Decoding India’s Affluent Customer Revolution
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As India enters its 77th year of independence, it is an interesting time to be an Indian.
With GDP growth, emerging affluent class, better disposable income, and global exposure, Indian consumers are flourishing. More Indians are seeking premium and luxury goods and services. 2023 has witnessed record-breaking sales for several luxury car manufacturers, real estate developers, and hotels.
?In this issue of the SHIFT, we explore:
5 behaviour shifts that are causing this boom.
? Revenge Spending: Luxurious Redemption in the Wake of Disaster
In 2001, diamond sales rose in the U.S. following the 9/11 attacks. As per Paul Zimnisky, a diamond market analyst, people buy fewer but nicer things after disasters. The pandemic was one such disaster. It locked people inside their homes along with their hopes and dreams.
Fuelled by the scarcity effect, consumers feel compelled to seek more pleasure and indulgence. Spending more on luxury goods that hold sentimental or aspirational value in an attempt to make up for lost time and opportunities.
? Mere Exposure Effect: In The Know Or Front Row
Around two-thirds of Indians born after 1991 haven’t experienced rationing and have enjoyed an average of 6% annual growth for decades. Many of these young Indians use the internet and have access to advanced smartphones.
We have a tendency to develop a preference for things merely because we are familiar with them. The main consumers of luxury brands are those aged 25-44, who were early adopters of social media like Facebook, Twitter, and YouTube. This has enabled exposure to more information and access to more of the world, impacting their taste and preferences.
? Signaling Splurge: Status, Peers, and Pricey Purchases
Revenge spending can also be a means of asserting one’s status and identity. The desire to keep up with peers and influencers can lead to impulsive purchases beyond one’s financial means. The urge to post aspirational content and portray a curated lifestyle drives individuals to indulge in luxury purchases they might not otherwise make.
This is due to signaling theory, which suggests that people use purchases to display their wealth and status to others. People may also engage in revenge spending to make themselves feel better or to prove that they can afford something they couldn’t before.
? Diderot Effect: A Domino Effect Of Consumption
Unlike a decade ago, demand for premium products is now also coming from Tier 2 and Tier 3 cities. There is a rise in first-generation entrepreneurs and tech professionals with higher disposable incomes. This, along with easy access to credit has given way to a new generation of aspirational consumers.
Coupling this with the previous 3 points, consumers with access to premium products experience the Diderot effect. After purchasing a new designer handbag, a consumer may feel the need to buy other luxury items such as shoes or jewelry to complete the look. This can lead to a cycle of consumption due to the desire for more items that fit within that lifestyle.
?? Risk Aversion: Indulgence In Every Day, Trust In Extraordinary
Premium products don’t always mean luxury cars or designer homes. There is an emerging trend of consumers seeking premium products in sundry items like soap, coffee, and even daily wear clothing. Indian consumers are seeking a piece of indulgence in every aspect of their lives.
As more premium products and international brands break onto the scene, the expectations of consumers are changing. In the aftermath of a period of uncertainty and buying less, consumers are not willing to take risks with lesser-known brands. They expect experiences that are seamless, where they are valued as a customer by brands they can trust. The trust and reliability in premium brands are driving up premium product sales.