kate.

Kate Barasz: Thanks.

Pedro Rey: Kate is an expert in consumer decision-making with a particular interest in how we make sense of other people’s choices. I guess the first question is straight forward. How can we make sense of consumption by people in this crazy year?

Kate Barasz: That’s such an interesting question. There have been many moments where this issue has been raised during the pandemic. There has been a lot of coverage on Covid changing the way we think that people should be acting. For example, should you be traveling to see your family, should you be buying those types of things, should you be traveling on vacations? I think we are increasingly looking at other people, and saying “are you doing the right thing? Are you being safe enough and are you taking the right risks?”

Pedro Rey: We are using others as a reference bond, right?

Kate Barasz: Yes, indeed. I was speaking to a colleague who had a theory, and I liked this idea, which is that we always think we are doing the right thing and people who are doing stranger things are being ‘totally crazy’, and people who are doing less are being ‘totally risky’. We sort of see ourselves as a middle point, and then we look at others to see what we should or shouldn’t be doing.

We see ourselves as a middle point, and then we look at others to see what we should or shouldn’t be doing

Pedro Rey: That’s funny because our behaviour is often inconsistent. So even if we use ourselves as the reference point of what is right, or what we should be consuming or doing, at the end of the day we are not consistent. So, what is the reference point or standard we hold ourselves against?

Kate Barasz: I think if you look back at how this pandemic has evolved since March, you will see how far we have moved since that point – and it is just incredible. What we thought was normal on 13 March was not normal by 13 April, and I don’t think any of us expected to find ourselves in this situation by December.

Pedro Rey: Yes, for example, with the consumption of masks. I remember a year ago looking at many people from Asia where it was normal to wear masks, and we were looking at them like they were crazy. Then, for a while in March, we were kind of hesitant about wearing masks, but we could not buy them anywhere, and so we tried to find a way to justify that we were not making the effort to get those masks. And now we are shaming everybody who is not wearing a mask. That’s an example of how things have evolved so much.

Kate Barasz: Absolutely. And now what’s striking is that if you look at any of these retailers and designers, they now have a mask portion of their website where you can buy a designer brand label mask. It’s a trend and a fashion statement. Who in March thought that masks were going to be the biggest fashion trend in 2020?

Who in March thought that masks were going to be the biggest fashion trend in 2020?

Pedro Rey: Do you feel companies are adapting to Covid? For example, I have a friend who is a designer who has come up with a specially designed bag that he calls the hero mask. It’s a bag to hold a mask. There have been some opportunities for marketing in that sense. Do you think companies have adapted to Covid?

Kate Barasz: Yes, it seems so. We had to be very agile with advertising and people were quick to change their advertising campaigns on social media. It took longer for television ads to catch up, and then it took even longer for production and the physical appearance of goods to catch up. I was making a holiday card for our family and a lot of holiday cards now have jokes on them about Covid and the pandemic. You can see this is trickling into all areas of the market.

Pedro Rey: What about consumers? It seems that the uncertainty is starting to be resolved as vaccines become available. Do you think as a shock it has been long enough to change our consumption habits?

Kate Barasz: Yes, that is a good question. I was thinking about how this is different from past recessions and economic downturns. And I think in comparison with the last downturn, there is a clear and understandable cause and effect. This time it is a virus, and we can see that it is not a complicated banking instrument that is collapsing the economy. There is a virus, and then there will be a vaccine, and then it will be over. And so, in some ways I think that gives people a sense of control over what is going on. So, yes, there is uncertainty on the timing, but people understand what is happening. I am curious to hear what you think about this too, but I feel people changed their behaviours, and expect that once they’ve got the vaccine and the world is more or less immune, then we are going to snap back to normal. Do you think that is what is going to happen?

Pedro Rey: Well, I don’t know. I mean, that is the one-million-dollar question. How are we going to recover from this and are consumption habits going to return to normal? I think much depends on the type of consumption. I’m thinking about theatres, cinemas, and other social venues in which we used to be entertained. For many months we have become used to downloading everything and having everything on our screens. But there are still some crazy film-goers and I’m one of them. I used to go to the movies two or three times a week. And I will never give up the cinema experience. Most people are now used to watching new movies on the platforms. Cinema is a type of consumption that will be difficult to recover. I’m also thinking about food channels, and restaurants and all these things. Now we have become so much pickier about hygiene than in the past.

Now we have become so much pickier about hygiene than in the past

Kate Barasz: You have the feeling that everybody has been restrained and there is going to be a huge party the moment they give us the vaccine. I don’t know if the whole experience has been long enough such that we really are adapting, and we have changed our consumption habits.

Pedro Rey: I’m also thinking about our work as academics. I have a seminar in Berlin this afternoon, and I am definitely not in Berlin. Last week, I had a seminar in Florida, and I’m really sad to say that I was not able to go to Florida. I wonder, how traveling is going to change in the future?

Kate Barasz: Yes, totally. I was watching an animated Pixar movie with my kids and there was a scene of a crowd of people not wearing masks and hugging each other and I felt a visceral reaction. I was like: “hey, you should be wearing masks … don’t touch each other … don’t touch your faces!” And so, I think it’s going to take a long time for us to rid ourselves of these beliefs and the knowledge that we have come to have.

Pedro Rey: And what about holidays? Christmas is a time of huge spending. Much of our holiday consumption is associated with the fact that we see each other, we have these huge family meals, and we give presents to each other. We don’t know what is going to happen with consumption, because it’s definitely going to depend on what we can do and what we cannot do. And those measures are changing by the minute.

Much of our holiday consumption is associated with the fact that we see each other, we have these huge family meals, and we give presents to each other

Kate Barasz: Right. You know, we think about the stereotype of the millennial consumer who is moving towards experiential goods, and away from tangible material goods, and how there is a shunning of material consumption. But now it’s hard to consume experiences, you can’t buy travel, you can’t buy nice dinners, you can’t buy experiences at a theatre or a museum – because those things just aren’t available right now. And so, I think people are flocking back to material goods. I read an article about the resurgence of old-school devices, such as hand churning ice-cream makers or butter makers. And how people are going even further back in time and want basic things to get away from this modern fast-paced life. People want a simpler life. I don’t know how long this will last, but it seems that it will be a theme under the Christmas tree this year.

Pedro Rey: Yes, in times of huge uncertainty, the problem is that we have many behavioural impulses that could go in different directions. And at the same time, policymakers are trying to find the right key for controlling the masses. On the one hand, they are telling us: “it’s important that you consume more and consume local goods to help local businesses recover”. But at the same time every time we have mass consumption – and I’m thinking about the national holiday we had last week – people went out and started to consume, and now the message is: “you are responsible for the spread of the third wave of the disease! So, don’t go out”. So, we have all these messages that contradict each other. On the one hand, the solution to the crisis is going to depend on consumption, but on the other hand, the crisis is going to continue unless we stop consuming. I get too many journalists asking me what is going to happen – and all I say is: “well, what we are certain about is that we don’t know what is going to happen”.

Kate Barasz: Yes, I think you brought up local businesses wanting us to be very thoughtful about where we spend our money. And we hear from lots of business owners who need help and support. And so, there is a really big tension between supporting the local community, while Amazon is shooting off into the atmosphere with record sales. Because it’s still safer and more convenient to order deliveries from and to our homes.

There is a really big tension between supporting the local community, while Amazon is shooting off into the atmosphere with record sales. Because it’s still safer and more convenient to order deliveries from and to our homes

Pedro Rey: The pandemic has been perfect for the Amazon business model. We are all at home, we can receive our packages, and so they are profiting from it. We need those things, yet we feel guilty and we want to support local business. But then when we go to local business, they are already closed. Is there a way these local businesses can adapt to the new situation? Did they have enough time to adapt? Have they gone online enough?

Kate Barasz: I don’t know, but I think this is an empirical question that will be fun to look at afterwards. This has pushed most everyone online. Even in business schools people said: “no, it’s not possible to deliver quality education online”. But it is possible, and we have to do it. Everybody is getting pushed to the limits on what is possible online and, for example, we now have virtual wine tasting and virtual travel. And I don’t know how many of these things will last afterwards, but I think everyone’s had to adapt very quickly and more is possible online that we thought. Even small retailers can be developing an online presence – just to have it.

Pedro Rey: Small businesses cannot compete on price, and they cannot compete on the logistics of deliveries because that’s not their business. But they can use other things, there are types of services that they used to give in the shops, such as advice and talking to the customer. Does it pay to make the investment to go online when you don’t know how long this pandemic is going to last? Those who are selling masks right now are doing good business, but for how long are we going to continue being crazy about hygiene – and is it going to become normal to wear mask on the streets? We don’t know.

Kate Barasz: What do you think is going to happen with masks? Do you think it will continue? I think for example, that sanitizing gel is probably going to become a stable in any retailer now. What do you think about that?

Pedro Rey: I think gels and masks are very different things. Gel is something that we get used to it, and it’s not that inconvenient. But masks stop visual communication way too much. I am a teacher and I use my face to communicate with my students – but I am also, and you might not know this, a professional magician. Performing magic with a mask on your mouth is very difficult because you rely on connecting to people through your smile and your appearance. I basically hate masks, and I hope they don’t become a permanent feature. I hope that we don’t need them. Because teaching with a mask has been a very painful experience. But let’s see how it goes.

I have a couple of more questions. One is about vaccines. One of the big questions is now that the vaccines are here, how do we persuade people to get vaccinated? Because there is this hesitance. People say things like: “they never came out with a vaccine for AIDS, and now they have made a vaccine for Covid in one year. Is it safe? Did they develop it properly? I keep looking at the medical research and the protocols – and you see that everything was done in the normal way. We got a grip on this disease and produced a vaccine very quickly. And that was good. But how do we convince the average customer? One way is to make it compulsory, but if this is a voluntary vaccine, how do we get people to vaccinate? What is your take on this?

Kate Barasz: This is the billion-dollar question. What kind of nudges or information will make people vaccinate? I think people traditionally think about vaccines as being safe for themselves, and they don’t think about vaccinations as an obligation to the community at large.

In the US in the beginning, they emphasised the importance of wearing a mask to protect other people. But I think it’s more effective when you also say: 'it’s also going to protect you'

Pedro Rey: We have seen this problem with mask wearing. In the US in the beginning, they emphasised the importance of wearing a mask to protect other people. But I think it’s more effective when you also say: “it’s also going to protect you”. People are inherently selfish in some respects. Asking people to suffer the annoyance of wearing a mask, or take the seemingly risky act of getting an unknown vaccination, makes some people feel that maybe the cost is too high if you are just trying to protect others. But this is really for everyone, and so I think the route of showing high-profile people receiving the vaccination is probably a good first step.

Kate Barasz: I was thinking that human beings are very complicated. The fact is that they are telling us that vaccines are going to be restricted – and that priority groups are going to get the vaccine first. This may work by making vaccines more desirable. Thinking “hey, I cannot get it because I’m not in the correct priority group right now”, will make me really want the vaccine. I think restrictions – if they are well organised – will work. However, I’m very worried that the priority groups won’t be respected. Making it something that is not so easy to get is maybe one of the avenues, and I think the other one is to show famous people getting the vaccine – and vaccinating by example. I think it could work the same way that George Clooney advertises coffee, and everybody thinks that by having coffee they are going to become George Clooney. Well perhaps if George Clooney gets the vaccine, we also want to get it. I hope they use the right marketing, because otherwise this is going to stay with us for a long time.

Pedro Rey: What do you think about obligatory vaccination? So, for example, airlines might say you can’t travel with us unless you have had a vaccination. What do you think about that?

Kate Barasz: I think it’s going to be very tricky. We have three types of groups. There are those who will get the vaccine the moment they can; there is a sad but growing anti-vaccine movement and it is going to be difficult to convince them. Even if you make it compulsory, they will find a way around it. This group is a small percentage of the population, let’s say 3-5%. But there is a big chunk of the population – some 20% to 30% – who are hesitant about the vaccines and these are the ones who need to be convinced. And I think the moment you make it compulsory, the ones who are hesitant will start wondering why it is compulsory. It’s a very tricky line about how compulsory to make it.

The message that you send as a policymaker is very important. I think the clever thing is to say: “look, if you want to do such and such activity, then you need to have been vaccinated”. In that way you are giving people priority for some types of services. In that way, it’s not seen as punishment, but as a reward. I think the big lesson that we learn from behavioural economics is that the way we present situations, and the framing that we use is very important. One thing I advocate is testing. I think we should experiment on which is the right message to send. And with different types of people, perhaps there should be different types of messages – especially because different groups have different risks. Young people don’t see this as a big concern, because apparently, it’s not affecting them so much. Perhaps the type of message we need to send to young people is not the same as for older people.

The moment you make the vaccine compulsory, the ones who are hesitant will start wondering why it is compulsory. It’s a very tricky line about how compulsory to make it

Pedro Rey: What kind of message would you want to say to young people? What do you think will work on that population?

Kate Barasz: I think the young generation lacks a sense of purpose in life. And we can help them to get a purpose with a message such as: “look, you really can save the world”. Young people have moved into environmentally friendly decisions and conscious consumption. Well, this is another thing in which they can really make a difference. And we should find a way to tell them: “look, it’s true that this may not affect you as much as older generations, but it’s true that if you don’t change your behaviour, or if you don’t get vaccinated, or if you don’t start to be more conscious about some of the things you do…” We should make the chance to change the world – or a little piece of the world – a part of the conversation.

Pedro Rey: That’s great. It reminds me of the ad that went viral in Germany of the older man who was looking back on his life and thinking about this year and how he became a hero because he had to sit at home and do nothing except watch movies. A lot of brands are also jumping on the same message: just do your part. Nike changed its logo temporarily to: ‘Play Inside, Play for the World’.

Kate Barasz: The messaging is so contra-intuitive. We have been told for so long that we need to be productive, and we need to be consuming, and we need to be doing things – and now the right thing to do is to stay at home and do nothing. It’s very difficult to change the wiring of people’s psychology into: ‘doing nothing is best’. But on the other hand, it is a simple enough message so that we probably could get there.

Pedro Rey: Yes. I don’t want to end without asking about your research. One of your papers is about what is necessary for other people. Can you tell us about this paper and how it relates to the topics that our audience may be concerned about?

Kate Barasz: Serena Hagerty, a doctoral student at Harvard, and I wrote a paper looking at why lower income consumers are often judged more negatively for consuming the same items as more affluent or middle-income consumers. For example, if we see a lower income consumer with a smartphone, we think that was irresponsible, whereas it’s very normal for the rest of us. We found that there is a double standard about what we think about what is necessary for other people to have or to consume. We think that lower income individuals have fewer basic needs or simpler basic needs. So, they need food, water, and shelter, and that’s about it. The rest of us can have higher other needs, such as comfort, entertainment, and so on. We found that this actually affects how we give to poor consumers. We want to give them groceries and that’s all. So, one of the messages that we hope people take away from the paper is when you are thinking about giving – which hopefully people are doing this holiday season – lower income consumers need more than just the basics. They still enjoy movies and magic shows, games, and entertainment. This is something that people sometimes overlook. Especially in these times when a lot of people are suffering economically, and otherwise, it’s just a good thing to keep in mind.

Pedro Rey: So, putting yourselves in the shoes of others is not just thinking about them but really thinking about what they really need, and what they want, and understanding that they may have the same needs as you.

Kate Barasz: Yes, yes.

Pedro Rey: Okay. That’s interesting and something to take into account for this holiday season. Hopefully, we will be able to consume a little bit and so help recover from this crisis. In any case, it’s been great to have this conversation with you Kate, and I hope this was interesting for the audience. Thank you very much.

Kate Barasz: So, thank you, happy holidays.

Pedro Rey: Thank you.