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  • Marketing has a lot to do with how we behave during Diwali

    Article by Parag Parikh in Live Mint, October 3, 2014

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    Marketing has a lot to do with how we behave during Diwali

    Marketing has a lot to do with how we behave during DiwaliJayachandran/Mint

    The festival season started with Navratri, followed by Dussehra. Few days later, there will be Diwali—one of the brightest festivals in India. Many legends are associated with this festival. It marks the victory of Rama over Ravana; and symbolically good over evil.

    This festival of lights also gets people to spend crores of rupees on people they may see once a year, or on things that they don’t really need. It is also a period of irrationality. If one is looking for an example of behavioural economics, look no further than the ongoing festival season. Diwali itself may be around four days long, but people’s irrationality starts at least a month before. The rituals of consumerism associated with Diwali and other festivals during the period influence us to do things that make no rational economic sense.

    We buy more food than we can possibly consume. It’s not surprising to see many of us go berserk at grocery stores. We delight in showcasing our generosity by laying the table with various types of sweets, dry fruits and other food items to avoid feeling guilty about not doing enough for Diwali.

    We consume more harmful food than usual, knowing fully well that they are a potential health hazard. And we justify the indulgence in the name of Diwali.

    We buy new clothes, jewellery and household items, even if we do not need them. The frequency of shopping increases, undeterred by the hardships associated with heavy traffic and crowd and long queues at shops.

    During this period, we throw all caution to the wind and forget about the environment, pollution and climate change. We become irresponsible and spend money on firecrackers, even as hungry eyes witness money being metaphorically burnt through a creative display of firecrackers. Where does our compassion go?

    Closer home, we worry about the stigma of giving cash or gift vouchers instead of a gift, even though the voucher may be worth more. In this way, we help retailers extract disproportionate value, which should ideally go to the recipient.

    The wasteful tendencies extend even to investors, who flock to their brokers on the mahurat trading day and buy stocks even if they are expensive and do not merit investments. Thanks to mahurat trading, brokers happily earn even at the cost of making a wrong investment.

    Businessmen worship their accounting books on particular days during the festival season. But they merely pander to custom, and have no firm resolve to follow ethical practices in day-to-day business dealings. In fact, the festival season is the perfect opportunity to give bribes in the form of expensive gifts and jewellery. The recipients, too, happily avoid feeling guilty about accepting such gifts, in the name of Diwali.

    Even the profession of begging becomes lucrative. Asking for alms in the name of Diwali, they rake in a greater collection as donors also become liberal.

    Setting the scene

    Marketing has a lot to do with how we behave during Diwali. Special Diwali deals create the anchoring and the scarcity effect. Consumers, being in a festive mood, are more likely to make lax purchase decisions rather than calculated ones. Special advertisements like “gift your dad a TV” use the reciprocity bias to encourage buying in the hope of receiving. The popular carrot, “exchange old for new”, exploits the loss aversion bias, especially when buying expensive gifts.

    Social norms, too, play a huge role in the mad rush of spending—“everyone is doing it, so let’s follow the herd”. Envy and comparison also add fuel to the fire of irrational spending. We are strongly influenced by how others act and the values and behaviour displayed by our peers.

    Surprisingly, no asset management company has launched a mutual fund scheme capitalizing on the irrationality of investors during the festival period. If such a scheme were to originate, I guess it would be called “Diwali consumer goods scheme”. And soon the market would be flooded with Diwali-themed schemes.

    But the great thing about the festival period is a tacit agreement across the country to make the season all about spending time with loved ones, exchanging gifts as a means to display our affection. Rationality makes people boring. It wouldn’t do to have every person using their minds to take decisions. It is a welcome change to sometimes use the heart and not the mind, even if the resultant actions are not in our best financial interest. Who cares? We are human beings, and we possess a mind as well as a heart. I am going to be irrational, and I am going to enjoy it!

    The original article could be seen here.

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