Understanding consumer behavior is an important factor in understanding decision making, target audiences, and product development. Without an analytical look at consumer behavior, marketers would have very little information on which to base campaigns.
Consumer behavior is the study of consumption. The study aims to better understand the consumer actions and processes used to make purchasing decisions, as well as how products and services are used.
Studying consumers’ emotions, attitudes, and preferences, and buying behavior draws on information from psychology, sociology, anthropology, and biology, as well as marketing and economics.
A consumer is anyone or even any group that uses goods or services – we are all consumers. The needs of consumers vary greatly based on demographics, personality, lifestyle, gender, age, income, and a myriad of other factors that are taken into account depending on the product or service sold. Some factors are considered immutable, such as all women who menstruate require period products, while some factors are influenced, such as while all women who menstruate buy period products, the item they choose will vary based on income, cultural factors, availability, and personal preferences.
When marketers understand consumer motivations, they are also able to better tailor products and services that answer the needs of consumers. They do this by asking and answering simple questions, such as who, what, and where. It is also important to note that a consumer is not always a purchaser. For example, a child requires school books, and it is most likely their guardian who buys the books with little influence from the child, but a big influence from the school who might say what types of books are required eg – 12 lined A4 sized legal pads.
Consumer behavior is not static. It changes according to product availability and quality, societal trends, and consumers’ personal needs. A woman who needed period products at 45 might not need them at 55, and instead, start purchasing liners and vaginal lubricants. A child who needed school books and pens is unlikely to need such items on the same scale in their 20s. This doesn’t mean we stop consuming, but that our needs and desires change.
Some of the factors that influence consumer behavior include:
- Individuality: age, gender, education, and upbringing
- Lifestyle: status, income, and identity
- Marketing: product design, pricing, promotion, packaging, positioning, and distribution
- Situation: physical surroundings, social surroundings, and time factor
- Social: social status, reference groups, social media, and family
- Psychology: buying motives, perceptions, and attitudes
- Geography: region, country, as well as urban or rural
- Cultural: religion and ethnicity
There is also more than one person often involved in consumption when a household or organization is involved. There are 5 key players:
- Initiator: the person who proposes a product (or brand) for consideration
- Influencer: someone who recommends a given brand
- Decider: the person who makes the ultimate purchase decision
- Purchaser: the person who orders or buys the product
- The User: the person who uses or consumes the product
While some decisions are impulsive and require little thought, others are repetitive and consistent. For example, many people will choose the same brand of milk from the shelf, in the same sized container each time they shop because they do not have to make a decision each time, the choice has already been made.
However, there are other purchasing decisions that take a long time. Much research and negotiation need to be considered before the buyer commits. For example, a mining contract can take years to negotiate as the sheer number of people invested in each stage of the decision-making process is often very large and the volumes of information that must be taken into consideration require careful examination.
Why consumer behavior is important to marketers
One of the biggest challenges for businesses is to stay relevant in their target market. To help determine the answer to the question requires more than just data, it also requires investigation by asking relevant questions of consumers, such as:
- What products do you buy, when do you buy them, and how frequently?
- Why do you buy and use this product?
- What do you like/dislike about the product and what are your expectations?
- Why did you choose this product over a comparable brand?
- Do you buy the product for yourself, your family/workplace/others?
Consumer behavior gives us a better understanding of what motivates consumers to make purchases, and the benefits most valued by them. Knowing what consumers value most will improve the decision-making of businesses when creating more effective marketing campaigns. Ideally to sell more! Marketing needs to be strategic to be at its most effective.
Consumer behavior influences research and development, management, sales, and advertising. Consumer behavior research can influence the final look, taste, and appeal of a product. From the scent of a new lipstick to the layout of an app, what researchers discover through product trials and market research is invaluable to the development of an end product. All this consideration means the development of a product that meets people’s needs and expectations, and ultimately, a product that will sell.
The benefit of understanding consumer behavior
When consumer behavior habits are understood, target markets are easier to reach. Consumer behavior research will influence:
- Product design
- Predicting trends and behaviors
- Customer retention
Researching the buyer decision process helps marketers to track a customer journey from product or brand awareness to close of the sale. When a marketer can track this process, it can be made smoother for customers, which encourages closing and brand loyalty.
The process has 5 distinct stages:
- Awareness of need
- Product research
- Product comparison and evaluation
- Post-purchase behavior/evaluation
Awareness of need
The consumer decision-making process begins with the identification of a want or need. The strength of the need drives the consumer’s decision to determine if they should pursue the satisfaction of fulfilling the need. Triggers for awareness recognition include:
- Out-of-stock/natural depletion: empty milk carton
- New needs/wants: new TV that is Smart compatible
- Related product : purchasing a new phone, then adding a cover, and buying other accessories that enhance the consumer experience
- Regular purchase: chocolate bar purchase with regular groceries each week
- Dissatisfaction: need to find a new service provider, such as an internet provider
- Marketing induced: advertising that triggers the recognition of a problem or needs that consumers did not realize they had. E.g coffee drinkers need teeth whitening toothpaste, not regular toothpaste
The information search phase aims to identify a list of options representing realistic buying options. Consumers think about what products or services they know of that will satisfy their needs. These are referred to as evoked options, and usually offer up to 3-5 options. They might also research options if they need more choices.
Having a strong brand voice that reaches your target market has the ultimate aim of becoming part of your target market’s evoked set. When market research reveals consumer behaviors it becomes easier for marketers to campaign and place their product in the direct sight of target consumers.
Researching options can include turning to the internet, looking through catalogs, shopping around, and talking to friends/family. This research and evaluation phase can take place throughout the entire decision-making process, even if an evocative search has been the primary motivator.
An underlying motivation drives a consumer to act and purchase. These motivations can be positive or negative, simple or complex.
A positive, simple motivation could be buying a muffin with a coffee purchase. It is a simple, impulse decision that, for most people, does not have a complicated long-term effect. It is a feel-good purchase that, again, for many people, does not disrupt their budget.
A negative motivation could be ignoring the engine warning light on a car dashboard, then having to pay far higher repair costs because of the avoidance.
Maslow’s hierarchy of needs
Abraham Maslow’s hierarchy of needs is a motivational theory in psychology comprising a five-tier model of human needs. The non-scientific theory is used in many fields to attempt to better understand human motivations. According to the theory, needs lower down in the hierarchy must be satisfied before individuals can attend to needs higher up.
When this model is applied to marketing, it can help marketers understand the needs and motivation levels of consumers.
Within the five levels of needs, the lower order needs are most important. Consumers typically use most of their time, energy, and finances attempting to satisfy these. Only then can they move onto the higher-order needs and they become meaningful.
Evaluation of alternatives
Consumers explore a series of rational evaluations of alternative options. During the evaluation phase, consumers narrow down a number of options comparing and contrasting the merits of different brands.
Brand awareness on the part of the consumer does not mean automatic consideration for purchase. Realistic purchase options are known as the consideration set. Each consumer has a set of distinctive characteristics they are looking for to satisfy their needs.
Different evaluation criteria are used depending on each unique buying situation. Consumers assess and rank the relative merits of each option. Consumers with lesser knowledge about a product category tend to evaluate a brand based on functional characteristics. For example, when consumers are making purchasing decisions about electrical goods they are often swayed by bigger numbers and technical specifications without necessarily knowing what those specs mean.
After evaluation, the consumer reaches a decision and they proceed through to the actual purchase. To increase the chances of customers completing a purchase, strong ‘call-to-action’ techniques are used in advertising. Statements such as ‘final sale’ and ‘don’t miss out, but now’ are motivational tools used to close a sale by applying pressure.
While for some purchases, such as milk, most people know what they will buy and their decision has already been made early in the awareness phase, other purchasing decisions, such as buying a new car, are far more complex and involve much time moving through different phases for clarity.
After the consumer has made a purchase and used the product or service, they will then make an evaluation of the product based on various factors including price, functionality, and quality.
It is this evaluation that will determine if the consumer will repeat the product purchase, and spread the brand name in a positive or negative way.
A consumer behavior analysis should reveal:
- What consumers think and how they feel about the available alternatives on the market
- What influences consumers to make a decision;
- Consumers’ behavior while researching and shopping;
- How consumers’ environment (friends, family, media, etc.) influences their behavior.
Three categories 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, all influence consumers’ behavior.
Four types of consumer behavior
- Complex buying behavior: is encountered when consumers are buying an expensive, infrequently bought product. They are highly involved in the purchase process and do extensive research before committing to a purchase. Buying a house or car falls into the category of complex buying behavior.
- Dissonance-reducing buying behavior: is when 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.
This often happens when people make a purchase based on cost over value, then seek confirmation that they have made the right choice.
- Habitual: purchases are characterized by the fact that the consumer has very little involvement in the product or brand category. When you buy milk and choose the same carton each time, you are exhibiting a habitual pattern, not strong brand loyalty.
- Variety-seeking behavior: is when a consumer purchases a different product seeking variety, such as buying a new brand of soap to experience the scent.
Six most frequent factors influencing consumer behavior
- Marketing campaigns: influence purchasing decisions. The goal of marketing is to convince people to switch brands, even if the cost is higher because that brand satisfies the needs of the target audience.
- Economic conditions: especially big purchases such as houses or cars are heavily influenced by economic conditions. A positive economic environment is known to make consumers more confident and willing to indulge in purchases irrespective of their personal financial liabilities.
- Personal preferences: can influence purchasing decisions, such as likes, dislikes, priorities, morals, and values. In sectors like fashion, food, and personal hygiene, personal opinions are especially powerful. Advertisements in these sectors tend to hold customer loyalty rather than attract new customers.
- Group influence: Peer pressure influences consumer behavior. What our family members, peers, colleagues, neighbors, and acquaintances think or do can play a significant role in our decision making.
- Social psychology: such as choosing fast food over home-cooked meals, is just one example of such a situation. Education levels and social factors can have an impact on choices.
- Purchasing power: purchasing power plays a significant role in influencing our behavior. All consumers need to take into account their budget when making a purchasing decision, except perhaps Elon Musk or Jeff Bezos. The product may be excellent, the marketing could be on point, but without the money, you will not buy it. This is why segmenting consumers based on their buying capacity helps marketers determine eligible consumers and achieve better results.
Customer behavior segmentation
Customer segmentation is important, but now personalization and customer experience are making that segmentation even more critical.
Traditionally, most marketers use six primary types of behavioral segmentation.
- Benefits sought: a customer buying milk might look for: expiry date; added vitamins and minerals; organic; homogenized, and pasteurized.
When customers research a product or service online, their search behavior can reveal which benefits, features, values, use cases, or problems are the most important motivating factors influencing their purchase decision.
- Occasion or timing-based: behavioral segments refer to both universal and personal occasions.
- Universal occasions include seasonal or holiday purchases.
- Recurring-personal occasions are purchasing patterns for an individual customer that consistently repeat over days, months, weeks, or years, such as birthdays or anniversaries, and daily rituals such as a morning coffee or evening beer.
- Rare-personal occasions are more irregular and spontaneous. This might mean purchasing a wedding gift, or ski equipment for a holiday.
- Usage rate: 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, for example, a prepaid mobile phone contract.
- Brand loyalty status: loyal customers are a business’s most valuable assets. They are cheaper to retain, usually have the highest lifetime value, and can become brand advocates.
Behavioral data analysis can reveal which customers are loyal and why which can then be used to better satisfy that segment and target marketing. Loyal customers expect to be rewarded and incentivized through loyalty programs and discounts.
- User status: there are many different possible user statuses, including:
- First-time buyers
- Regular users
- Defectors (former-customers who have switched to a competitor)
- Customer journey stage: segmenting your audience based on buyer readiness allows you to align communications and personalize experiences to increase conversion at every stage of the sales funnel. It also helps identify stages where customers are not progressing so marketers can improve the sales funnel.
Understanding consumer behavior is important to the longevity of products, customer satisfaction, product development and sustainable growth. The biggest manufacturers and service providers in the world pour millions of dollars each year into consumer research to ensure that they are meeting market expectations. Even the smallest businesses can easily conduct consumer research to improve their sustainability and growth by asking questions and assessing the answers.