Habits, COVID and Strategy
Executives consistently ask for my advice on strategy in the wake of COVID. My answer, always, is to pay close attention to habits. Habits underpin your company now and many are being interrupted by the COVID pandemic. That is both a threat and an opportunity that must be taken seriously.
Over the past decade or so, lots of brain science research has filtered into the world of business — from nudging to eye-tracking analyses to stress management techniques. One important insight, which I have written about previously in Harvard Business Review (Loyalty is Overrated), is the central importance of habit. Habit is the subconscious analog to the conscious act of loyalty. While marketers focus on customers consciously choosing their brand because of a warm feeling of loyalty, the more powerful motivator tends to be the subconscious drive of habit. The subconscious loves to make sure its owner sticks to the tried and tested and will cause its owner to feel nervous and worried when inclined consciously to try something new.
That means that the one of the biggest assets of any company — if not the biggest — is the habit of its customer base to use its product/service, whether that is a Facebook habit, a Tide habit, an F-150 habit, or an Avengers habit. The Superbowl is every year’s biggest television event by far because people who don’t have a season-long habit of watching pro football have nonetheless developed a habit of throwing or attending a Superbowl party.
Among many other features, COVID represents perhaps the most dramatic forced habit break since World War II with its rationing and the need for women to fill jobs previously only filled by men — remember Rosie the Riveter! The measures put in place to fight the pandemic have forced the interruption of habit after habit from eating at your favorite restaurant, to going to your favorite movie theater, to flying your favorite airline, to shopping at your favorite store, and so on.
Those habits won’t necessarily come back, particularly on their own, because they have been so thoroughly interrupted. It is the job of every business to determine what habits that are important to their business have been interrupted by COVID in order to craft an approach to best deal with that interruption. In some cases, customers with the prior habit will have missed the habit dearly — like going out for a nice meal with a loved one — and in other cases, they won’t miss the old habit once it has been broken — like fighting rush hour traffic every day to get to work. In the latter case, the company needs to figure out how it can take advantage of the new habit because fighting to re-establish the old habit is a losing game that isn’t worth playing. For New York City commercial landlords, that might mean creating flexible working spaces in the suburbs because those commuters just aren’t going to come back anywhere close to five days a week!
In the former case, the company needs to do everything it can to encourage the customer to re-establish the habit — and do it quickly. The old habit should be seen as a rapidly decaying asset. It has tough competition from two angles. First it has to compete with habits that formed during the pandemic. You may enjoy shopping for clothes in physical stores but have grown a new habit of shopping for clothes on line. Second, pre-COVID competitors who lost to you then are back on increasingly equal footing because of the break in your habit. You may have had a habit of going to your favorite restaurant every Sunday evening meaning that other restaurants were in a deeply disadvantaged position pre-COVID. But with the habit interrupted, those other restaurants have a better chance of sweeping in and helping you establish a new habit. And the longer you wait, the more chance they have of doing so as your old habit fades into the mists of time.
With respect to habit re-establishment, I have been the subject in a great natural experiment as two companies with which my wife and I have established habits have gone in polar-opposite directions. Their actions are highly illustrative.
The first is Seabourn Cruise Line. In the summer of 2017, my wife and I decided to try our first cruise together and chose a Seabourn cruise in the Mediterranean. We weren’t highly committed — we just wanted to give it a try. It turned out that we really enjoyed it and while on the cruise booked another for 2018 in part because Seabourn cleverly reinforced the building of a habit by offering a discount if we booked the next cruise while still on the ship. In fact, as a testament to the strength of habit formation, we picked a cruise on the same vessel in the same cabin. And we did it again in 2019. Our habit was taking shape! And while on that cruise, also a happy one, we booked another for May 2020.
Due to the great habit interruption of COVID, we received a letter from the Seabourn CEO about a month before departure that our cruise had been cancelled. He apologized but did something in addition that was more important. He gave us the option of either receiving a 100% cash refund for our cruise or taking a 125% credit for a future Seabourn cruise. The pleasantly surprising part of the offer was that the credit could be spent on anything related to the future cruise — airfare to get there, excursions, on-ship extras. Much of that spending would not end up in Seabourn’s coffers, but it was offered, nonetheless.
We chose the credit, signed up for a 2021 cruise — thus re-establishing the habit — and have most of the 25% bonus to spend on lots of great stuff. That was textbook habit re-building. We felt warmly treated by the provider of our growing habit — and Seabourn Cruise Lines is the deserving beneficiary.
On the other side of the coin was Swiss Air. My wife and I do business around the world and that means traveling all year round. We go to Europe often and like Swiss Air’s service and Zurich hub. So, we have developed a Swiss Air habit. That was interrupted in March 2020 with the cancellation of several subsequent trips. But we had a (hopefully) post-COVID trip planned in October through the Zurich hub — consequently, Swiss Air had the advantage over Seabourn of a built-in habit re-establishment opportunity.
However, their response was entirely different. We were recently informed that the outbound flight to Zurich on that trip was cancelled and we had to fly a different day — a significant inconvenience. There weren’t many choices offered by Swiss Air — most would have involved missing the business meeting that was the motivator for the trip or going a week before intended. The compromise was a flight two days before the original departure in which my wife was able to fly in the original cabin in which we booked, and I needed to fly in the lower fare cabin. Not terrible thus far: COVID has caused much in the way of undesirable changes (and worse), so we didn’t blame Swiss Air. But the key was what came next.
First, Swiss Air informed us that because we accepted the flight change, we would not be refunded anything for the reduction in service from the higher fare cabin to the lower one. Second, Swiss Air informed us that if a seat in the higher fare cabin became available, we would have to pay an upgrade fee to re-acquire that seat that we already paid for. Third, when we asked for their help on the following, Swiss Air refused completely. Because it was their cancellation in the first place, we had the right to get a full refund of the ticket. We asked Swiss Air whether they would hold my seats on the other three legs of the trip for the hour or so that it would take to rebook the rest of the itinerary so that we could rebook the trip and take advantage of the lower fare on the leg in which I had to fly in the lower fare cabin. Nope they said: if we cancelled, those seats would disappear.
Because I am an educator at heart, I escalated this situation several levels up into the Swiss Air organization with the help of our travel agent. In due course, Swiss Air relented and restored my seat in the original cabin at no penalty. By doing so, Swiss Air took a step in the direction of re-establishing our habit rather than willfully destroying it. Hardly the Seabourn relationship-building response, but at least an eventual step in the right direction.
Every company needs to be asking itself: am I doing all the smart things to re-establish key habits of my customer base, like Seabourn, or risking them never coming back, like Swiss Air with its original response.