INTRODUCTION
Long-term sales stability is not just about having a great product. It's about meeting consumers' needs, understanding what makes them tick, and speaking to them in the ways that make them want to engage. In order to do this, marketers turn to a variety of reports, surveys, and tools to understand one thing - consumer behavior. It's a marketer's gold. And as we've seen time and time again, those who use it best, and align their marketing decisions to what the data tells them, are those who win. But what exactly is consumer behavior, and why does it matter to your business?
MEANING OF CONSUMER BEHAVIOR
Consumer behavior is the study of consumers and the processes they use to choose, use (consume), and dispose of products and services, including consumers’ emotional, mental, and behavioral responses. Consumer behavior incorporates ideas from several sciences including psychology, biology, chemistry, and economics.
In this guide we’ll take a look at the different aspects and facets of consumer behavior, and we’ll discuss the most effective types of customer segmentation.
IMPORTANT CONSUMER BEHAVIOR
Studying consumer behavior is important because this way marketers can understand what influences consumers’ buying decisions.
By understanding how consumers decide on a product they can fill in the gap in the market and identify the products that are needed and the products that are obsolete.
Studying consumer behavior also helps marketers decide how to present their products in a way that generates maximum impact on consumers. Understanding consumer buying behavior is the key secret to reaching and engaging your clients, and convert them to purchase from you.
A consumer behavior analysis should reveal:
What consumers think and how they feel about various alternatives (brands, products, etc.);
What influences consumers to choose between various options;
Consumers’ behavior while researching and shopping;
How consumers’ environment (friends, family, media, etc.) influences their behavior.
Consumer behavior is often influenced by different factors. Marketers should study consumer purchase patterns and figure out buyer trends.
In most cases, brands influence consumer behavior only with the things they can control; like how IKEA seems to compel you to spend more than what you intended to every time you walk into the store.
So, what are the factors that influence consumers to say yes? There are three categories of factors that influence consumer behavior:
Personal factors: an individual’s interests and opinions that can be influenced by demographics (age, gender, culture, etc.).
Psychological factors: an individual’s response to a marketing message will depend on their perceptions and attitudes.
Social factors: family, friends, education level, social media, income, they all influence consumers’ behavior.
TYPES OF CONSUMER BEHAVIOR
There are four main types of consumer behavior:
Complex buying behavior
Dissonance-reducing buying behavior
Habitual buying behavior
Variety seeking behavior
1. Complex buying behavior
This type of behavior is encountered when consumers are buying an expensive, infrequently bought product. They are highly involved in the purchase process and consumers’ research before committing to invest. Imagine buying a house or a car; these are an example of a complex buying behavior.
2. Dissonance-reducing buying behavior
The consumer is highly involved in the purchase process but has difficulties determining the differences between brands. ‘Dissonance’ can occur when the consumer worries that they will regret their choice.
Imagine you are buying a lawnmower. You will choose one based on price and convenience, but after the purchase you will seek confirmation that you’ve made the right choice.
3. Habitual buying behavior
Habitual purchases are characterized by the fact that the consumer has very little involvement in the product or brand category. Imagine grocery shopping: you go to the store and buy your preferred type of bread. You are exhibiting a habitual pattern, not strong brand loyalty.
4. Variety seeking behavior
In this situation, a consumer purchases a different product not because they weren’t satisfied with the previous one, but because they seek variety. Like when you are trying out new shower gel scents.
FACTORS AFFECTING CONSUMER BEHAVIOR
Many things can affect consumer behavior, but the most frequent factors influencing consumer behavior are:
1. Marketing campaigns
Marketing campaigns influence purchasing decisions a lot. If done right and regularly, with the right marketing message, they can even persuade consumers to change brands or opt for more expensive alternatives.
Marketing campaigns can even be used as reminders for products/services that need to be bought regularly but are not necessarily on customers’ top of mind (like insurance for example). A good marketing message can influence impulse purchases.
2. Economic conditions
For expensive products especially (like houses or cars) economic conditions play a big part. A positive economic environment is known to make consumers more confident and willing to indulge in purchases irrespective of their personal financial liabilities.
Consumers make decisions in a longer time period for expensive purchases and the buying process can be influenced by more personal factors at the same time.
3. Personal preferences
Consumer behavior can also be influenced by personal factors, likes, dislikes, priorities, morals, and values. In industries like fashion or food personal opinions are especially powerful.
Advertisements can, of course, help but at the end of the day consumers’ choices are greatly influenced by their preferences. If you’re vegan, it doesn’t matter how many burger joint ads you see, you’re probably not gonna start eating meat because of that.
4. Group influence
Peer pressure also influences consumer behavior. What our family members, classmates, immediate relatives, neighbors, and acquaintances think or do can play a significant role in our decisions.
Social psychology impacts consumer behavior. Choosing fast food over home-cooked meals, for example, is just one of such situations. Education levels and social factors can have an impact.
5. Purchasing power
Last but not least, our purchasing power plays a significant role in influencing our behavior. Unless you are a billionaire, you will take your budget into consideration before making a purchase decision.
The product may be excellent, the marketing could be on point, but if you don’t have the money for it, you won’t buy it.
Segmenting consumers based on their buying capacity will help marketers determine eligible consumers and achieve better results.
NATURE OF CONSUMER BEHAVIOUR:
1. Influenced by various factors:
The various factors that influence the consumer behavior are as follows:
Marketing factors such as product design, price, promotion, packaging, positioning and distribution.
Personal factors such as age, gender, education and income level.
Psychological factors such as buying motives, perception of the product and attitudes towards the product.
Situational factors such as physical surroundings at the time of purchase, social surroundings and time factor.
Social factors such as social status, reference groups and family.
Cultural factors, such as religion, social class—caste and sub-castes.
2. Undergoes a constant change:
Consumer behavior is not static. It undergoes a change over a period of time depending on the nature of products. For example, kids prefer colorful and fancy footwear, but as they grow up as teenagers and young adults, they prefer trendy footwear, and as middle-aged and senior citizens they prefer more sober footwear. The change in buying behavior may take place due to several other factors such as increase in income level, education level and marketing factors.
3. Varies from consumer to consumer:
All consumers do not behave in the same manner. Different consumers behave differently. The differences in consumer behavior are due to individual factors such as the nature of the consumers, lifestyle and culture. They go on a shopping and spend beyond their means.
They borrow money from friends, relatives, banks, and at times even adopt unethical means to spend on shopping of advance technologies. But there are other consumers who, despite having surplus money, do not go even for the regular purchases and avoid use and purchase of advance technologies.
4. Varies from region to region and country to county:
The consumer behavior varies across states, regions and countries. For example, the behavior of the urban consumers is different from that of the rural consumers. A good number of rural consumers are conservative in their buying behaviors.
The rich rural consumers may think twice to spend on luxuries despite having sufficient funds, whereas the urban consumers may even take bank loans to buy luxury items such as cars and household appliances. The consumer behavior may also varies across the states, regions and countries. It may differ depending on the upbringing, lifestyles and level of development.
5. Information on consumer behavior is important to the marketers:
Marketers need to have a good knowledge of the consumer behavior. They need to study the various factors that influence the consumer behavior of their target customers.
6. Leads to purchase decision:
A positive consumer behavior leads to a purchase decision. A consumer may take the decision of buying a product on the basis of different buying motives. The purchase decision leads to higher demand, and the sales of the marketers increase. Therefore, marketers need to influence consumer behavior to increase their purchases.
7. Varies from product to product:
Consumer behaviour is different for different products. There are some consumers who may buy more quantity of certain items and very low or no quantity of other items. For example, teenagers may spend heavily on products such as cell phones and branded wears for snob appeal, but may not spend on general and academic reading. A middle- aged person may spend less on clothing, but may invest money in savings, insurance schemes, pension schemes, and so on.
8. Improves standard of living:
The buying behavior of the consumers may lead to higher standard of living. The more a person buys the goods and services, the higher is the standard of living. But if a person spends less on goods and services, despite having a good income, they deprive themselves of higher standard of living.
9. Reflects status:
The consumer behavior is not only influenced by the status of a consumer, but it also reflects it. The consumers who own luxury cars, watches and other items are considered belonging to a higher status. The luxury items also give a sense of pride to the owners.
CUSTOMER BEHAVIOR PATTERNS
Buying behavior patterns are not synonymous with buying habits. Habits are developed as tendencies towards an action and they become spontaneous over time, while patterns show a predictable mental design.
Each customer has his unique buying habits, while buying behavior patterns are collective and offer marketers a unique characterization. Customer behavior patterns can be grouped into:
1. Place of purchase
Most of the time customers will divide their purchases in several stores even if all items are available in the same store. Think of your favorite hypermarket: although you can find clothes and shoes there as well, you’re probably buying those from actual clothing brands.
When a customer has the capability and the access to purchase the same products in different stores, they are not permanently loyal to any store, unless that’s the only store they have access to. Studying customer behavior in terms of choice of place will help marketers identify key store locations.
2. Items purchased
Things to consider: the items that were purchased and how much of each item was purchased. Necessity items can be bought in bulk while luxury items are more likely to be purchased less frequently and in small quantities.
The amount of each item purchased is influenced by the perishability of the item, the purchasing power of the buyer, unit of sale, price, number of consumers for whom the item is intended, etc.
Analyzing a shopping cart can give marketers lots of consumer insights.
3. Time and frequency of purchase
Customers will go shopping according to their feasibility and will expect service even during the oddest hours; especially now in the era of e-commerce where everything is only a few clicks away.
It’s the shop’s responsibility to meet these demands by identifying a purchase pattern and match its service according to the time and frequency of purchases.
One thing to keep in mind: seasonal variations and regional differences must also be accounted for.
4. Method of purchase
A customer can either walk into a store and buy an item right then and there, or order online and pay online via credit card or on delivery.
The method of purchase can also induce more spending from the customer (for online shopping, you might also be charged a shipping fee for example).
The way a customer chooses to purchase an item also says a lot about the type of customer he is.
CUSTOMER BEHAVIOR SEGMENTATION
Only 33% of the companies that use customer segmentation say they find it significantly impactful.
Customer segmentation, types of buyers, has always been important, but now that personalization and customer experience are factors that determine a business’ success, effective segmentation is even more important.
Traditionally, most marketers use six primary types of behavioral segmentation.
1. Benefits sought
A customer who buys toothpaste can look for four different reasons: whitening, sensitive teeth, flavor, or price.
When customers research a product or service, their behavior can reveal valuable insights into which benefits, features, values, use cases, or problems are the most important motivating factors influencing their purchase decision.
When a customer places a much higher value on one or more benefits over the others, these primary benefits sought are the defining motivating factors driving the purchase decision for that customer.
2. Occasion or timing-based
Occasion and timing-based behavioral segments refer to both universal and personal occasions.
Universal occasions apply to the majority of customers or target audience. For example holidays and seasonal events when consumers are more likely to make certain purchases.
Recurring-personal occasions are purchasing patterns for an individual customer that consistently repeat over a period of time. For example birthdays, anniversaries or vacations, monthly purchases, or even daily rituals such as stopping for a cup of coffee on the way to work every morning.
Rare-personal occasions are also related to individual customers, but are more irregular and spontaneous, and thus more difficult to predict. For example attending a friend’s wedding.
3. Usage rate
Product or service usage is another common way to segment customers by behavior, based on the frequency at which a customer purchases from or interacts with a product or service. Usage behavior can be a strong predictive indicator of loyalty or churn and, therefore, lifetime value.
4. Brand loyalty status
Loyal customers are a business’ most valuable assets. They are cheaper to retain, usually have the highest lifetime value, and can become brand advocates.
By analyzing behavioral data, customers can be segmented by their level of loyalty so marketers can understand their needs and make sure they are satisfying them.
Loyal customers are the ones who should receive special treatment and privileges such as exclusive rewards programs to nurture and strengthen the customer relationship and incentivize continued future business.
REFERENCES
Schivinski, Bruno (2019-09-05). "Eliciting brand-related social media engagement: A conditional inference tree framework". Journal of Business Research. doi:10.1016/j. jbusres. 2019.08.045. ISSN 0148-2963.
Tadajewski, M., "A History of Marketing Thought," Ch 2 in Contemporary Issues in Marketing and Consumer Behaviour, Elizabeth Parsons and Pauline Maclaran (eds), Routledge, 2009, pp 24-25
Sheth, J.N.,"History of Consumer Behavior: a Marketing Perspective", in Historical Perspective in Consumer Research: National and International Perspectives, Jagdish N. Sheth and Chin Tiong Tan (eds), Singapore, Association for Consumer Research, 1985, pp 5-7.
Fullerton, R.A. "The Birth of Consumer Behavior: Motivation Research in the 1950s," Journal of Historical Research in Marketing, Vol. 5, No. 2, 2013, pp.212-222
Tadajewski, M., "A History of Marketing Thought," Ch 2 in Contemporary Issues in Marketing and Consumer Behaviour, Elizabeth Parsons and Pauline Maclaran (eds), Routledge, 2009, p. 28
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