Toilet paper is wiped clean. Purell hand sanitizers have gone up 500% in price, if you can find it at all. Canned goods are disappearing off store shelves. Have people gone crazy? The answer is: No.
Irrational yes, but not crazy. In fact, most people are practicing an age-old habit of stockpiling when there is rising uncertainty and the threat of scarcity. Shame, criticism and public humiliation may seem like a great way to deter these behaviors, but these measures aren’t very effective in the long-run.
Here’s why: Self-preservation is a hard-wired human instinct and it happens in the most primal part of our brain (hindbrain and medulla). When the primal brain is being activated by fear, it shuts down our frontal cortex, which is where judgment, impulse control and problem-solving take place. Most Gen X and Millennials will be hard pressed to remember the Energy Crisis in the mid-1970s which created massive gasoline shortages, but they may have lived through the gasoline shortages following Hurricane Sandy. In both instances, consumers raced to stockpile gasoline, as well as other goods, out of deep uncertainty of future availability. So, don’t blame consumers for being human. Instead, we need to attack this problem from a behavioral point of view.
Manufacturers and government agents need to start rethinking their approach and act less like law enforcement agents and more like human centered designers. Here’s a few starter solutions on how we can employ behavioral science practices to shift consumer behavior.
Loss Aversion — Cognitive psychologists have long understood the principle in which the pain of losing is psychologically about twice as powerful as the pleasure of gaining. People are more willing to take risks, or behave dishonestly, to avoid a loss than to make a gain. One example of this is in the online travel industry, in which consumers who are shopping for a hotel room are being constantly reminded of how many other buyers are looking at that very same hotel room. Customers fear losing the hotel room of their dreams, at that price point, and move quickly to book the room before it vanishes. This principle can be applied to manufacturers of hand sanitizers as well. They can utilize this principle to control supply by informing consumers that the current prices are VERY high now and they expect the cost to drop precipitously very soon. This warning might give the average consumer pause before they grab twenty bottles of Purell.
Visual Context Bias — Another cognitive bias that can be harnessed for good is the visual context bias. This is a bias in which the context and framing of visually perceived information tends to influence a person’s judgment and decision-making. For example, in 2008, an Israeli radiologist hypothesized that by including a picture of a patient alongside their imaging exams, it would affect their judgment and choices. It turned out that this accompanying visual stimuli indeed had an effect. Those radiologists had an increased feeling of empathy towards the patients and as a result, the radiologists provided a more meticulous reading of their medical image results. Applying this principle to the stockpiling problem, what if retailers included photos of other families around the coveted goods and asked that buyers limit their consumption. Not for the benefit of the store, but for other families in the community. By enhancing the visual context to include photos of other local families, it may dissuade people from acting greedily and impulsively.
Incentives — The use of incentives is widely practiced but not always well understood. An incentive is something that motivates an individual to perform an action. Incentives, whether they are intrinsic or extrinsic, can be effective in encouraging behavior change, such as ceasing to smoke, doing more exercise, complying with tax laws or increasing public good contributions. For example, airlines will often offer travel vouchers for a future date to encourage customers to NOT take a flight that has been overbooked. In the case of stockpiling, incentives can also be a useful tool to dissuade purchasing behaviors. For retailers that are worried about being overwrought by customers, what if retailers and manufacturers teamed up to offer a manufacturer rebate, or incentive, to buy LESS toilet paper in exchange for a steep discount at a later date. By offering a future incentive, it can shift consumers out of the fear-based mindset and have them react in a more thoughtful way.
In uncertain times, one thing that is certain is that consumers will overreact, and some third-party sellers will move to take advantage by raising prices. Rather than browbeating consumers and going after venal third-party sellers, manufacturers and retailers can play a more proactive role. Rather than wait for the inevitable shortages, they should think like human centered designers and create behavioral based solutions that encourage consumers to do the right thing rather than the instinctive one.