Understanding Consumer Behavior to Convert More Customers and Boost your Business

November 09, 2020 by Stefanini
Consumer behavior helps us understand how people make purchase decisions. Learn how to tap into the study of this behavior for your marketing efforts!

How many times throughout the day do you make decisions? Whether it’s choosing what you should wear today or what you’re going to have for lunch, one thing is for certain – you make many buying decisions every day without giving them much thought.

And when it comes to marketing, decoding the processes behind consumer behavior means that we can use that information to boost revenue. What should we be looking out for when we perform the study of consumers? Read on for the answer!

Consumer Behavior – What Is It?

Consumers make choices like the above every day. Before we even begin to examine consumer behavior analysis, let’s examine the buying process. Two behaviors influence the buying process:

  • Consumer – the person who is using the service or product
  • Shopper/Customer – the person who is buying the product or service

According to Psychology Today, consumer behavior analysis involves performing market research (that may include focus groups) of how people buy and use goods and services, which is particularly useful for companies trying to sell products to as many potential customers as possible.

There are several factors that influence consumer behavior:

  • Psychological: Considered the most important factor that affects consumer behavior, psychological factors like motivation, perception, personality, attitude, and beliefs are important when figuring out the reason a customer would buy a product.
  • Personal: These are characteristics like age, occupation, financial situation and lifestyle, which are applicable to individuals and may not relate to other people in a group.
  • Social: Social factors like family, communities, and social interactions play an important role in consumer behavior. While preparing a marketing message and plan, these personal factors can be difficult to assess.
  • Geographical: Where customers are located also plays a role in how they purchase products. For example, a person living in warmer weather would be less likely to purchase winter clothing compared to someone living in more temperate climates.
  • Knowledge Environment/Content Exposure: The information customers are exposed to as well as the type of information they consume (their knowledge universe) affects the choices and decisions customers make.

Why Should You Perform Consumer Behavior Analysis?

We’ve established that all marketing campaigns are crafted to influence consumers and turn them into customers of the products or services the business provides. In order to create a successful approach, organizations need to take the time to deepen their understanding of customer behavior. Yet, this perspective is not enough – businesses shouldn’t stop at gaining insights into customer behavior, but find ways to engage, retain, and strengthen bonds to improve the customer experience. TDWI outlines them as follows:

1.      Gain insight: this step of the process, of course, seems obvious. Exploring behavioral data for insights about customer behavior can involve segmenting your customer base, which often uses cluster analysis. This technique organizes a set of observations into two or more groups that are mutually exclusive based on combinations of variables. With structured data, organizations typically can do discovery and segmentation analysis. However, don’t forget about unstructured data like social media data and internal text data. These insights can reveal important patterns about customer sentiment and behavior. Today, it has become more common for organizations to perform social media analytics, like voice-of-the-customer analysis, with text analytics technology to gain insight into what customers are saying and how branding is resonating with existing and potential customers.

2.      Attract and engage: once you’ve segmented your customer base, you will have a better sense of what your audience might be interested in, allowing you to engage your target audience. For example, an organization wants to make customers the right offer after launching a product campaign across various channels (like online, email, mobile, in-store, etc.). Companies are able to predict the likelihood of future activity at a customer level by analyzing historical purchases and profiles. For example, a company might use past purchase behavior and a propensity model to judge the probability of a customer making a certain purchase. This data can then prove useful when developing the new campaign.

3.      Improve retention: particularly when it comes to profitable customers, customer retention is a key marketing activity; here, predictive analytics can be extremely useful. For example, when there are discrete target or outcome variables of interest (such as leave or stay), decision trees can be useful. Ordinarily, a set of historical training data is given to the predictive analytics algorithm. Consisting of different kinds of information about customers like demographics, purchase history, and past sentiment, this data is used by the decision-tree algorithm to determine decision rules that describe the relationship between the input and outcome variables. These rules can be used against new data where the outcome is not known (again, like leave or stay). These models are often operationalized -- for instance, in a call-center where agents can use them to try to retain at-risk customers.

4.      Strengthen customer bonds: as they attract new customers, organizations want to continually strengthen relationships with existing customers. An important part of a customer strategy are customer lifetime value models that help organizations understand the future worth of customers and segments. Techniques like affinity analysis using market basket analysis to understand combinations of products bought together can be very useful in driving e-mail marketing and recommendation engines.

Types of Buyers

One of the most important components of studying consumer behavior is getting an idea of the types of buyers out there. The Milwaukee Business Journal pinpoints the following as the five personas you’re most likely to encounter:

1.      Innovators

The smallest group of early buyers – representing only 2 percent of your market – are the innovators. Members of this group read journals and magazines extensively, are more frequently exposed to innovative ideas, and are willing to experiment with anything new. They may influence other buyers in their same group, but their purchases do not lead to a widespread trend.

2.      Adopters

The next group, which represents roughly 15 percent of your market, is the early adopters. This group represents true opinion leaders who set examples by their decisions and are willing to try a new product if it will significantly improve their lifestyle or allow improvement for their business. They need to understand the benefits and will seek out references from other satisfied users before making a purchase.

3.      Early majority

The next group, which typically represents 39 percent of the market, is the early majority. In contrast to adopters, this group is slower to try new products, usually entering the market only after their peers have actively embraced the product. They are less technology-driven and far more pragmatic than the previous groups. With a focus on modest productivity improvement, they care about the longevity and reputation of the company providing the product.

4.      Late majority

Representing 39 percent of the market, the late majority makes its purchases late in the cycle, often after the innovators and early adapters have moved on to new product forms. They wait until the product has become the universally accepted solution and prices fall. They are most concerned with low cost and customer support, and they rely on the mass media for purchasing information.

5.      Traditionalists

Representing only 5 percent of the market, this group waits until price has bottomed out, competition is intense, and the product has become an absolute need. They tend to purchase products the other groups would consider obsolete. If they are in the approval cycle for new products in a business, they will try to block the purchase of products the other groups might buy.

Get Insights into Consumer Behavior with Stefanini

When it comes to understanding consumer behavior, we are focused on strategy, data science, media, and advertising to reveal telling insights. We use data intelligence to boost business, connect people, and create experiences. With our expertise, best practices, and statistical techniques, we provide actionable business insights based on data mining and predictive models. We provide these insights through consumers research, analytics, and social insights.

Ready to try new methods to get in touch with your consumers? Let’s chat – connect with us today!

 

Ready to try new methods to get in touch with your consumers? Let’s chat – connect with us today!

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