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The psychology of the COVID-19 Economic Crisis

No matter how we look at the COVID Crisis, and no matter which sector we want to analyse, psychology always comes to the fore. And it cannot be examined from a global perspective, either, because this virus has affected every nation in entirely different ways. In other words, there will be significant differences between its effects on the decisions of consumers and business leaders.

Once upon a time

Personal experience and objective facts both show that there are drastic differences between the citizens of different countries. Let’s look at a couple of specific examples: Italy and Spain. These nations did not manage well during the early days of the virus. Both are famous for large family get-togethers, yet their very direct and distinctly social people were locked up for months. In the meantime, people lost loved ones and acquaintances, lived in tremendous insecurity, and things are still unstable to this day. In the United States, there has been a veritable civil rights movement: the pre-existing violence against African Americans at the hands of police, which is incomprehensible to many Europeans, fomented this movement. And yet, it seems that every week new videos show outrage if not outright violence based on an argument about wearing a mask. Diving deeper into the horrors, we can see that there are multiple South American nations where the mafia needs to “keep the peace” because the state is not up to the task. Then, there’s the other side that understands less and less but still believes in the threatening nature of the epidemic. Obviously, in countries where the number of casualties is less than 1,000 – and more than 90% of those who passed away were over the age of 65 with pre-existing chronic diseases – everyday life is different today. But why is this all so relevant in an article about business research and interpreting trends? Because no matter how much we sometimes want the opposite, decision-makers are people, too. And a person is significantly affected by social events, especially processes of this magnitude. We must also understand that when examining psychological effects, we cannot separate the B2B and B2C business lines from each other. Both the consumer and the business decision-maker react to, or maybe, in this case, we should say “suffer from”, the same social effects.

So, if we want to understand what awaits us commercially in locations, both local and global, we also need to understand what is happening now in people’s minds. Especially with regards to the processes that will critically impact their purchasing decisions in the years to come!

Summer Showers

If only it were true! But many are still pretending as if the current economic situation will disappear by the end of the year. Like a summer shower passing overhead that drenches everything in a matter of seconds; then, the sun will come out and dry up all the rain. Often, it’s even exciting and kind of a party! We ask ourselves “Why didn’t we wait another half hour?” and “Did we have to be outside?” but even when our clothes are soaked, we can still crack a smile about what just happened. Does anyone want to smile now? I don’t think so! And I also don’t believe that we can wait for anything to put an end to the crisis. A lot of businesspeople, unfortunately even analysts, are linking the end of the economic crisis to the appearance of a miracle cure or a vaccine that will solve all our problems.

Rojan Maharjan

But having walked through empty airports in mid-September, I cannot imagine how things will get sorted out by January. But how would they get sorted out, or what does it mean to “sort out” anything at all? Does everything need to be sorted out? To do this, we need to know precisely what phenomena and trends we can see in the business world. It bears emphasis that I am not talking here about what we are going through in terms of health! Naturally, everyone is in favour of a vaccine coming out as soon as possible to save millions of lives. But I don’t even want to talk about the social climate, as everyone around the world sees that existing social problems have intensified and become crueller. Overall, it would be best to solve these issues everywhere, and one can hope for this as an idealist. But economically speaking, the virus has created some profound benefits.

Economic trends

What can businesspeople expect in the future? How will the economy change in general? Taking into account the local differences already mentioned, of course. As you can see now that many companies are going bankrupt, they couldn’t handle several months of downtime. Demand has ceased to exist, and its return is a prolonged process. On the one hand, this is awful, yet on the other hand, it looks very much like supply markets will emerge. This, in turn, means that the consumer side will receive much more consideration. We will have to pay even more attention to the satisfaction of our clients and partners. The trend is already visible on a small scale. When I arrive at a hotel or a restaurant today – or almost anywhere I spend money, really – the welcome is already significantly friendlier than before. Of course, some companies always had a friendlier approach pre-COVID; they did not have to change. But there will be a significant increase in high-quality service, where the buyer can feel that the seller is there at their disposal.

Another important change deals with objective decision-making. There will be more logic and less emotion present in decisions. The “he’s a friend of a friend, and even though I know the quality isn’t the best, I’ll still buy it” rationale is already dying. Professional knowledge and quality are valued. I mean real quality. Obviously, some companies will find this extremely painful, but for others, this will spur growth. Products and services advertised with superficial voices, but otherwise with knowledge far below the price, will not work (anymore). Even so, there was plenty of it on the market.

The labour market is also normalising. In many countries, finding enough employees at an affordable price has been a considerable challenge over the past 10-15 years. And when they finally found them, employers had to do everything in their power to keep employees, even those with questionable loyalty and skill. Well, a new world is coming, and this is already visible in the job market.

Employers also need to end their superficial attitudes. They need to cultivate real, meaningful loyalty. It will not be enough just to act as if they care about their employees. The best people, those key people on whom we can build the future, really need to be provided for. Employers also need to learn how to say it aloud when someone is unfit for their role, even if that person is a top leader. They may be a good person, but unfit means unfit. These hard truths will no longer be swept under the rug because the “don’t rock the boat; things are fine” attitude will not work in this economy.

No wonder more people think that the summer showers should keep on coming, soaking the land and the people a little more. But of course, they want to damage society as little as possible. From time to time, economic life needs a crisis. Many people say that a crisis occurred not long ago, so why do we need another one after only 12 years? Let’s ask the question through the eyes of a business developer. But strictly, exclusively through the eyes of a business developer! If there was a crisis not long ago, then in principle a businessperson was faced with what to do in a crisis, in principle they learned from it, in principle they remained strong, and in principle, it was impossible to move forward without a serious change of strategy. So, in principle, why has the COVID Crisis caused such big problems for everyone? The Great Recession of 2008 also had strong psychological elements, and the present one has them, too. With standard solutions, it is now entirely impossible to move forward! But the human psyche has always had to play a prominent role in business. Now, we have no choice but to understand what is happening to consumers and decision-makers on the mental front, and based on this information, we need to build a new strategy for the future! If possible, by modifying the current strategy. If nothing else, by drastically restructuring our existing business. And if there is absolutely no other solution, then we need to take our skills and business in an entirely new direction!