Friday, July 10, 2009

The Recession Psyche

In these tough times, understanding the psychology of human nature is paying economic dividends.

Restaurants are restructuring their menus offering specials such as “recession-busting burgers” and “bear market brisket.” There are also those frequent-buyer deals where the seventh or tenth meal is free.

Jewelry stores with sales plummeting are turning to buying gold. They and companies advertising mail-in services are promising quick and easy cash. The ads are enticing especially to those in need. Interestingly, if you go to five stores, there may be a 50 percent difference in the purchase price. This is a reflection of a buyers’ market awareness of desperate sellers.

Psychology is also seen in the limited employer-provided outplacement services for laid-off employees. Employers are hoping in part, that departing employees don’t bad mouth them hurting their reputations, and that the remaining employers’ are comforted by that benefit so their morale isn’t adversely impacted.

These psychological aspects are all at the surface. The recession is also causing deeper psychological problems. For people out of work, it is affecting their perceived self-worth. Many, at times, view themselves as failures, although they aren’t at fault. It is also affecting many of those with jobs, dramatically impacting and changing their spending patterns and investment philosophies. Many are becoming much more risk adverse and want guarantees. The growing appeal of annuities and the move from equities are proof.

There is a particular need for a greater study and understanding of human nature and psychological ramifications of this prolonged recession. How many of our parents and grandparents were identified as having a depression mentality and how did that impact their behavior and thought processes? Will there be generations similarly impacted by this recession?

In that regard, I expect businesses and professionals will be paying increased attention to understanding the psychological implications of this recession and how to capitalize on it. For example, some financial planners will incorporate so-called “financial-planning therapy” into their service package in various ways.

No comments:

Post a Comment