Video: How reminders of resource scarcity shape consumer behavior

Caroline Roux: Thank you, Jiaying, for inviting me to this wonderful event. So yes, today I want to talk to you about my work that I've been doing about the last seven to eight years on how reminders of recent – reminders of recent scarcity shape consumer behaviour. And I also want to give a shout-out to all my wonderful co-authors that helped me make this work happen.

So I guess we all agree today that resource scarcity is a prevalent phenomenon. It's something that a lot of people are experiencing. And what I would like to emphasize today is that, when we think about scarcity, we usually tend to think about what I like to call resource-poor environments, so where people live with actual limited resources, such as people living in poverty all around the world. However, even in more plentiful environments, consumers often encounter reminders of scarcity in their daily lives that make them feel as if they don't have enough. So for instance, middle class families might feel resource constraint when they get their bills at the end of the month and they have to figure out how to pay everything. This is going to be probably even more salient in January, when all the holiday expenses are going to start rolling around.

Consumers also, for instance, experience product stock-outs in the marketplace. A lot of consumers might have lived that last weekend over the Black Friday sales, having a hard time finding those coveted products on sale, which again makes them feel that resources in environment might be scarce. And what's interesting, actually, when you start thinking of scarcity in this more subjective way, even relatively wealthier consumers can also feel that way.

So in the news in the last few years, I found that even single people making a hundred thousand dollar a year feel like they're scraping by. And they might actually be in a bad situation when you compare them to families that are making five hundred thousand dollar a year in the US and are also feeling that they're scraping by and actually quite disadvantaged, when you compare them to bankers in London that think that they cannot possibly live on a $1 million a year income, given their lifestyle.

So what's interesting with these examples is that people from all walks of life can experience resource scarcity, and that's the phenomena that my co-authors and I are interested in our work. So consumers from all walks of life often think and talk about not having enough. Many of you today, when you go home after participating in this event, might feel like you don't have enough food in the house because you didn't get the chance to do groceries. This morning you might have felt like you didn't have enough clothes to look appropriate for the event. You might feel a bit cash constrained because you have to experience more expenses for coming to Toronto for this event. The gas tank might feel lower than usual because you have to do extra commute. You might feel time is constrained for the rest of the week because you've missed a day or two of work. Or you might also feel like you don't have energy to finish the rest of the week. But I do hope that this event will be more replenishing than depleting in terms of resources for most of you. So that's this idea of a scarcity mindset. when people think in terms of not having enough, when they have these reminders in their daily life that triggers these thoughts about scarcity, and we wanted to see how that impacts consumer.

So first of all, we found that merely thinking about scarcity, or about thinking not having enough, prompts a competitive orientation. So what we find in our work is that consumers have this learned association between resource scarcity and competition. And we believe that there's two reasons why this is happening. So first of all, throughout our lives we often have to compete for things that are scarce. So for instance, many of you here might have to compete for this highly coveted job that you wanted to have, or compete for a highly coveted mate that you might wa—have an eye on, or compete for a highly coveted product, where you had to line up for hours to get your hands on. So throughout our daily experience, throughout our lives, we get to experience scarcity and competition. But even consumers that might be lucky enough to have never having to compete for resources might still be exposed to reminders of the fact that when there is scarcity, there is competition.

So if you watch the news about, for instance, part of the world where they're experiencing famine or drought, you might see people competing for scarce food resources. Or even here in North America, if you watched the news about last weekend, you probably saw people compete for the highly coveted discounted televisions at your local Wal-Mart. So through repeat exposures through our daily lives, and through instances where we see this happening, we learn that when things are scarce, we have to compete for it. And what's interesting is that in our work we find that just thinking about the fact that things may be scarce, even though they're objectively not that different, is enough to trigger this psychological response of making more people more competitive.

Then the consequences of that is that the competitive orientation tends to prompt consumers to become more selfish and to seek and maximize self-benefit. So unfortunately, what you find in our work is that the scarcity mind-set tend to make people keep their resources, hoard their resources, and less likely to share resources with others. So for instance, when you have all kinds of allocation tasks in the lab, where we ask participants to allocate resources between themselves and other lab participants, we find that they keep a much greater share for themselves than what they're willing to allocate to others. And the downstream consequence of that is that people experiencing scarcity are also less likely to want to behave pro-socially, so to donate money, volunteer time, and so on and so forth.

So for instance, in some of our work, we gave participant windfall one dollar in the lab for their compensation for participating in the study, and we gave them a choice between pocketing that one dollar or slipping it in an envelope to donate it to a local charitable organization, and we found that people experiencing scarcity pocketed the one dollar in a much greater proportion than people in a more neutral condition. The dark side of this selfish behaviour is that we also find that sometimes people experiencing scarcity are willing to cheat or behave dishonestly for personal gain. So we had a few tasks in the lab where we had people – participants do all kinds of tasks, like solving anagrams or finding bells – best deals, and they were performance-based task where they would get more rewards the more problems they solved correctly. And we even have some versions of the task where they would get a much bigger bonus if they managed to solve all the anagrams or find all the problems. And what we find is that people experiencing scarcity were over-reporting the number of problems they solve or over-reporting the instances of solving all the problems, even in conditions where we had – actually had unsolvable problems, like we knew could not be solved, and they still claimed they were able to solve them all, in order to increase their participation bonus in the lab.

We wanted to see how far this could go in terms of consequences. And so with one of my co-authors, we ran this study in China, where there is a big housing crisis in lots of major cities in China. It's really hard to get home ownership in those cities. So the government has a subsidies program where people can apply to, to get some money to help them buy their first home. But there is a lot of fraud involved with that program, unfortunately., And so we wanted to see if scarcity might have a role to play in that. So we ran a survey in a couple of companies in China, where embedded in the survey we had some questions about feelings of scarcity. So we asked people if they felt that they had enough money, time, housing, and all kinds of resources. And later in the survey, we asked them how acceptable it was for them to apply to a housing subsidies program if they already own a home, which basically would disqualify them for the program. It would basically be fraudulent if they would do that. And, lo and behold, we found that people that were expressing greater scarcity of resources thought it was way more acceptable for them to apply to a program for which they didn't qualify. So that was pretty interesting in terms of finding.

So this paint a pretty dire picture of the impacts of scarcity on consumer behaviour. So I always try to find the silver lining in my research. And we found that once you understand the psychology of scarcity, you can find ways to make consumers act generously and honestly, even if they are experiencing resource scarcity. So in one of our studies, for instance, we had again a donation study, where we asked people if they would be willing to participate in a corporation donation program that their employer was thinking of putting together. And, as with our previous research, we found that people experiencing scarcity were less likely to want to do so.

However, in one of the versions of the questions, we asked – we told them if you participate in this program, your name is going to appear in the company's newsletter under the generous benefactors section. And we found that in that case, people experiencing scarcity were more likely than people in a neutral condition to want to participate in the program. Because the idea here is that people experiencing scarcity become selfish, so they think in terms of what's in it for me. And here what's in it for me is social signalling. It's signalling to my co-workers I am the kind of person that participates in charitable donation programs.

Similarly, we ran a study with undergrads, where we asked them their likelihood of wanting to give a gift to a classmate that helped them do better on a test in a class. And again, we found that people experiencing scarcity less likely to want to give the gift, less willing to pay for the gift. But once we told them that the classmate might feel more obliged to help them again on the next test, then they became more likely to want to give a gift, and they were willing to pay more for that gift. So they were willing to give a nicer gift to the classmate if they thought that it could bank in their future favour from that classmate. So again, this what's-in-it-for-me kind of mind-set.

In terms of dishonesty, we also found that we were able to curb dishonest behaviour in our studies if you were reminded participants that the behaviour they were thinking of doing, which was over-reporting anagrams or task, or looking up anagrams answers on line using an anagram solver, constituted cheated. So once we labelled that grey behaviour as, like, uh, over-reporting might not be that bad, as no, no, this is actually cheating, that we completely eliminated cheating in the scarcity condition, and it became at the same level as people in a baseline condition. So when you people – threaten people's self-image in terms of making – labelling them as a potential cheater, they were less likely to behave dishonestly.

And if we go back to our study in China, we also find ways to decrease the likelihood of people wanting to commit fraudulent behaviour. So in one of the version of the survey, instead of asking participants whether it was acceptable for them to apply for the housing subsidies program, we asked them how acceptable it would be for their colleague to apply for a housing subsidies program if they already own a home, so if they didn't qualify for the program. And in that case, we found that people experiencing scarcity were much less likely to condone the behaviour. So once you make people experiencing scarcity realize that other people might have the same idea of abusing the resource and taking advantage of the resource, then they become a lot more conservative in how the resource should be used and managed. So these are ways to curb this selfish and dishonest behaviour that experience from a resource scarcity mindset.

We also found that you can harness the competitive orientation that is prompted by a scarcity mindset to help consumers get better, improve themselves. So there's also positive consequences on consumers. So when we think about competition, we tend to think about the destructive type of competition, when you have to bring someone else down in order to emerge as the winner. But there's also a more constructive type of competition, where you try to bring yourself up to emerge as the winner. So you try to gain new skills to get the promotion at work, rather than undermining your colleagues, and probably undermine your likelihood of getting that promotion.

So what we find is that people in – experiencing the scarcity, feeling like they have – they don't have enough resources, are more likely to pay, more likely to buy, and willing to pay more for all kinds of products that offer self-improvement benefits, so vitamin water that enhances mental clarity, sleeping products and apps that gets you the best sleep ever to seize the day the day after, or apps that allow to track and monitor your lifestyle to be a better you. So we thought that was an interesting positive consequences of the competition, especially so that people experiencing a scarcity of resources and are willing to sacrifice these resources by paying more for the product to get these self-improvement benefits. So again, what's in it for me in this case.

We wanted to see how far we could push that out by actually trying to frame products as offering self-improvement benefits. I'm in marketing, so we always try to see can we push it that far. And so in one of our studies, we had a good, old, boring pack of sticky notes. And in one, we asked participants how much they would be willing to pay for a pack of sticky notes, which wasn't very much, as you can imagine. But in one case, we framed the sticky notes as a self-improvement products. So we told participants that sticky notes are the effective knowledge-retention tool and the tool for people that want to self-improve, and we found that people in that condition, that when they were experiencing scarcity, were willing to pay more, about 50, 60 cents, for a pack of post-it note that offered these self-improvement benefits.

So in sum, what we find in our work is that thinking about not having enough, experiencing scarcity, makes people more competitive, more selfish, and, unfortunately, sometimes a bit more dishonest. But once you understand the psychology of scarcity, you can then make them act more generously, more honestly, and also help improve the self. So if you want to learn more about my work, the info is there. And I'll leave you there because I'm already over time, over the hourly. Thank you so much.

(Applause)