This case is being set-up to reflect the few concepts of behavioural psychology working around us
Mr. X was holding a postpaid plan of a leading telecom operator which gave him the benefit of carrying forward the unused date every month, a win-win situation for both (operator and customer). Operator retains customer with this offering while for customer it works as loss aversion where customer is able to avoid loss rather than equivalent gains. Data prices are going southwards and considering his actual average usage, the customer will save Rs 100 (assuming existing plan of Rs 1,000) if he moves to new plan. But the benefits on his current plan (Rs 1000) are 25% higher while he will only save 10% in cost. With telescopic benefits, the anchoring works where customer compare the benefits in his existing plan as reference point (incremental prices v/s incremental benefits) as it is the only information easily available to him. The psychological balance of time spend and money saved to initiate the process to downgrade with either a call center call or store visit is already impacting his decision. The customer has also experienced a social proof of increase in data usage due to efficient networks, technologies, devices and processing power among his closed acquaintance which again impact his decision. (The self-service portals will only push and show him an upward path or plan to UPGRADE) What happened next? Customer continued with the same plan irrespective of his usage (status quo) How Case Changes for a Rational Thinker The rational thinker Y was in same situation as of X. One day, the astronomical figure of his unused GB’s balance made him realize that he need to relook his plan. He checked his past usage, his requirement and found that now Rs 999 is suitable for him. He quickly calculated his savings of Rs 1416 (Rs 999 + 18% GST) which saves him a rental for more than a month. To reinforce his decision and savings, he used the concept of reference pricing and calculates his savings with the reference of fixed deposit rates. With existing fixed deposit rates of 7% per annum and as he was on 20% tax slab, he calculated that he need to put Rs 25,285 in fixed deposit for a year to get similar returns (savings) from his plan change Calculation: Interest = Principal * Fixed deposit rate per annum * Net (post tax) = Rs 25,285 * 7% * 0.8 [Rs 1,416] What happened next? Mr. Y got his plan changed. Now he is already running some thoughts in his mind, what he can do with the saved money :-) With multiple factors impacting our decisions from small to big in our daily life, understanding their impact is very critical for a marketer. In this case, we can’t advise the telecom operator to limit accumulated GB’s or phased expiry of carried forwarded GB’s unless we have an evidence that it triggers such behaviour from them. For majority of them it could be a strong perceived benefit.
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December 2018
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