By Cheryl Harwell | Case Planning & Practice Management
Behavioral Finance – Reopening the Economy & Consumer Behavior
When COVID-19 first hit the U.S., it was only a matter of weeks that the ordinary acts Americans took for granted became fraught with concern. Going to the store, getting a haircut, dining out with friends and family, taking a flight…all suddenly introduced risk. States locked down, businesses closed, and consumers stayed home. Our economy, for the most part, came to a screeching halt.
Today, as states attempt to reopen their economies, it’s unlikely that consumers will immediately return to their “normal” pre-pandemic behaviors…first, they want to feel safe. How quickly and robustly the U.S. economy rebounds will be shaped in large part by emotion.
Cautious consumers may delay their reentry into the economy until they think it is completely safe to do so, both physically and financially. Of course, just about everyone was ready for a haircut, risk or no risk. These consumers’ concerns about their well-being have definite implications for retailers, restaurants, airlines, workout facilities, theaters, and other consumer-oriented businesses.
Citing a recent article in Forbes Magazine, titled “How Will the Pandemic Change Consumer Behavior,” written by Kian Bakhtiari:
“On an individual level, the pandemic is likely to cause two opposing social behaviors. For a large section of the population, COVID-19 provides an ideal opportunity to re-evaluate their current lifestyle choices, adjust, and reset their lives. You only have to take a look at the number of people who have used their newfound time to exercise, start a new skill, or make a career transition. For instance, sales of Peloton bikes have jumped nearly 66% and LinkedIn has reported a 3x increase in time spent learning.
“Although it feels like we’re going to change the way we live forever, things are never that simple. If anything, we know that human beings are not very good at sticking to new habits. In the U.S., 44% of adults make a New Year’s resolution — and the most popular is going to the gym. But we also know 80% will quit within five months. Even if there won’t be a “normal” to go back to — once lockdown is over — levels of adaptability and will vary among different groups.
“The pandemic is likely to produce two distinctive behavioral archetypes: people who have embraced a new lifestyle and those who have largely remained unchanged. The emergence of the new behavioral group is going to have a transformative impact on the future of brands. Inevitably, there will be winners and losers. Some brands will need to figure out how to win back old customers with new mindsets. Whereas, other brands will use the opportunity to steal market share by appealing to consumers newly formed lifestyles. Regardless, marketers should have these two distinct archetypes in mind when updating their customer segments.”
Due to the emotional impact this pandemic has had (and continues to have) on consumers, representatives have been presented an extraordinary opportunity. Clients and prospects seek safety and hope for a secure future. That’s where planning fits…planning financial professionals can provide.
Reach out to your clients and talk with them – not just about their account balances and performance, but about how they are feeling. Show empathy, and help them plan. They will appreciate your ear and your advice, and you will reap the rewards by receiving their gratitude and their referrals.
Would you like to discuss behavioral finance and how it plays into the “reopening” mindset? Send me a note at firstname.lastname@example.org. I’d be happy to discuss the present and the future for your financial practice.
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