Getting Pushed Into Action in 2016 - 17

Daniel Kahneman won the Nobel Prize in Economics [with Vernon L Smith] for his work on Psychology of Judgement and Decision Making. His seminal article in collaboration with Amos Twersky kickstarted the Behavioral Economics movement. His book Thinking Fast and Slow became a best seller and spun off more than a dozen very interesting books on the subject. One of his famous studies discovered that the way consumers behave does not directly depend on the monetary value or the value of time but works on a relative scale of perception.  For instance if you were buying a Rs 2000 saree and were told that in a shop near by the same saree is available for Rs 1500, you may switch your allegiance to the other store that gave you a Rs 500 discount. But at the same time if you were buying a Rs 50,000 colour TV and were told that a shop near by is offering the same brand for Rs 49,500, you may decide to stay put. Think about it. The amount is the same. The time taken to walk to the next store is the same. But you decide to stay put. Behavioral Economists have named many of these effects and folks in marketing and advertising are slowly getting to use these templates to explain consumer behavior.

Let us now try and apply some of these to what we have witnessed during the year 2016.

Early in 2016 there was much debate about the future of BARC, the television audience measurement system jointly promoted by the Indian Broadcasters Association, Indian Society of Advertisers and Advertising Agencies Association of India. There was always some doubt if the TAM system will continue. Early this year BARC decided to acquire many of the valuable assets of TAM, ending the speculation. Till this happened, and both panels were putting out the data, there were many who managed to find loop holes in BARC. But with this one swoop BARC became the single currency. As is always the case, and Behavior Economics tells us this, there is the Anchoring Effect that can make one choice look better. The absence of TAM made BARC also the target of more criticism. Fortunately the angry voices are becoming muted as BARC itself is actively improving its reporting systems.

The year also saw the big launch of Jio by Reliance Group. In a big introductory move Jio offered its mobile internet free to all its subscribers [Its offer of Free Voice Calls will stay forever]. First the service was free till 31 December; but now it has been extended to 31 March. India has around 250 mobile internet users, while over 600 million people have a mobile in their hands [the number of mobile connections could be as high as 1.2 billion but please note that many of the mobile users have double/sim phones]. My guess is that around 600 to 700 million people have an active mobile phone. Even those with a mobile internet connection use the mobile very sparingly for internet surfing; you can see youngsters looking for free wi-fi wherever they go. Jio is going to change all that with its FREE offer. Behavioral Economists have studied the magical effect of FREE. In an experiment where consumers were asked to choose between one brand of popular chocolate for 1 cent vs another better brand for 5 cents, a large number of respondents picked the 5 cent option. But when the same offer was changed to FREE vs 4 cents, it turned out that almost all the consumers chose the FREE option. What are people using FREE mobile internet for? I suppose the first flush of usage is for downloading movies and watching them during commute or doing multiple WhatsApp messaging. But if the habit of using internet grows, we will see a dramatic change in the way we consume entertainment, education and more. No wonder all major entertainment channels are jumping on to the OTT [Over The Top] bandwagon. We are witnessing content being created to be consumed only on a smart phone. I remember when television advertising started in India, we who had been used to cinema advertising had to readjust our ‘size’ perceptions from 20 feet by 10 feet [200 square feet] to 24 inches. Now the screen size shrunk by another factor of 5.

Finally as we near the end of the year Demonetization is upon us. Almost all markets have been affected by the sudden impact of this masterstroke by the Modi Government. Every old man taking a morning walk has turned into an amateur economist. While there is a lot of debate on the short term, medium term and long term effect of Demonetization [The Economist, 3 December 2016, has gone out on a limb calling it Modi’s Bungle “By designing a scheme that was needlessly callous and which is becoming increasingly unpopular, he has squandered political capital.”]. However I  believe Demonetization is the Biggest Behavior Change Moment for India.  There are two Behavior Change effects that are in play here. Loss Aversion / Status Quo bias says that we tend to value what we have in our hand more than what we may get in the future. So people, even middle-class people who have nothing to fear, are suffering from Loss Aversion Bias when they deposit their money in the bank. And there is the effect that is called Inaction Inertia Effect. This says that if we missed out on an offer and if that offer resurfaces again, we will completely ignore it. It is here that Modi’s move may help the country. Millions of small businessmen have thrived on cash sales, not that they did not know of credit cards or payment wallets. But chose to ignore it due to sheer Inaction Inertia. This new move has made them reevaluate the need for a different payment system. Even my sister who has a  Dermatological practice in Chennai is now considering getting a credit card Swipe Machine, overcoming the Inaction Inertia. This is a big change that The Economist experts did not comment about. May be next year they will compensate for the scorn they heaped on Government of India and will call it ‘Modi’s Magic’.

The digital money transformation that Demonetization should be a cause that Marketers should celebrate, same time next year, if not much earlier.

Wishing all of you a wonderful cash-free 2017!

----------------------------------------------------------------------------------------------------------The full version of the article that appeared in Business Standard Dec 2016

Ambi Parameswaran is a Brand Strategist and Founder Brand-Building.com; a branding/ advertising veteran and a Brand Coach, he is also the author of eight books including the critically acclaimed bestseller “Nawabs Nudes Noodles – India Through 50 Years of Advertising” [Amazon.in - Top 100 most Memorable books of 2016]