How Does Air Pollution Affect Consumer Spending?

Does increased exposure to deteriorating urban air quality affect people’s daily spending and choices? Despite extensive discussions on worsening air quality, little is known about the effects of air pollution on consumer behavior and economic activities.

In a new Journal of Marketing study, we find that a higher level of air pollution is associated with greater spending. A quantitative analysis of credit card usage data and experimental evidence further reveals that this correlation is pronounced in hedonic (pleasure-seeking) categories, as products and services in these categories tend to lift the mood of consumers.

Benefits for Retailers

There are several notable ways retailers can benefit from an increase in consumer spending for hedonic categories. We define managerial implications for this group of stakeholders into two broad categories:

Promotion and advertising, and
Corporate social responsibility and brand image building.

An increase in demand linked to air quality fluctuations presents an opportunity for retailers to develop tailored marketing strategies. Marketers can consider the following examples:

As soon as the rise in air pollution is noted from the Air Quality Index (AQI) tracking, retailers can leverage displays or signage catering to hedonic consumption and comfort. In-store events, such as a hobby workshop or a wellness product demonstration, can be planned in advance and ready to deploy at the opportune time.

Retailers can adjust store ambiance (e.g., music and in-store decorations) to serve current customer preferences more proactively.

Retailers can prepare point-of-sale promotions during periods of high air pollution. These may include instant markdowns, special offers on mood-lifting items, or bundles that include hedonic items of increased demand.

Retailers may also want to provide sales promotions to counteract an anticipated shrinkage in spending the day following higher air pollution (to correct for overspending) or from big spenders (who are less likely to spend after exposure to pollution).

Ideas for Chief Marketing Officers

Given the ambient nature of air quality, marketing strategies leveraging our results should be capable of quick and effective deployment over a short planning horizon. Chief marketing officers can consider implementing the following ideas:

Employ digital marketing tactics such as online ads, social media, or customized content. These may include:
- i) localized display or search ads for products offering enjoyment and comfort, such as gourmet snacks, entertainment gadgets, wellness products, or feel-good promotions on social media, and
- ii) customized content, such as timely emails advertising leisure activities.

Improve corporate social responsibility and brand image. For example, a company may want to launch a campaign that emphasizes the importance of self-care to address the effect of air pollution on individual well-being. They may partner with healthcare and wellness experts to generate content and resources that help consumers navigate stress and health concerns related to air quality. This campaign can tie into the idea that indulging in hedonic products responsibly is part of self-care during significant air quality drops.

Develop a line of hedonic goods and services that are environmentally sustainable, including organic luxury comfort foods or ecofriendly leisure activities. This initiative aligns with the increased demand for such items during periods of high air pollution and reinforces the company’s commitment to sustainability.

Implications for Policymakers

This research is also valuable to policymakers for designing environmental and socioeconomic regulations.

First, our main findings of increased spending due to deteriorating air quality raise public awareness about a major environmental crisis and its consequences for daily life, making the issue more relevant and urgent. Accordingly, policymaking institutions can develop campaigns that associate air quality with everyday consumer choices and illuminate how environmental health contributes to individual well-being and economic stability.

Second, increased spending might lead to social costs for the general public, such as overconsumption of pleasure-seeking categories. Insights from this research should help consumers be cautious of their continual and habitual consumption of hedonic goods and services during periods of higher air pollution, while policymakers can promote healthier and more environmentally conscious alternatives.

Third, our study has implications for household economics in that pollution-induced incidental spending, particularly overspending, may result in the accumulation of revolving debt.

Finally, our study suggests an opportunity for industry collaboration involving retailers and manufacturers. Joint campaigns could support the development of sustainable practices, providing incentives for consumers to engage in more sustainable consumption (e.g., emphasizing the benefits of sustainable products) and ecofriendly practices (e.g., highlighting the benefits of eco-friendly transportation), hence promoting responsible consumerism.

Overall, we advocate for the execution of marketing strategies with a strong focus on sustainability, aiming to balance business profits with societal values in the face of escalating environmental challenges and practice more responsible marketing for a better world.