BackA snapshot of consumer behaviour
A snapshot of consumer behaviour
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The method of economic analysis
The method of economic analysis consists of postulating theories to explain observed economic phenomena, deriving testable hypotheses from the theory, and empirically testing the hypothesis using data and statistical techniques. In my previous column, I hypothesized that which format or formats of cricket survive in the long run will generally depend on the fans’ opportunity costs of watching cricket and their preference for the mode of cricketing entertainment—fast-paced games with hard hitting, as opposed to slower, strategy-driven games where bowling and batting matter.
Once the dust settles on this World Cup, a clearer picture will emerge with regard to demand trends, and we will analyse data collected from individuals who consider themselves “cricket buffs", in a survey commissioned by this newspaper, to see if there is support for the hypothesis that we put forth in the previous column regarding consumer demand.
Does opportunity cost matter?
The family wanting to watch some other programme on TV is cited as the next most important reason for not watching cricket live on TV. While this does not clearly indicate the preference of the respondent in terms of other entertainment options on TV, it does indicate that as these increase, cricket viewership falls.
A significant number of the respondents (31% overall) indicated that they have stopped watching ODIs after the advent of T20 cricket. While this could be the result of the availability of an entertainment option that has a lower opportunity cost—T20s—it could also be the result of fans’ preference for a fast-paced game. Nevertheless, one could view this cannibalization rate of 31% in a matter of merely three-and-a-half years as a significant trend, and further support our hypothesis that opportunity cost matters.
In addition, the overall distribution of those who watch the various formats of the game is indicative of the importance of the opportunity cost of watching cricket. An overwhelming majority of the respondents watch the relatively shorter ODIs and T20s (87% overall) as opposed to Test cricket. Interestingly, when one looks at the age-wise breakdown, we observe that individuals aged 41 and above, including retirees (who tend to have a lower opportunity cost in terms of earnings capability), prefer Test cricket marginally compared with younger respondents.
A closer look at the behavioural side
While one can make general assertions about consumer behaviour as it relates to sensitivity to price, taste and preference, at the more micro-level, various behavioural factors come into play. For instance, how does culture affect the fan following at the city level?
The survey shows that the Chennai fan is very different from the rest of the country. In fact, to a large extent, the behaviour and attitude of the Chennai fan seem to support the hypothesis that ODIs will be displaced in the long run as they would not have a distinct fan base as separate from Test and T20 cricket. The majority of the respondents (55%) from Chennai feel ODIs are not relevant any longer, and 78% claim to have stopped watching ODIs after the advent of T20.
Curiously, however, a large majority of the respondents (60%) from Chennai prefer Test matches, while only 3% follow T20s. This is striking given the fact that in terms of income, Chennai has the largest percentage of respondents (60%) whose household income is ₹ 3-5 lakh, with 50% of that group having household income greater than ₹ 5 lakh. Therefore, it is clearly not just opportunity cost that is driving the Chennai fan’s preference.
Recent developments in economic research have focused on factors that are behavioural in nature as opposed to those that would be considered purely economic to explain consumer behaviour, especially behaviour that would have previously been considered irrational by economists. For instance, in the context of the survey results, is there a cultural element at the individual city level that would explain customers’ preference as it relates to cricket formats? Chennai is among the oldest cricket centres in India, and the fans are considered to be very traditional and knowledgeable about the game. Does this explain the preponderance of Test cricket over the newer formats of the game, even though the economic factors would indicate otherwise?
Another observation from the survey that supports the cultural argument is the fact that while 8% of respondents started watching cricket after the advent of the Indian Premier League across all the cities surveyed, the percentage was markedly higher in cities that have traditionally not been cricket centres, such as Ludhiana (15%), Ahmedabad (18%) and Pune (12%).
What does this mean?
Is the cricketing landscape changing, at least as it relates to demand for the various formats? While more will be revealed as time goes by, the survey does bring out some interesting information.
The survey provides a snapshot of the views of around 1,000 cricket fans. While it is hard to draw conclusive inferences about the future of any particular format of the game, it does seem that T20s are having an impact on the other formats. Even within three-and-a-half years since its introduction, T20s seem to have made significant inroads—31% of the respondents claim to have stopped watching ODIs since the advent of T20s, 32% claim to watch the T20 format the most, 28% think ODIs are not relevant any more, and 8% of the respondents say they started following cricket after the advent of T20 cricket.
Nathan Economic Consulting India Pvt. Ltd is the Indian subsidiary of Nathan Associates Inc., a US-based economic consulting firm. Nathan India specializes in applying microeconomics’ principles to consumer behaviour, competitive strategy and competition law.
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