Behavioural Economics and the Badshah of Bollywood
It was a bright Sunday morning in Bangalore. Unlike the weekdays when I wake up to the sound of horns that day I woke up to an alarm which I had set so that I don’t miss playing a game football to breath little life into my life. I still had quite some time left to snooze the alarm 5-6 times, but that day I woke up. I completed all the morning chores and prepared myself a cup of coffee. I went down to pick up that day’s newspaper. Being a Sunday, the newspaper was a little heavy with all the ads, flyers, supplements and some news here and there. The idea that a kg of English newspaper will be taken for 10 Rs per kg in the nearby thrash shop was doing circles around my head.
I sat down with the newspaper in one hand and coffee with another. After searching through a bunch of pages finally, I found some news. Then moved directly through sports section and then the supplementary. Here I saw an ad which captured my attention. After all, the most intriguing piece of information that I came across the newspaper on that day was this piece.
A huge first-page advertisement of an e-grocery startup with Shah Rukh Khan which reads “I believe in getting the best prices for my groceries.” For a moment I was taken aback. I kept wondering why he has to believe in best price for groceries. This thought has stayed with me for several days after that.
By pure coincidence, for the past few months, I was also passively reading about economics. I was keenly interested in an upcoming field under economics, Behavioural economics which studies the effects of psychological, cognitive, emotional, cultural and social factors on the economic decisions of individuals and institutions.
I came across this concept of diminishing the marginal utility of wealth while skimming through some of the content. The graph below clearly depicts the theory.
It states an addition of extra 10,000 dollars for a person with little money will have a huge impact in his life, but the addition of the same amount for a millionaire will go unnoticed. Can’t help but think about the scene where Goundamani behaves crazily after he gets to know he won a big prize in a lottery. That’s Behavioural economics at play.
Let’s sync in this thought and going back to our case where Shah Rukh believes in best price for grocery. All we have seen is theory so far and no numbers yet. Let’s do the same thing which we have been doing since the time this blog series started, let’s get some numbers first.
I went to the big basket’s site. They had a whole list of products which ran for pages. From that to figure out the ones which Shah Rukh will purchase every month is a very tedious task. I really didn’t have an idea how to narrow down the grocery list for a month. After hanging around the website for a while, luckily I stumbled upon this curated list which big basket have created on their own to help customer to buy grocery and other essential stuff for a whole month without much ado.
There were 85 products classified under the following 10 categories.
Let’s scrap the website and get all the product data including the price because we believe in best price for our groceries. When I scrapped the website instead of 85 products, to my surprise I found 254 products. When I parsed through the data I found that many products came in different sizes and combos. For example, take a look below.
Let us consider Shah Rukh Khan orders everything that is available irrespective of the size or combo or offer. So he adds all the 254 products to his cart and checks out. The monthly bill amount for his grocery totals Rs 48518.71.
Let’s move out of this basket for a while and get some figures on how much he earns per month. Forbes says that his total earnings for the year 2017 was 38 million dollars. Which is around 3.2 million dollars per month. Let’s forget income tax, GST, PSG, PPG all for a while and convert the amount to the Indian rupee. This amounts to 22 crores INR per month. His total monthly grocery was around 50 thousand rupees, which is 0.0002 of his income. But this too is not the right number. Because he doesn’t believe in getting grocery for free, he believes in getting grocery for the best price. Let’s consider if he had brought the same groceries in any other outlet it would have cost him Rs 10,000 more. So the amount he saved Rs10k, which is only 0.00004 of his monthly income.
These numbers are still hard to consume, I know. Let’s dilute it to a scenario which we can all relate to this. During my engineering, I got placed in Infosys Ltd. I and a bunch of my friends joined the Infosys training facility in Mysore. It was a huge campus, we would roam in cycles all around the sprawling campus every evening stopping by the food courts and the departmental store every now and then. One of our favourite snacks was biscuits. That too especially Parle G and Tiger Biscuits for two simple reasons. 1. One packet fills the stomach for quite some time 2. It’s cheap. Shah Rukh khan believing in getting the best price for his groceries is like us believing getting the best price for our parle G biscuits packet.
I am not denying the fact that we will be more than happy to take few biscuits for free if someone offers, I am just stating that I don’t believe in getting the best price for my Parle-G biscuits packet.
Found few other similar ads with Shah Rukh Khan with his believes endorsing Big basket, which sounds little more reasonable believes for the Kingmaker to have.
I am not completely ruling out that he can’t believe in getting the best prices for his grocery, I am just saying that it is very unlikely for him to have such a belief given his income. ‘Believe’ is a very strong word, people don’t form beliefs just like that. It takes time, some impact and a strong notion to form a belief. You don’t believe me? Okay. You are only proving my point.
And hey, I do believe in getting the best price for my old english news paper. Won’t accept anything less than 10 Rs/Kg.
