Behavioral Economics & Impact on Business Practices
1. Human Behavior
and Its Impact
on Business Practices
Akhil Mehta
2006B3A8645G
Saturday 24 April 2010
2. Structure
• Story - Chapter Hybrids
• Classical - Behavioral Seamlessness
• Natural Language
Saturday 24 April 2010
3. Methodology
• Primary Information
• Personal Observations
• Interview
• Secondary Information
• Books
• Courses
• Newspapers
• WWW
Saturday 24 April 2010
4. How do marketeers work around
Diminishing Marginal Returns?
• What is DMR?
• Why Not Constant?
• When to Stop?
Saturday 24 April 2010
5. • Plate System - Chunks
of Utility
• Experienced & Expected
Utility OR
• Buyer’s Quantity, Money)
(Need,
Remorse
Saturday 24 April 2010
6. How do economic concepts explain
Chache Di Hatti Closing Early?
• History
• A Typical Day
• Customer Cross-
Section
Saturday 24 April 2010
7. • How?
• Price Ceiling
• Why?
• Wider Demographic
• Scarcity - Queues & Brand
• Time Gain
Saturday 24 April 2010
8. HP/Gillette Marketing Strategy of
Lowering/Eliminating Prices
• Click-Whirr Responses
• Too Much/Too Less Information
• Non Intuitive Information
• Uncertainity
• Examples
• Scarcity
• Reciprocity
• Commitment/Consistancy
• Social Proof
Saturday 24 April 2010
9. • Gillette - MACH III Confidence Challenge
• HP - Very Low Pricing
• Things In Common
• Refillable Commodities
• Proprietary Refill Technology
• Refill Costs Significantly Higher than Competition
Saturday 24 April 2010
10. • How Does it Work?
• Click/Whirr Triggers
• Reciprocity
• Commitment/Consistancy
• Increase in Number of Printers/Razors in
Target Demographic’s Hands
• Rightward Shift in Complementary Good’s
Demand Curve
Saturday 24 April 2010
11. How are Pricing Models for Windows 7
Profit Maximizing?
• Consumer’s Surplus
• Producer’s Surplus
• Differential Pricing
• Examples (Water,Vegetables,
Extortion Money)
Saturday 24 April 2010
14. What is common to BITSAA
International, Cypress University Alliance,
and UPSC Chaat Bhandar?
Saturday 24 April 2010
15. • Click/Whirr In Action
• Commitment/Consistency
• Social Proof
• Reciprocity
• Amplified By
• Too Much Information
• Uncertainty
• How It All Connects
Saturday 24 April 2010
16. What can PVR Cinemas Learn from Air
Deccan & Investment Banks?
• What Did Air Deccan Do?
Saturday 24 April 2010
17. • Why with Cinema Halls?
• High Fixed Costs, Low Variable Costs
• Similar Target Demographic
• Differential Pricing already exists, Profits Leaking
• Recommendation
• Use Model A/B Depending on Situation
• Make Tickets Non-Transferrable
• Implications
• Comparatively Greater Profits, Hit or Flop! (Tickets & More)
Saturday 24 April 2010
18. • Cinema Hall Issue - Sell A Show
• Hall Owner and Prospective Customers Negotiate a Price for the show
• Issue Purchaser decides Price, Uses Ticket Window + Own Network for
Distribution & Mitigates Risk for Hall Owner
• Extra Revenues are his/her to keep
• Has Precedent In Airlines Industry
Saturday 24 April 2010
19. Object Oriented Management (Intro)
• Computer Programming & Management
• Solution Development Approaches
• Similar Paradigms may work in both
• Translating selective concepts from OOP and finding managerial
equivalents
Saturday 24 April 2010
20. • Abstraction
• Breaking down Big Problems into Mutually Exclusive-Collectively
Exhaustive Sub-Problems
• eg. Arranging a Guest Party has Making Tea as a Sub-Task
• Making Tea too has sub-tasks, and Arranging a Guest Party may be part of
an even bigger piece of work
• In Programming, Implemented Using Functions - eg. Multiplication Table
Program uses * function
Saturday 24 April 2010
21. • Encapsulation
• Hiding specific details of functions from the function which sends
messages to it
• Especially Useful in Delegation and Outsourcing
• Frees up Resources, both Human (in Management) and Computer
• eg. Household Help who makes Tea In the Guest Party
Saturday 24 April 2010
22. Why do all good things come to an end?
• Diminishing Marginal Returns
Saturday 24 April 2010
23. Thank You!
• Questions?
Saturday 24 April 2010
