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Blog post

How resource scarcity and the COVID-19 pandemic impact consumer behavior

Faculty Frames series
October 28, 2020
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By Dr. Caroline Roux, Associate Professor of Marketing at JMSB

Faculty Frames is a series of blogposts on the research and areas of interest of John Molson's faculty. This week, we interview Dr. Caroline Roux on her research and findings pertaining to the effect of resource scarcity and the COVID-19 pandemic on consumer behavior.

Dr. Caroline Roux Credit: David Ward

Earlier this year, we saw the predictable ‘panic shopping’ in response to the pandemic, but how has COVID-19 affected consumer behaviour more specifically?

The COVID-19 pandemic is extremely complex and multifaceted. I will focus on one of its many consequences on consumer behaviour – the heightened experience of resource scarcity. The pandemic has been the source of many forms of scarcity: product stock shortages, financial constraints, time pressures, lack of protective gear for front-line workers, sky-rocketing unemployment rate, economic recession, and so on. People from all walks of life have been increasingly experiencing resource scarcity in their daily lives, while also being regularly exposed to scarcity-related news and information.

My co-authors and I have identified two main routes through which consumers attempt to cope with feeling that they “do not have enough.” One route is a more direct route to reducing the feeling of scarcity, while the other is more indirect.

Some of the panic shopping that we observed during the pandemic is an example of what we call the scarcity-reduction route. This is the most direct way for consumers to reduce their feelings of scarcity by investing money, time, and/or efforts into acquiring the scarce resource.

As an example of the scarcity-reduction route, many people may not have had (enough) hand sanitizer when the pandemic hit, which greatly increased their desire to acquire the product. Seeing the news and social media flooded with images of empty store shelves and of consumer stockpiling may have prompted more people to follow suit due to a fear of product shortages. This, ironically, exacerbated the shortages.

Another type of panic shopping that we observed during the pandemic provides examples of what we call the control-restoration route. This occurs when the experienced resource scarcity cannot be alleviated by investing money, time, and/or effort, such that people instead seek an indirect way of dealing with the unpleasant feelings resulting from actual or perceived resource scarcity.

For instance, people have been engaging in considerably more activities to help restore their sense of control and feelings of security since the pandemic hit, such as baking, sewing, or playing video games.

Are there other ways in which experiencing resource scarcity affects our behaviours?

In another research article, my co-authors and I found that experiencing resource scarcity (e.g., financial constraints, time pressures, etc.) or being exposed to scarcity-related cues (e.g. seeing empty store shelves) prompts consumers to become more competitive and focused on their own welfare. They become more focused on protecting their own resources and on acquiring more for themselves and their loved ones, while being less focused on the needs of others.

Seeing empty shelves in stores, on social media, and in the news may have triggered this competitive response, even if many of the stock shortages were due to supply chain issues and increased in-home consumption (due to stay at home orders), rather than consumer hoarding. Interestingly, accidental stockpiling, where most consumers added just a few more items to their shopping cart and/or shopped more often, seems to have put the most strain on retailers when compared to the rarer cases of hoarding.

Experiencing resource scarcity can also increase dishonest behaviour, such as fraud, cheating, hoarding, or price gouging, especially if it provides a mean to acquire resources. For instance, in a study where participants were rewarded money based on their performance, those exposed to scarcity-related cues (vs. neutral cues) claimed having correctly solved more anagrams, as compared to their actual performance (which was also recorded), and, thus, obtained more money than they should have. Similarly, as products such as hand sanitizer, disinfecting wipes, and N-95 masks were rapidly getting increasingly scarce when the pandemic hit, some people engaged in price gouging by stockpiling and reselling these products at a high premium.

However, while experiencing resource scarcity can make people more selfish and increase dishonest behaviour, it can also have positive impacts on consumer behaviour, such as an increased desire for self-improvement. Since the beginning of the pandemic, many self-improvement products and services for both physical and mental health, such as virtual fitness programs, mindful mediation apps, online certifications and training have had soaring subscriptions or sales. This phenomenon could be partly due to a heightened sense of resource scarcity.

My co-authors and I have found that experiencing resource scarcity can negatively impact peoples’ self-esteem and, especially, their concerns about how they are perceived by others. Products and services offering self-improvement benefits can help address both the competitive response and the decreased self-esteem triggered by experiencing resource scarcity. Such products and services allow consumers to gain a competitive edge over other consumers who may also be trying to acquire the same scarce resources. For instance, obtaining online certifications during the pandemic can help people retain their precarious job or be more competitive in a scarce job market.

Conversely, such products and services also allow consumers to self-improve by “competing” with their past selves. Fitness apps often encourage people to beat their previous time, number of repetitions, and other workout statistics. Interestingly, this “self-competition” can foster a sense of community by encouraging consumers to share their best results with others to also help them self-improve.

Social-signaling

However, we have found that people experiencing resource scarcity also engage in social signaling (publicly expressing opinions or sentiments) and, especially, virtue signaling (behaving in a manner intended to demonstrate one's good character). For example, we have found that participants exposed to scarcity-related cues (vs. neutral cues) expressed higher charitable donation intentions if their donation was made public – and thus also serving as virtue signaling – than if it was private.

The sharp increase in self-improvement-related social media posts and news articles we have been witnessing since the beginning of the pandemic could thus be an indication that, while some consumers are finding healthy ways to cope, others may be trying to signal socially desirable, but superficially adopted, behaviours. In other words, we don’t know whether people are actually coping better under the circumstances or whether they are only pretending to be. Such social signaling can have vicious negative consequences on people; being exposed to such posts and news can make them feel either inferior and/or guilty, thus further hurting their self-esteem, or more competitive, thus prompting more focus on one’s needs over others.

How can retailers, policy makers, and consumers offset the adverse effects of scarcity on consumer behaviour, especially during the COVID-19 pandemic?

Panic shopping and similar purchase behaviours increase the perceived value of a scarce resource. This helps to explain why consumers desire and become more competitive for scarce resources – they value them more.

When product stock shortages started happening due to the pandemic, many retailers tried to dissuade consumer hoarding. One approach was to impose a steep price premium on additional items purchased (e.g. $5 for the first bottle of hand sanitizer purchased and $50 for each additional bottle). While this pricing strategy may help deter consumers from overbuying scarce products, it disadvantages poorer and more vulnerable consumers when wealthier consumers may be willing to pay the higher price. Another approach was to put purchase quantity restrictions, which was a fairer and more effective response to stock shortages, since it circumvents the effect scarcity has on the perceived value of a scarce products.

Of course, public policy can play a role. Another way to help curb panic shopping and encourage other protective behaviours (e.g., hand washing, mask wearing, physical distancing, etc.) is by harnessing selfishness and social signaling for good. The increased focus on one’s needs over others puts people in a “what’s in it for me” mindset. Therefore, highlighting why behaving in a certain manner can hurt or benefit oneself is important for people experiencing resource scarcity.

For instance, consumers who were panic shopping for hand sanitizer, disinfecting wipes and face masks were most probably trying to protect themselves and their loved ones from the pandemic. However, it may have helped change consumer behaviours to emphasize that the coronavirus is spread by others and that hoarding protective products for oneself is impractical if they deny others access to these products. People who do not have hand sanitizer will be touching the same doorknobs as you!

Similarly, while many behaviours have been framed as ways to protect others (e.g., mask wearing), they also provide self-benefits that should be highlighted, such as not getting sick, helping normal activities resume more quickly, etc. Relatedly, many protective behaviours are done in private (e.g., hand washing, physically distancing), thus undermining opportunities for social or virtue signaling. Findings ways to allow people to signal to others their compliance with public health guidelines, thereby creating a positive social norm, could help increase adherence.

When exploring the effect of resource scarcity on dishonest behaviour, research (including our own) has shown that most consumers behave dishonestly only when they believe that their behaviour was not dishonest. Clearly explaining what constitutes dishonest behavior can help curb cheating or fraud since it undermines consumers’ ability to reframe their own behaviour.

On the other hand, some people may simply make honest mistakes. For instance, people distressed by financial constraints may be less able to process information from lengthy instructions and forms when applying for government support, or simply misunderstand the eligibility criteria. Providing clear, simple instructions and forms, and leaving no room for interpretation becomes crucial for people seeking to resolve their experience of scarcity.

 

Dr. Caroline Roux is an Associate Professor of Marketing at the John Molson School of Business and holds the Concordia University Research Chair in Psychology of Resource Scarcity.

Dr. Roux also presented these research findings on August 18th during a webinar hosted by the John Molson Executive Centre, entitled How resource scarcity and the COVID-19 pandemic impact consumer behavior. She continues her engagement to research consumer behaviour in light of the ongoing pandemic.

For more information about John Molson's research-based graduate programs, visit our website. Then connect with a recruiter to arrange a one-to-one meeting or participate in one of our many online information sessions.

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