There are usually three types of customers for any product or
service:
(i) Dog type - The
customers who are attached to the people and/or the brand. For example, the
people who prefer their hairs to be cut by the same person in a large saloon;
to be served by the same waiter/waitress in a restaurant; to buy the same brand
of clothes, food, etc. These customers would usually not mind paying higher
price or waiting longer to get the product or service of their choice.
(ii) Cat type - The
customers who are attached to a place rather the people or brand. For example,
the customers who prefer to shop from a specific store, watch movies at a
particular theater, spend their whole life in one house, etc. These customers
also usually would not bother about the offerings of the competitors.
(iii) Rat type - The
customers who are always looking for a favorable deal. They usually have no
loyalty to any place, brand or people. They keep actively looking for the best
deals and buy the products/services from the places/people who offer them best
value for their money/effort.
In past couple of decades, the proportion of the third type of
customers (Rat type) has risen disproportionately, almost everywhere.
- Employees are less attached to their jobs and employers are less attached to their employees.
- People do not mind changing places (cities, states, countries) in search for better professional opportunities.
- Cheaper Chinese products are preferred to expensive German products, despite poor durable life.
- Cheaper and lighter MDF furniture is preferred over heavy long lasting pine wood or sheesham wood furniture.
- Easy to install and change ceramic tiles are more preferred to marble flooring.
- Ready to cook & eat food and beverages are gaining currency even in traditional societies.
- The youth prefer live-in relationships over matrimony as the intensity of commitment is much lower in such relationships. Even the jurisprudence is evolving to accept such less committal relationships as valid contractual obligations for parenthood and property sharing and inheritance.
- Politicians have given up commitment to any particular ideology and are willing to go to nay extent for getting a better "deal".
- The house or private labels of the large retail formats (Big Bazaar, Spencer, Reliance Retail etc.) are growing faster than many established FMCG and textile brands as these invariably come at cheaper prices or with attractive deals (1 for 1 free!).
- Many successful business models are purely based on this rise in "deal seeking tendency" of customers, e.g, MakeMyTrip, Trivago, Zomato, Policy Bazaar, Paisa Bazaar, etc.
If we apply this theorem to the investing in equities, we shall
see a sustained decline in buy and hold strategy and higher trading. The people
who cannot do the frequent churning by themselves might increasingly entrust
the job to professional traders and fund managers.
At this point in time I am avoiding any opinion on the issue of
Buy & Hold vs. Active Investment vs. Passive Investment. But I guess It'll
be not long when I am forced to take a stand on this.
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