Decisions, decisions, decisions; there are a million and one decisions that each individual has to make each day. Be it about your choice of clothing for the day, what to eat for breakfast, what brand of lotion to buy or even deciding on what to watch on Netflix. Most of us make many such decisions subconsciously, out of force of habit or familiarity of using the same product or following the same routine over the years. However, even such seemingly insignificant decisions are what marketers boggle their minds over, night and day, as all of these decision-making tendencies translate into what we call consumer behaviour. If we succeed in decoding this, there will be nothing to stop us from achieving the status of zen in the marketing platform.
The most important component in marketing is the consumers. Consumers as such, tend to pose as a very complex entity, varying in their needs and demands. Therefore, it is crucial to dissect and analyze consumer behaviour, to be able to meet their expectations better and thereby establish a loyal customer base.
Table of Contents:
- What do you mean by the term, consumer behaviour?
- Why should consumer behaviour be analyzed and understood?
- The different consumer behaviour types
- What factors affect consumer behaviour and how?
- The patterns of consumer behaviour
- Segmenting consumer behaviour patterns
What do you mean by the term, consumer behaviour?
Consumers are nothing but the customers you serve. The modalities or the processes by which a person decides to pick one item, use it or consume it and the method in which they choose to dispose of it, all comprise consumer behaviour. This also means that we should try to understand their behaviour from mental and emotional standpoints. Consumer behaviours are very intricate and complex and tend to have deep-seated roots arising from different walks of life, such as psychology, economics and life sciences.
Why should consumer behaviour be analysed and understood?
The most important reason for marketers to study about or dissect consumer behaviour, is to understand the intrinsic and extrinsic factors that influence their decision-making process while buying a product. Only if this is understood, can the marketers bridge the gap between consumer needs and requirements and production? Studying consumer behaviour will help the marketers to arrive in the best possible way to present their products to the customers in a manner that will have the utmost impact on their deciding process. This knowledge is crucial for assessing what products are on-demand, what is required and what others are outdated. This is the key to achieve maximum reach and penetration with the clients and convincing them to purchase from your market.
An analysis of consumer behaviour must disclose the following information:
- The customer’s feelings and thoughts about different alternatives to either a product or a particular brand and so on
- The factors which influence the customers in their decision-making process and how they arrive at a final decision while choosing from the varied options available
- The behaviour of the consumers when they shop and also when they research different products
- The impact of the consumer’s environment; could be friends or family or even the media, on their behaviour and choices
Numerous different factors play a role in influencing consumer behaviour. One key thing that the marketers have to figure out is the consumer’s pattern of purchasing and buying trends. The majority of the brands influence consumer behaviour only through things that can be controlled by them. Case on point, IKEA; ever wondered how you go in there just to purchase a mirror and end up returning home with an entire living or dining room?
So, let’s see what are the most compelling factors that consumers tend to agree with. The following three are the most important categories that have a massive impact on customer behaviour:
- Personal factors:
This includes each individual’s tastes, opinions or interests, which tend to be influenced by demographic characteristics such as age, culture, gender, society and so on.
- Psychological factors:
This refers to an individual’s perception of a marketing campaign or product. This can either positively or negatively impact their attitude towards said brand or product. If manipulated correctly, marketers can utilize their understanding of this factor, to their advantage.
- Social factors:
This is quite possibly the most important of all three factors, as we all know the impact that a person’s social environment can have on their behaviour. Studying about the influence of family, friends, media and peer-pressure all matter while trying to assess consumer behaviour.
The different types of consumer behaviour
Four major types of consumer behaviour have been identified, which are as follows:
- Complex buying behaviour:
This pattern of buying occurs when a consumer is trying to make a huge purchase or invest in something very expensive; say, a vehicle or a house. This type of behaviour involves a lot of research work, comparisons, scrutiny of the pros and cons and detailed analysis before coming to a decision. The consumers will be very invested in the process of purchasing, as they are trying to make a wise investment. This type of buying behaviour occurs only during the purchase of a product which is expensive and also not bought frequently.
- Habitual buying behaviour:
This type of behaviour is what occurs when a person follows a routine. Not much thinking or decision-making goes into this purchase, as the consumer has been buying the same product over many years now; e.g., preferred brand of yoghurt or cheese, while grocery shopping. People tend to choose the same brand out of habit.
- Dissonance reducing buying behaviour:
Imagine buying a new product that you have never purchased before. A good amount of research goes into it, before deciding on what brand to choose. Various product features such as price, warranty, lifespan, etc., would be considered before making the ultimate choice. And finally, after the product has been purchased, the customer will seek for validation that they have indeed made the right choice. Dissonance is the uncertainty that the customer feels while trying to choose a new product for the first time. It is the feeling that they might regret the purchase later on.
- Variety seeking buying behaviour:
Some customers do not prefer routine and crave variety. Such consumers will want to choose different products each time and try out different brands. They might genuinely like a product, but their inherent behavioural pattern makes them opt for new things each time. E.g., This applies more to self-care products such as lotions and shower gels, where people would want to try a different scent or flavour each time, rather than stick to the same one scent.
What factors affect consumer behaviour and how?
Numerous different things can have an impact on consumer behaviour, of which, the most frequently encountered ones are listed below:
- An individual’s personal preferences:
The first and foremost thing to consider and understand is that every individual has their own set of opinions, preferences and choices. These personal preferences play a major role in their buying behaviour. This factor is also of utmost importance in the fashion and food industries. Consumer behaviour in these fields will depend largely on the individual’s moral and lifestyle choices. Despite effective advertisements, their choices will be influenced purely by unshakable intrinsic factors. E.g., a person that does not like flashy colours and prefers pastels, cannot be convinced to buy a neon-coloured dress, no matter how beautifully it is advertised or campaigned for, the same way a vegetarian won’t be convinced to eat a juicy double-whopper, no matter how tempting the advertisement is.
- Peer influence:
The next most important factor that influences people’s buying behaviour, is the peer influence. Family, friends, acquaintances, neighbours, social media friends, can all have a major impact in influencing a person’s buying behaviour. Societal and social factors and education, can all have an impact on consumer behaviour. For instance, trying to dress up in a way that would help them fit in with a group, eating home-cooked meals rather than junk, are all examples of how such factors influence buying.
- Advertising campaigns:
The success of any new product or brand depends majorly on its marketing campaign. Depending on how it is done, it has the power to either make or break a particular brand or product. Marketing campaigns can largely influence consumer behaviour, if done correctly and regularly. These campaigns can also aid as reminders for services or products that the customers tend to not prioritize. When done right, marketing messages can even convince customers to purchase something impulsively. At the end of the day, this is what marketers are focused on; to increase their sales and also ensure customer satisfaction, to amass a loyal customer base.
- Economic situations:
Buying patterns of customers also largely depend on their economic conditions prevailing at the given time. Economic stability plays a powerful part in real estate, house and vehicle purchase. A steady economy will boost a customer to make a purchase, whereas they’ll be more reluctant to invest in something huge when the economy seems to be stumbling. Favourable economic conditions can influence customers to make a purchase irrespective of their financial standing and liabilities.
- Individual purchasing power:
Lastly, the buying patterns and behaviours of consumers also depend on their socio-economic status and conditions. Unless you’re a multi-millionaire, every single person will have to limit their expenses to fit their budget. No amount of advertising and marketing can make consumers buy a product that they cannot afford. This is where segmentation benefits the marketers. Segmenting the customers on the basis of purchasing power will aid marketers in identifying variable needs and providing accordingly and thereby achieve improved results.
The patterns of consumer behaviour
The first thing to understand here is that consumer buying habits is not the same as buying patterns. A habit is something that is developed over time and tends to become something spontaneous, as years go by. A pattern is, however, a predictable design according to which consumers buy products. Buying pattern largely depends on consumer mentality as a whole. Buying habits will vary from person to person and are unique to each individual, whereas a buying pattern applies to the collective tendencies of many consumers and aids marketers in the characterization of the customers based on this. Customer buying patterns are grouped into the following:
- Place from where they purchase:
Majority of the consumers split their purchases among different stores, even though the same store might sell all the products. For instance, a hypermarket might possess all kinds of products, including clothes and footwear, but we might prefer buying clothes from actual clothing stores, rather than the supermarket.
Customer loyalty is unbelievably hard to earn and there is no single customer that would stay loyal to just one particular store, unless forced to do so by being the single store that they have access to. Customers will naturally migrate to different stores, to buy different products, given the wide variety offered to them by competing retailers. The necessity for marketers to study consumer behaviour based on place of purchase is to get ideas for store locations. A store can have everything possible and yet if it has been located in an obscure or hard-to-reach place, it’s not going to benefit them at all.
- The items they purchase:
Three words; shopping cart analysis. By doing this, a multitude of things can be assessed, such as, the number of items purchased, whether the items are perishable or non-perishable, the price range in which the items have been purchased and so on. So, why should we know this? Because, as per consumer behaviour analysis, it has been found that people tend to buy the necessities in bulk, frequently and the luxury items singly, and also less frequently. The quantity and quality of the products they purchase also depends on the family size, socio-economic status, product pricing, quantity offered, perishability, etc.
- Frequency and usual time of purchase:
One thing to be kept in mind here is that the customer is always right, even though it can be really hard to agree to that at times. Customers will shop at a time that’s convenient for them, irrespective of what odd hour of the day it is. And they will also expect good service 24×7. The marketer needs to assess the usual timings of such shoppers, to ensure that the shop remains open at the peak hours and that there are sufficient staff and products to satisfy the customers. Customer flow in shops will also be subject to seasonal and regional variations.
- The method by which they purchase:
Customers can opt to shop either online or in-person. The choice of their shopping method goes on to reveal the kind of spender they are. Online shopping can come with added shipment charges, shopping in-person for things like furniture can come with added delivery charges. And some customers may look for a shop that does free deliveries. Noticing how the customer chooses to shop can give information about their shopping pattern and behaviour.
Segmenting consumer behaviour patterns
With the fast-growing retail landscape, marketers need to be shrewd in making sure that their products stay in-trend and remain fast-moving, all the while trying to get a loyal customer following. In this era where personalization of customer experience has become a major part of shopping, segmentation of consumer behaviour patterns becomes very essential to the success of a business or a brand. Analyses have shown that only a mere 33% of companies found customer segmentation significantly advantageous. More companies ought to realize the importance of effective customer segmentation.
There are six primary types of segmentation that the marketers traditionally use, to segment consumer behaviour, which are as follows:
- Product benefits offered:
Customers look for different benefits when it comes to a product. E.g., while looking to buy footwear a person may consider many things such as fit, comfort, orthopaedic sole, arch support, heel size, price, water-resistance and so on.
Customers generally do some amount of research before settling on one brand, and analysing their behaviour will give us the necessary information about the reasons why they prefer one brand over the other. However, out of all these reasons, it is essential to pinpoint the primary features that they look for in a product, that will majorly influence their decision-making and it is this information that the marketers must use to their advantage.
- Rate of usage of the product:
Another common method of segmentation is by segregating customers based on their rate of usage of a product or service. The frequency of buying or visiting the store is a good indicator of customer loyalty to the store and also the reach a particular store or brand has. This offers them lifetime value.
- Loyalty to a brand:
The most valuable asset that a business can gain is a loyal customer base. When consumers are retained by a brand, they’ll keep returning and will even become advocates for the particular brand. This is what businesses should aim at. Furthermore, loyal customers need to be given special treatment and privileges in the form of rewards or exclusive points, to make sure that they retain their brand loyalty. Analysing the customer loyalty and purchasing behaviour will allow marketers to understand customer needs better.
- Occasion/ timing-based purchases:
This consumer behavioural segmentation refers to both personal and universal occasions.
- Personal occasions: Recurring personal occasions- Refers to a frequent and predictable pattern of buying on instances such as birthdays, anniversaries, monthly purchases, weekly purchases, or sometimes even daily routine ones such as a cup of cappuccino, on their way to work. Rare personal occasions- These types of purchases are erratic and unpredictable. E.g., buying a gift for a wedding or a date. These also are specific to each individual and are spontaneous.
- Universal occasions: This applies to the customer base as a whole, for instance, seasons and festivals that would prompt the entire customer community to make purchases. Furthermore, adding sales and deals during such times attracts more customers.
- User status:
Every business will come across the following types of users for their products:
-Defectors (customers who have changed over to a competing brand for some reason)
Segmenting customers on this basis will allow marketers to understand customer needs and expectations and retain faithful customers, focus on prospective buyers and offer improved services.
- The customer journey:
It is of utmost importance to assess the journey of a customer through each stage and segment them accordingly. This not only allows marketers to understand the stage where there’s trouble progressing, but also aids in customer conversion at every possible stage. It helps marketers identify obstacles to progression and improvement opportunities.
Apart from these types of segmentation, there’s another segmentation model known as the RFM model. Recency, Frequency and Monetary value is abbreviated as RFM. It is of bigger value to online businesses and markets where websites can keep track of client activity.
- Recency: Refers to how recently the last order was placed on the website y a customer.
- Frequency: How frequently a customer has bought something from your website in a given period.
- Monetary value: This is the total amount of expenses a customer has made on your website, since their first purchase.
The RFM analysis can be done in two different methods:
- Manually, by exporting the data in a spreadsheet and analysing it as per the RFM analysis rules
- Automatically, by using certain tools that can do RFM analysis
An RFM analysis will reveal the following data:
- Who your most profitable and loyal customers are
- What are the bestselling products and brands and what products are dragging down business
- Information necessary to customize recommendations for your customers
- Identify and manage any user-experience related problems
On a final note, always know your customers, their behaviours, their patterns and then make an informed decision, rather than go with your gut (it may help you at times, but not always). Always make sure that you’re attentive to the needs of your customers and establish a good relationship with them before they go in search of greener pastures.