Customers of the Northern Rock bank in the UK are being urged to calm down. Yesterday the nation was swept with mass panic as customers flocked to the bank’s branches to withdraw their savings. Queues were seen stretching round the block and branches had to remain open until late at night to deal with everyone.
The panic started because the bank has set up a loan facility with the Bank of England, sanctioned personally by the Chancellor the Exchequer, Alastair Darling. This actually means that Northern Rock is the safest bank to be with, so people should really be flocking to put their money in, not take it out. However, the reverse happened.
People are social animals and tend to be rather “sheep like” in states of stress. We lose our sense of logic and respond automatically. We see other people queueing to get their money out, so off we go to the bank to do the same. After all, if everyone is doing it, it must be right – or so it seems.
What this means for Internet retailers is that if you can create a similar social movement you can gain. The Apple iPhone is a great example – a huge seller, outselling the iPod itself in the first month. A huge social “panic” buy. If you can create a group or social “need” for something, you will get significant numbers of people flocking to your door.
So just how do you create such a need? You get loads and loads of media coverage, preferably TV. The queues at Northern Rock grew during the day as more and more people saw the queues on TV. Whilst the TV was rightly reporting what was going on, the images themselves helped the social pressure rise for customers to be rather sheep like. It’s a well known psychological phenomenon that we tend to do what other people are doing. This means if you can show enough people are buying your product, it will create increased demand. Sadly for Northern Rock, what has been shown is enough people leaving, so it created increased numbers of people deciding to quit.
There is another side-effect of the Northern Rock situation for Internet retailers. Thousands of people in the UK now have cash in their pocket which until yesterday was “locked away” in their “savings”. Now they have it, guess what, they are likely to spend it. Watch out for a rise in shopping statistics this week.