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Did you buy a new refrigerator or washing machine, this year?

Author: Venkata Ravi Ram/Wednesday, July 18, 2018/Categories: Consumer Durables, Expert View

Did you buy a new refrigerator or washing machine, this year?

Interesting isn’t it? How frequently you buy those home appliances that really make your life that wee bit easier? Not frequently. And, by frequently, I meant like every year or, so. Surprised? But, the same you, when asked if you upgraded your mobile phone every year, are ‘cool’ with that. Why so? Cost is definitely not a factor. With prices of premium smartphones between Rs 60k to more than a lakh of rupees, most homes can upgrade all home appliances instead of upgrading one member’s smart phone!    

Psychology explains this through the recency effect, which tells us that one craves for the latest, irrespective of their marginal utility. Phone companies exploit this effect efficiently through persistent ads that manipulate your feelings towards that mind-state. They need to do it because it is raison d'être of their business. That’s the only way they can make more money, selling latest models and not through repairing old phones. This effect is driven by what Thorstein Veblen termed in 1899 as “conspicuous consumption”. Originally meant to explain the behavior of the nouveau-riche, later research proved this was equally prevalent among all classes. An important facet of this conspicuous-consumption is that it must be, well, conspicuous. Hence, the 10-year old refrigerator that quietly (OK, sometimes not so quietly!) does its job standing in a corner of your home, doesn’t need regular replacement as it is not as visible to others as the now ‘not so shiny’ 1 year-old phone in your hand.

Jeff Bezos disparagingly called this the “upgrade treadmill”. Keep in mind though that his company Amazon makes money even when you use the old devices as their primary focus is on selling products/services through those devices, and as much as selling new devices.

Another factor for the conspicuous consumption is your internal ‘keeping-up-with-the-joneses’ imperative. The result of this recency effect and ‘keep-with-the-jones’ double whammy is, you are much more ready to junk that one-year old phone rather than the 10-year old refrigerator. An interesting evidence of these at work, are the contrasting growth rates of LG and Samsung. LG entered the consumer electronics market before Samsung and was the leader. LG was making more ACs, refrigerators etc. But, it was Samsung’s (correct) decision to focus on memory and mobile devices that effected a role reversal; today Samsung is bigger than LG. Thanks to people like you and me!

One useful decision tool when it comes to the ‘to-buy-or-not-to-upgrade’ question is the definition of quality, which is defined as ‘fitness for use’. Next time that upgrade question pops-up in your mind, ask yourself if the device is fulfilling its purpose or not. The honest answer to this should be your guide. With current phone prices you may be able to upgrade your bike to a used-small car, instead of your phone!

So, what are your upgrade plans this year?! 

The author writes commentaries on contemporary financial, business, taxation and political issues

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Venkata Ravi Ram
Venkata  Ravi Ram

Venkata Ravi Ram

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2 comments on article "Did you buy a new refrigerator or washing machine, this year?"


7/18/2018 6:12 PM

Eye opening article. Thank you for providing valuable information.


7/19/2018 11:18 PM

Thank so much otherwise I want to buy new mobile for 35k

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