spending is the best revenge:
the phenomenon of revenge spending
the phenomenon of revenge spending
By Catie Fromknecht
March 3, 2021
Many brands around the globe have experienced an unprecedented decline in sales during the CY20 and Q1CY21 as a result of the COVID-19 pandemic, yet brands may be ready to bounce back sooner than expected. Researchers at Clicksuasion Labs are predicting a surge in ‘Revenge Spending’, which suggests consumers will celebrate the end of pandemic-related lockdown restrictions by dining out, shopping, and traveling. Many businesses are poised to see a rapid rebound in sales during the coming months due to the release of pent-up demand from shoppers once they aren’t recommended to stay at home.
‘Revenge Spending’ is the theory that consumers are likely to increase their spending to make up for lost time and missed experiences during lockdown restrictions. This post-lockdown phenomenon has been prevalent in China, where businesses have experienced a surge in consumer demand. As vaccines become available and lockdown restrictions ease, revenge spending is expected to impact brands in Europe and the United States.
Researchers at Clicksuasion Labs believe brands who offer in-person experiences could capitalize on the anticipated increase in consumer spending with the application of behavioral economics and behavioral finance. In behavioral economics, the construct, ‘loss aversion’, refers to people’s desire to avoid losing, even more than winning, which incorporates a negativity bias. The previous 12-months of physical distancing and government-mandated lockdowns has led to consumers experiencing repeated losses; the loss of face-to-face interaction, loss of travel plans, and the loss of experiences such as ballgames, theme parks, bars, or gyms. As the pandemic comes to an end, it’s reasonable to believe that consumers will demonstrate what could be considered a reverse-loss aversion bias; that is, people are likely to put forth considerable effort to avoid additional losses (perceived or tangible).
Scarcity marketing is likely to be highly effective in the coming months as consumers revenge spend. The scarcity principle is a theory that when a product or service is limited in supply, it has greater value. Scarcity marketing capitalizes on buyer FOMO (fear of missing out), which is likely to be a strong motivator for decisions and purchases after the tangible or perceived losses that people missed in quarantine. Many people used their time in lockdown making plans for post-pandemic life, to include travel plans, favorite or desirable restaurants, and events such as concerts, conferences, and sporting events; these buyer ‘bucket lists’ are likely to contribute to an increase in spending across multiple industries.
Due to the increase of vaccine availability throughout the United States and a perceived end in sight to pandemic-related restrictions, people are likely to be anxious about a sense of normalcy. Industries ranging from retail and hospitality to tourism and entertainment have the potential to experience a ‘roaring twenties’ in sales once lockdown restrictions are lifted and it is safe for people to roam about the globe. Although it’s too early to tell exactly how soon sales will return to pre-pandemic levels, it’s believed that businesses are anxiously waiting to see if consumers agree that spending is the best revenge.