Behavioural economics

AYUSH GANGWAR I IT KHARAGPUR

Part 1

BEHAVIOURAL ECONOMICS

In the given context , the following point has been highlighted

Study the effects of social, emotional factors on the economic decision  of individuals and institutions and the consequences for market prices, returns, and the resource allocation. The fields are primarily concerned with the bounds of rationality of economic agents. 

Behaviour economics: Brief idea

It deals with how the decision of consumer are affected psychologically which can go a long way in increasing the effectiveness in the marketing of the product.

Presentation manipulates the willingness and satisfaction of the consumer and the sales of the product increase .

Strategies employed to psychologically attract consumers

Among the various strategies employed ,the one

focused in the experiment was

WEIGHTAGE A USER GIVES TO VARIOUS COMPONENTS OF THE TOTAL COST OF AN

ARTICLE(PRICE COMPONENTS)

T H E C O M P O N E N T S O F T O T A L M R P O F T H E A R T I C L E .

1. A C T U A L VA L U E O F T H E A R T I C L E 2. T A X E S : VA T , S A L E S T A X , G O V E R N M E N T T A X , C U S T O M

D U T I E S E T C 3. L A B O U R C O S T S 4. L A N D R E N T S 5. T R A N S P O R T A T I O N C O S T S6. S E R V I C E C O S T S

N O W F R O M T H E S E , T H E M O S T I M P O RTA N T FA C T O R F O R T H E U S E R W I L L B E T H E A C T UA L C O S T O F T H E A RT I C L E . I F H E F I N D S T H AT O F T H E T O TA L M R P H E I S PAY I N G F O R T H E A RT I C L E , O N LY 5 0 % O F T H E T O TA L M R P I S T H E A C T UA L C O S T O F T H E A RT I C L E , H E W I L L T H I N K A B I T B E F O R E TA K I N G A D E C I S I O N

Example

WHAT THE USER IS LOOKING IN THE PRODUCT ,HOW IS HIS PERCEPTION

ABOUT THE UTILITY OF THE PRODUCT ,THE COMPONENT TO WHICH

MAXIMUM WEIGHTAGE IS GIVEN BY THE USER SHOULD BE GIVEN HIGHEST

Main emphasis on pricing components

HOWEVER , IT DOESN’T MEAN THAT OTHER COMPONENTS MUST BE TOTALLY

IGNORED.FROM THE SECOND EXPERIMENT WHERE

MAJORITY OF CONSUMERS VOTED FOR ARTICLE WITH LABOUR COSTS RATHER

THAN WITH ZERO LABOUR COSTS.

EXTREME CASE OF PRICING OF COMPONENTS FOR BENEFIT MUST BE

AVOIDED

Loop hole :the second experiment

IDENTIFY WHAT THE COSTUMER EXPECTS FROM THE PRODUCT .COMBINE

PSYCHOLOGY AND ECONOMICS IN THE BEST POSSIBLE PROPORTION TO

INFLUENCE THE ECONOMIC DECISION OF THE CONSUMER

Results :

D Y N A M I C A L LY M A N I P U L AT E L O W B E N E F I T I N G A N D H I G H B E N E F I T I N G

C O M P O N E N T S , D E P E N D I N G O N T H E M A R K E T E C O N O M I C S C E N A R I O S. F O R E XA M P L E , VA R I O U S D I S C O U N T S , S C H E M E S A R E V I S I B L E S P E C I A L LY D U R I N G S P E C I A L O C C AT I O N S. T H E S U P P L I E R S

T RY T O C A P T U R E T H E M A R K E T S I T UAT I O N S AT T H AT T I M E . S O T H E S E S C H E M E S A C T A S

P S YC H O L O G I C A L M A G N E T S I N T H E C O N S U M E R S M I N D W H I C H A L L O W S H I G H E R S A L E S

Result 2:

A C O N S U M E R WA S R E A D Y T O PAY F O R T H E L O W B E N E F I T I N G C O M P O N E N T S A S W E L L I F H E WA S T O L D A B O U T T H E H I G H U T I L I T Y O F T H E H I G H B E N E F I T I N G C O M P O N E N T S . H E N C E , I N T H I S R E G A R D , I F H I G H E R

M A R K E T I N G A N D P U B L I C I T Y O F T H E P R O D U C T I S D O N E W H I C H I N C R E A S E S T H E U T I L I T Y O F T H E P R O D U C T I N T H E E Y E S O F T H E C U S T O M E R , H E

W O U L D B E W I L L I N G T O PAY T H E A D D I T I O N A L C O S T S A S S O C I AT E D

RESULT 3:

APPLICATION TO THE INDIAN MARKET

PART 2

Scenario in India

Most of the Indian population is middle class ,the per capita income being INR 73,140 in 2011-2012.

Indian per capita is much lesser than that of other BRIC nations

They keenly look for products in which their benefit is maximum . They compare products over different brands and only pick up the one in which they find they are being benefited maximum.

The low per capita income promote the Indian users to invest their resources judiciously .They always look for the deals in which their profit is the maximum

Here comes Behavioural Economics in the picture .This concept acts as a guideline for the sellers to fight for producing the most attractive deals .

High car sales during Diwali: An indication of the effect of the sellers taking advantage of the festive mood of the people

Behavioural economics

In India , this field has had a very deep history and it is applied quite intuitively by the people varying from uneducated street vendors to big retail houses to various online market stores .In Mumbai ,approximately 60% of the people buy their daily need items from roadside markets who try to pitch in pricing which goes in sync to the consumers ears and one should know that they have no theoretical knowledge of these concepts ,they have garnered it by experience.

Pricing components

We give a lot of emphasis to where is the money going.It is irritating if we find that some percentage of the costs is actually the taxes imposed .It acts as negative pricing

Some representations of behavioural economics

Sales and special offers during festive seasons

Free home delivery concepts Buy now ,pay later schemes Cash cards from various domestic storesOnline bookings ,shopping etcTest drives on automobiles

Major implementations of Pricing components in India

Free gifts of very small value are given out along with the new product being launched .The free gift is later terminated when the product occupies a share of its market

Numbers which are generally favourable sounding to ears are set as the prices of the commodities . Commonly it can be seen with the street vegetable vendors who can often e heard shouting out offers like 2 for 10 at some point of the day and then dramatically changing their offer to 15 for 4 at some other time on the same day

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