Did you know businesses that utilize consumer behavior data to gain valuable insights about their potential customers enjoy 85% more in sales growth and an additional 25% in gross margin than those who don’t?Ifyou’re a business owner, there’s no doubt you want to achieve this success for your company, but lacking the necessary consumer behavior analysis understanding and knowledge can put you at a serious disadvantage.
This is becausemarketing strategies are normally based on direct and indirect beliefs about consumer behavior. Therefore, when a business is devising their marketing tactics, using the knowledge they have gained through their understanding and analysis of their consumers' behavior can help them achieve higher sales growth, boosted revenue, and marketing success.
Within this guide, we will walk you through everything you need to know about consumer behavior to boost your business
Understanding consumer behavior basics
What does consumer behavior mean?
Consumer behavior refers to the study of consumers and the actions and the decision processes they use to purchase goods and services to satisfy their needs and wants, including emotional, mental, and behavioral responses with the aim of determining what influences consumers’ buying decisions.
Why is consumer behavior important?
The study of consumer behavior is one of the most important marketing activities undertaken by companies and institutions because it helps marketers determine what influences consumers’ buying decisions.
Understanding consumer behavior is therefore helpful to identify the products that are needed and the products that are obsolete, because no business wants to spend a fortune on producing a product line, only to find that it doesn’t sell.
A typical consumer behavior analysis should reveal:
What consumers think and how they feel about various brands, products, services, etc.
What influences consumers to choose between the various options available to them
Consumers’ behavior while researching and shopping
How consumers’ environment (including their friends and family, the media they consume, etc.) influences their behavior
In order to understand consumer behavior on a deeper level, it’s important to look at the elements that influence consumer behavior. These include:
Personal factors such as those influenced by a consumer’s demographics, including age, gender, cultural background, life stage, and more. These elements play an important role in shaping an individual’s own interests and opinions.
Psychological factors such as their response to a marketing message or elements that stimulate the senses, including light, heat, sound, touch, and more.
Social factors including the influences of friends, family, and social media, or aspects such as an individual’s education level or income.
Marketing campaigns which, when done successfully, can influence impulse purchases or persuade consumers to change brands or opt for more expensive alternatives.
Purchasing power including a person’s financial ability to buy products or services, as well as the “value” of the transaction in terms of what they receive. This can play a large role in what brand they choose (for example, the cheaper or more expensive brand) and if they can justify making the purchase at all.
Personal needs and wants, as well as their personality and the in-built preferences, priorities, morals, and values that come with it.
Types of consumer behavior
When we refer to consumer behavior, the concept can be further broken down into 4 distinct types:
Complex buying behavior
This refers to those rare, expensive purchases that will often see the consumer researching their options thoroughly, such as when buying a new car or house. They are highly involved in the purchase decision-making process before making the final commitment.
Dissonance-reducing buying behavior
When, despite lengthy research, a consumer has difficulties determining the differences between brands. Then, even after making the purchase, they must seek reassurance that they’ve made the right buying decision.
Habitual buying behavior
When, as opposed to purchasing a particular product due to brand loyalty, a consumer chooses a product based on their buying habits. For example, they’ve purchased it before, were satisfied, and chooses it repeatedly over other brands simply because it takes the ‘need to think’ out of the buying process.
Variety-seeking behavior
When a consumer enjoys trying new products and seeks variety in their buying patterns. For example, they might like trying new flavors of tea or enjoying a different fragrance of hand soap each time they make their purchase.
Consumer behavior examples
Now let's look at some examples of different consumer behaviors that matter to your marketing.
Needs: Needs are essential to your marketing as they give people a reason to buy. You'll need to understand the needs of your target audience to effectively communicate your solution. For example, a customer paying for a dog-walking service has an underlying need to have their dog walked. You'd want to dig into the causes of that need, such as not having the time or desire.
Motivation: It's important to understand what gives your audience a general desire and willingness to take action. For example, the dog owner who wants to hire a dog walker may have a restless dog that is causing problems in the house.
Search: Customers use various methods to learn more about the products and services they need. It's important to understand how your customers are looking for information. For example, they could be searching for certain keywords on Google and social media.
Purchasing decisions: Customers often go through stages when deciding what to buy, such as researching the details of an offering, comparing multiple providers, and reading reviews. It's important to understand your buyer's process and have content in place to guide them along the desired path. For example, the dog walker could run ads for people searching for dog walkers and even problems that result when dogs aren't walked. They could write blogs and social posts about their service, their results, and overall dog health. Then, they could ask customers for reviews and testimonials to post online.
Customer loyalty: Customers are loyal to brands that satisfy their needs and vice versa. Understanding what drives customer loyalty, and what hurts it, is important to growing a customer base that doesn't churn. For example, if a dog walking service brings back a dog that is happy and calm, the owner will likely continue with the service. However, if they bring back a dog that continues to be hyper, they may look for another solution.
Technology adoption: Customers are often willing to try a new technology or innovation. However, it's important to gauge your audience's willingness. For example, VR headsets are rising in popularity as the technology has improved and more consumers are open to that form of entertainment.
Price sensitivity: The price of a product will impact if a customer is willing to buy and how much they will spend. For example, a customer may be willing to pay for an expensive dinner out on occasion but not every month. As a brand, it's important to understand your audience and how much they are willing to pay.
Perceptions: Customers form perceptions about brands based on their encounters with that brand and their internal reference point (belief, values, etc.). As a brand, it's important to be aware of the impression you are making on the audience and in control of it. You can do this by developing a documented brand strategy and showing up with consistency.
Product use: It's important to understand how your customers use your products and services to encourage increased use. For example, Facebook enables you to pick your most important friends so you can see their content first on your feed. This encourages users to use and engage with the app more.
Post-purchase evaluation: Customers will have an opinion after they buy from your brand, and brands can benefit from connecting with customers to find out their level of satisfaction. For example, you could send follow-up emails with surveys to gauge satisfaction and gain feedback.
Word of mouth: When people are happy with a product or service, they will often tell others about it. As a brand, you can encourage this behavior with referral programs. For example, Airbnb offers travel credits when members refer new members.
Consumer behavior models
A consumer behavior model is a theoretical framework that aims to decode why consumers behave and make the buying decisions they do. Many models exist today with varying perspectives that range from acting on pure impulse to following complex rational processes.
Learning model
Have you ever heard of Maslow's Hierarchy of Needs? Psychologist Abraham Maslow broke down the needs of humans into categories and ranked them in a pyramid. At the bottom are the most basic and essential physiological needs. Then, they gradually shift to psychological needs as you go up. Here's a look at his hierarchy:
Self-actualization (top): achieving your full potential and exploring creative activities
Esteem needs: psychological needs involving prestige and feeling accomplished
Belongingness and love needs: a psychological need for intimate relationships and friends
Safety needs: a mix of a basic and psychological need to feel safe and secure
Physiological needs (bottom): What our body requires to stay alive — rest, warmth, water, and food
The Learning Model of consumer behavior theorizes that consumer purchases are dictated by this pyramid. It says consumers will generally fulfill their basic, essential needs at the bottom of the pyramid before moving up to the higher-level learned needs. For example, a person will spend their money on food and ensure they have a safe home before investing in outings with friends, trendy clothes, or a nicer car.
As a business owner, understanding these drives can help you to better serve your customers. For example, Wal-Mart was once a store that sold many items but did not have a full grocery section. Now, it does offer groceries and attracts shoppers to buy their basic essentials in-store. This step helps to increase the sales of other items. Think of how you can cater to the various needs of consumers to grow your offerings.
Psychoanalytical model
The next model stems from the father of psychoanalysis, Sigmund Freud. His theories say that individual consumers have various motives driving them to make purchases that are both conscious and unconscious. For example, motives may lie in suppressed desires or hidden fears. Being that some of these motives are unconscious, consumers may not know why something appeals to them but they feel like they need it.
As a brand, it's important to understand what underlying motives drive your consumers to buy. For example, luxury bag brands like Louis Vuitton and Coach appeal to an audience that wants to elevate their status through expensive bags. The primary driver is not utility, but prestige. Being so, the advertisem*nts and positioning should reinforce how the bag will make consumers look and feel.
Sociological model
The Sociological consumer behavior model says that people buy based on their places in societal groups. These societal groups can range from a person's family and friends to their work circles, generation group, and hobbies.
For example, say that you are into rock climbing and join an indoor rock climbing gym. Everyone at the gym has certain brands of clothes, climbing shoes, and gear like harnesses, chalk bags, belay devices, and even water bottles. The Sociological model says that you would buy similar products in order to secure and retain your position in the group.
Another example is a corporate executive. Once an executive position is gained, the individual will need to attend meetings and events where formal dress is required. Being so, they will need to purchase formal wear to uphold the group's rules. As a business owner, you can design products or services for societal groups, and those groups will help to reinforce the demand for your offerings.
Economic model of consumer behavior
The Economic Model of consumer behavior focuses on price alone. It says that consumers want to meet their needs for the lowest price possible and enables companies to predict sales based on a product's price and their customer's income. For example, Wal-Mart offers a wide range of products at very low prices to serve its target audience.
However, this model doesn't always pan out as some consumers care more about factors besides price. For example, if someone is buying a new car, they may not want the cheapest one, but the one that can adequately tow their RV or elevate their social status. Being so, this model can be limited.
Engel-Kollat-Blackwell (EKB) model
The EKB model sums up the consumer's buying journey into five steps that follow a rational thought process. It says that when making a purchase, the consumer will start in the stage of awareness and continue to the outcome analysis. Here's a closer look at each of the steps:
Awareness: Consumers become aware of a need or want for a product or service (often through ads)
Information processing: Consumers think about the product or service and how it could fit into their lives
Evaluation: Consumers shop around to find the best deal on the product or service
Purchasing decision: Consumers decide on the best deal and make the purchase or decide not to
Outcome analysis: The consumer reflects on their purchase to see if it met their expectations, and they may become a repeat customer or may begin to look for another solution
By understanding the process that your customers go through, you can create content that meets them at each step of the process. For example, if you want to bring more people into the buyer's journey with your company, you need to raise awareness. You can do that through content marketing that involves search engine optimization, ads, social media campaigns, and email sequences.
Then, you can publish guides, comparative blogs, case studies, testimonials, and customer reviews to help guide prospects through the information processing and evaluation stages. Once a customer makes a purchase, you should also have support available for them to ensure they're satisfied and encourage future purchases.
Black Box model
The Black Box Model, also known as the stimulus-response model, theorizes that each consumer's mind is like a "black box." When they come into contact with external stimuli from your business (like a marketing message), they relate it to their existing knowledge and then make a decision on whether they will buy or not.
But what all exist's in the buyer's mind (black box) that factors into the decision-making process? A combination of internal influences such as their beliefs, values, motives, perception, and lifestyle. By understanding these things about your customer, you can speak to them in a way that helps the right customers find your products.
For example, if you're selling a hiking shoe, your audience's "black box" is going to look a lot different than if you're selling a high-heeled luxury shoe. The seller of the hiking shoe needs to appeal to people who value the outdoors and need a quality product that will ensure comfort and support. The seller of luxury heeled shoes will need to speak to people who value social status and formalities.
Hawkins Stern impulse buying model
The next buying model claims that purchases aren't always made from a rational mindset, as the Learning and EKB Models suggest. Instead, it claims that sometimes purchases are made on impulse, and more specifically, the following four types of impulses:
Escape impulse: A purchase that's made that's not on a person's list and isn't routine. This provides a bit of an escape from the mundane and ordinary.
Reminder impulse: A purchase made on the reminder impulse happens when a shopper is reminded that a product exists in an opportune moment. For example, a chip bag clip is placed in the chip section.
Suggested impulse: People buy based on a suggested impulse when something is suggested to them. For example, if you're buying a new phone and the salesperson suggests a phone case and screen protector.
Planned impulse: While these two words may seem to contradict each other, a planned impulse purchase happens when someone has been planning to buy something but then does so because they find a great deal.
With this buying model in mind, you can design your marketing to appeal to these impulses. For example, if you have an online store, you can offer suggestions of items they may also like that are related to the items in their shopping cart. You can also plan sales at regular intervals to entice shoppers to make a planned impulse buy.
Howard Sheth model
Back to the models that lean into a buyer's rational side, this one says there are three levels of decision-making that buyers use. It's kind of like a condensed version of the EKB Model.
First, customers who are aware of a product or service perform extensive research to find out which one will suit them best. Next, they slow down and compare their options. Once they've made a purchase of a particular product or service and are satisfied, they continue to make similar purchases from the trusted brand.
During the research process, this model says that shoppers can be impacted by several stimuli, including inputs, existing perceptual and learning constructs, outputs, and external variables.
Nicosia model
The Nicosia Model was created by Nicosia, an expert in consumer behavior and motivation. It focuses on the relationship between consumers and businesses. He breaks the model into four major "fields" which are like stages.
The first is a combination of the business's marketing and the target audience. During this stage, consumers come into contact with a business's messaging and form an opinion or attitude about it.
Next, if interested, the consumer begins to perform research about the business and compares it to competitors.
If successful, a brand motivates the seller to buy from it which results in a purchase.
Then, the firm and customer review their satisfaction with the transaction to decide on future steps.
This model is similar to the EKB and Howard Sheth Models, suggesting that businesses need to nurture customers through multiple stages of a buying journey.
Webster and Wind model of organizational buying behavior
Lastly, the Webster and Wind Model is focused on B2B buying. It theorizes that there are four major variables affecting the buying decisions of businesses. They include environmental, organizational, buying center, and individual variables. Here's a closer look at each:
Environmental variables: external factors like supplier relationships, customer demands, politics, and competitive pressure
Organizational variables: internal business factors like a company's leadership team and goals
Buying center variables: factors within the team making buying decisions like who is in charge of approving the decision and who's involved in the process
Individual variables: factors within individual prospects such as their age, education, priorities, etc.
When selling B2B, understanding these four different types of variables that can impact the buying process helps you better guide prospects to the sale. For example, your sales process can incorporate steps to better understand the buying team at prospective companies. Further, it can involve keeping tabs on environmental factors that could help or hinder your sales process like changes in laws, increases in demand, etc.
Customer behavior segmentation
Segmentation looks at consumer behavior patterns displayed by customers as they interact with a product or brand or make a purchasing decision and divides customers into groups according to this data.
The aim of segmentation is to understand how to deliver the particular needs or desires of a group of customers, discover opportunities to enhance their customer journeys, and measure their potential value to your business.
Just some of the common criteria consumer behavior can be segmented by include:
Purchasing behavior: The consumer's attitudes, preferences, intentions, and decisions when purchasing a product or service
Benefits sought: What the customer is hoping to attain from purchasing the product or service and why they are seeking it in the first place
Customer journey stage: There are five main stages in the customer journey, starting from their very first interaction with your brand (awareness) and leading through to consideration, decision, retention, and advocacy
Usage: How the product or service is used by the consumer, including how often, when, and where
Occasion or timing: Occasions can indicate purchasing patterns for an individual customer that consistently repeats over a period of time. These might include birthdays, anniversaries, vacations, monthly purchases, or daily rituals
Customer satisfaction: A measurement that determines how happy customers are with the company's products, services, and capabilities
Customer loyalty: Loyal customers are those who do repeat business with the brand, choosing them over their competitors time and time again. A customer’s loyalty is encouraged by three things: positive customer experiences, customer satisfaction, and the perceived value they gain from the product or service.
Conclusion
With a thorough understanding of consumer behavior and how it can be used for your marketing strategy, you too will be able to reap the benefits of higher sales growth, boosted revenue, and of course, marketing which drives the results you desire.
From learning about the types of consumer behavior and factors that influence it to undertaking the research process and applying these behavior techniques to a marketing strategy, this in-depth guide has provided you with the knowledge, step-by-step methodology, and relevant tools you need to succeed.
Business owners can also outsource the formulation of a marketing strategy based on consumer behavior to professionals within this area, meaning that help is always on-hand when needed.
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