Festivals in India have a spiritual and social relevance. All communities with great enthusiasm and fervor celebrate them. The ‘New Year’ is also a reason to celebrate. Most Indians consider it to be auspicious to buy during the festivals, especially the ones with spiritual dimension. These festivals fall in the October-December period. No wonder then, most companies see them as great opportunities for generating business. The reasons are not difficult to fathom. This is the period when the sales are expected to peak. Let’s look at the underlying causal factors for this spike.
1. Consumers in the buying mood
Festivals are an occasion to celebrate and the consumers are clearly in a buoyant mood, hence greater propensity to buy. The purchase could be anything from traditional items like mithai and dry fruit to branded consumer products ranging from chocolates to cell phones and cars. Both the conservatives and fashionistas have a yen for gold and silver. The significance of ‘Dhanteras’ cannot be underrated. There is a tradition of exchanging gifts amongst families and friends. Giving gifts to employees is considered to be an employee welfare activity. Needless to say, gifts to customers are another way of saying ‘Thank You’ for the business.
2. Peak of disposable income
Large number of government, PSU and private companies disburse their annual bonus to their employees during festivals, thereby leading to a sharp increase in the disposable income during this period. This leads to most of the planned buying happening around this time. However, with the proliferation of finance schemes and availability of credit from banks and financial institutions, the significance of this factor has diminished. This leads marketers to announce festival deals to attract the consumers at this time.
3. The Indian agricultural cycle
While the contribution of the agriculture to the GDP has seen a steady decline largely due to the buoyancy of the service sector, it is still significant at 17 per cent. During the Rabi and Kharif crop cycle in January –March and July – September periods respectively, there is an investment in agro inputs like seeds, fertilisers and pesticides which leads to tight liquidity in rural economy. This impacts the urban areas as well. The farmer is dependent on credit to invest in the crops, which adversely impacts the liquidity. The money comes back to him when the produce is sold. The disposable income after paying debts drives consumption especially during the festivals which fall in the post-harvest seasons (April-May) and (October-November).
4. Change of season
Indian transition of the seasons coincides with the agricultural cycle. While Baisakhi and Holi festivals in March/April signal the onset of summer, Dussehra and Diwali in October/November indicate the transition from autumn to winter. This generates demand for air cooler and air-conditioners and other refrigerating appliances in March - April period and geysers, heaters and other heating appliances in the October -November period. Given the improved liquidity and disposable income during these periods, the demand also peaks at these times, something the industry is familiar with.
The input industries like Advertising and Media benefit from this phenomenon as it leads to peaks in marketing spends (ATL + BTL) during this period.
5. The spiritual mindset
In India, it is considered auspicious to buy during the festivals. This is especially relevant to categories like real estate, consumer durables and cars. These festivals follow the ‘Shraddh’ month in September, which is considered to be an inauspicious period by many consumers for making new investments. This also leads to the ‘trough’ in sales.
Festival Season 2014
The Financial Year April 2014-March 2015 started with the uncertainty due to the national elections. The marketers were cautious in their spends. The results of the elections and a clear mandate changed the scenario to cautious optimism. There were some media segments like Print, TV & Radio that benefitted from political advertising. All national parties spent big during the elections. The Out of Home spends have gathered momentum in the July-September quarter. The festive season has started early; the month of October has seen a sharper spike. Most brands have gone for customer engagement and experiential opportunities to maximise their sales and ROI. The brand wars in e commerce and consumer durables categories especially cellphones have contributed to this peak. The feeling of optimism is back. This augurs well for the future.
As is evident, the ‘peaks’ and ‘troughs’ in demand are caused by rational and irrational factors. The marketers understand this phenomenon and hence attempt to maximise revenues during the peaks. This is no different in the other parts of the world where companies depend on the Christmas/New Year period to drive revenues.
The author is Managing Director, Times OOH