Wharton psychology guru on the dangerous thoughts defining post-Covid shopper
Pedestrians wearing protective masks walk past a Lululemon store in San Francisco, California, on Monday, March 29, 2021.
David Paul Morris | Bloomberg | Getty Images
Instead of jumping to a conclusion about the post-Covid consumer, revert back to one that psychology studies educated us on long before the pandemic. Individuals don’t change habits easily, and what they may stand to lose by changing behavior weighs more heavily on the mind than any potential gain.
“Breaking habits is hard. It is an uphill battle,” said Wharton professor of marketing and psychology Deborah Small at the recent CNBC Small Business Playbook Summit.
The idea behind that is known in the academic field as risk perception, and the pandemic did complicate it. An unprecedented event which suddenly forced consumers to go against their nature and into new behaviors, and out of many of the commerce interactions previously taken for granted: bars, cafes and restaurants, in-person fitness classes, and in-person education. Consumers have been exploring alternatives in ways they rarely do, and that occurred on top of a consumer landscape that is always changing, in recent years mostly related to digital buying and selling.
“Lots of ways in which people consumed pre-pandemic won’t return to those levels,” Small said. “We’ve been permanently changed by different experiences we had in the past year plus.”
But the Wharton professor also says it is unwise, based on all that we know about the consumer brain, to assume that the habits formed during the pandemic will become a permanent, preferred majority state. A recent Forrester survey found 75% of U.S. adults saying that the pandemic would drive long-term changes in behavior, but its research also stresses that the consumer has always been in a state of flux; it’s just maybe now more likely that change is the “new normal” for consumers.
In Small’s view, there is no single consumer to sell to — and thinking in those terms would be a fundamental mistake.
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Take exercise, as an example, and the rise of workout-from-home Peloton before its momentum was taken away by what Wall Street calls the reopening trade. Meanwhile, Lululemon continues to sell a lot of yoga pants, but it has seen a steady increase in store traffic after seeing the popularity of direct-to-consumer athleisure wear sales during the peak of Covid in the U.S. It also bought at-home fitness start-up and Peloton competitor Mirror.
Betting on more than one kind of consumer — which was already occurring before the pandemic with the rise of digital — is a smarter strategy than planning around a fixed idea of the consumer emerging from the past year.
“Imagine someone who used to go to the gym and then couldn’t, started exercising from home. Maybe they really miss the old way and are dying to get back, and couldn’t replicate it at home,” Small said. The pandemic may ultimately reconfirm that person’s original preference. On the other hand, she says, some consumers try new forms and conclude “it is convenient for me” and are changed forever.
This thinking already has a name in retail, and big presence: omnichannel. Or in other words, spread your bets rather than concentrate them. Meet the consumer where they want to be met, and understand that each consumer is not motivated by the same set of preferences. Small said it is the type of thinking which small business owners across the country — if they were able to survive the pandemic or opportunistic enough to form a new business during it — need to be acting on as the post-pandemic period begins.
She provided CNBC with a few key ideas for tackling this tricky consumer landscape.
1. Learn the difference between risk and risk perception.
Many people want to put the consumer into the pre-pandemic and post-pandemic buckets, and Small said that is actually a reasonable starting point in order to make predictions. Humans tend to categorize as a way of making sense of the world, it just becomes dangerous to categorize all consumers as being similar.
“There is enormous heterogeneity, variation across consumers, in their views, risk preferences, political ideologies … all the stuff shaping the way changes are affecting them,” she told CNBC.
That is why she says the first thing to keep in mind is the difference between risk and risk perception.
“Risk perception is not risk,” Small said. “Risk is reality, its truth. Risk perception is psychology, what we feel and think.”
Risk perception is a function of personality and the culture we live in, and the information we consume. And that can all be varied at the individual and community level.
2. Accept Covid-19 politics will continue to be a big buying and selling factor.
The politics of the pandemic are an example of how that risk perception needs to be factored into consumer marketing in the future.
The information people consume in communities can be a function of local political ideology, and Small says it is compounded by the fact that social networks are overlapping, with individuals talking to others within a cluster.
In communities and regions where there are greater concerns about Covid, consumers may remain more risk-averse even after the CDC guidance on mask wearing eased. And there is going to be the polar opposite extreme — “feelings of invulnerability and shades in between.”
“Businesses need to measure and understand where their customers are coming from,” the Wharton professor said.
There may be areas where patrons, including fully vaccinated ones, continue to only enter stores where others are masked. That may be due to personal preference, new habits being formed or politics, including wanting to be an ally of essential workers who could still be at risk of contracting the virus. And there may be examples that go far in the opposite direction, and reinforce how political polarization is part of the future that Main Street businesses must navigate. Think of the hat store in Nashville, Tennessee, which made national headlines for yellow star lapels promoting non-vaccinated status.
3. Don’t draw a pandemic line, but maybe segment by preferences.
Vaccination efforts in the U.S. have made great progress and case counts and mortality from the virus have sharply declined, but there is a significant portion of the public which will need more time to be at ease with Covid.
Small says that means it is smart to maintain a stance that leans into hygiene, but also recognize that among your customer base there may be those who believe society went too far in reacting to the risk of the virus, and there is a risk of backlash towards businesses that overemphasize sanitation.
“This is a tricky balancing act,” Small said, one that is maybe most difficult to navigate for businesses in “purple states.”
She strongly recommends considering if there are ways to doing segmentation of consumers to meet the needs of those who continue to stress Covid hygiene and those who may feel differently. The idea of segmentation circles back to the heterogeneity that underlies human risk perception. As one example, it could be embraced by having business hours designated for different customer segments. Some businesses maintained shopping hours reserved only for older customers during the Covid peak.
Small also said business owners should not lose focus on one forced change that has worked very well: conducting business outdoors. Some of the best innovations she has seen among small businesses where she lives related to figuring out more way to do things outdoors. “It’s better for safety and lower risk … so when possible that’s great. Why didn’t we think of it before?”
4. Ask your customers what they want.
The best way to learn what customers want? Ask them.
For big companies, that can mean market research, a science that includes in-depth tools to measure concerns and preferences. And can be expensive.
Small said it is not necessary for a small business to give up on the effort because it can’t afford proper market research. There are plenty of good alternatives, from do-it-yourself Google Trends analysis to creating surveys using free online tools or Instagram for quick polling.
“Asking customers questions is the key thing” she said.
And it is important, because another side of human nature that often trips us up is overconfidence.
“We think we know customers well. Oftentimes our intuitions aren’t correct,” she said. “So it is really useful to ask them. … not just assume. Ask them those questions.”
And she says people tend to tell the truth.
“As a general rule … if they are your customers and you have some relationship … they want you to do well, so it is in their interest to be honest,” Small said.
Right now, they also probably have a lot of information to share that is valuable.
“We’ve all had a lot of time to reflect in the last year and they have opinions. … listen to customers,” the Wharton professor said. “Don’t go with intuition. Talk to customers, seek feedback from them, and try to understand what they care about.”
While assumptions are bad, and intuition can be wrong, Small also stressed that business owners should not be overwhelmed by the challenges, and should start by reflecting on what they’ve learned from so much having changed, the innovations they’ve come up with, and the extent to which they’ve been adaptive. “Trust yourself. If you have adapted before you can adapt again, and can you learn from the way you adapted before and apply it going forward.”