Consumer behavior 101: What is it, and why does it matter?

Emotion drives our behaviors across many facets of life, and it even affects what we buy and when. Consumer behavior can make or break B2C companies, alter buying trends, and give established companies new market share.

The study of consumer behavior emphasizes understanding the customer experience (CX). Harnessing those insights enables your business to develop new strategies, helping consumers solve their problems with your products and services. It also plays a vital role in enhancing the customer-brand relationship.

Businesses with nuanced knowledge of their market stand the best chance of speaking to customers in ways that inspire confidence and loyalty. Above all, this deep understanding motivates them to purchase your product or service.

Let’s learn more about types of consumer behavior and everything else you need to know.

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Consumer behavior refers to studying how consumers behave and how that behavior drives their buying choices.

It requires setting aside biases and spotlighting customers' fundamental needs, desires, beliefs, and external conditions to discover how these motivators drive market activity.

Marketers spend most of their efforts determining and analyzing their target audience's activity. 

Businesses with a greater understanding of their intended market can influence customer responses by altering their marketing strategy.

Primarily, effective consumer behavior research can dramatically impact:

• Customer revenue: You’ll see improved key performance indicators, such as customer lifetime value, average purchase value, sales by region, and monthly recurring revenue.

• Content optimization: Carefully honing brand messaging inspires growth behaviors, reducing customer acquisition costs and boosting conversion rates.

• Customer retention: Knowing what motivates your customers can help you decide which products to release and how to market them with your audience's preferences in mind.

Cognitive effort impacts consumers buying decisions. When they require a high degree of thinking and reasoning, risk elements can heighten emotions and influence buying behavior.

An example is the risk involved in buying a new car compared to a packet of chips. The car requires a lot of consideration, and it’s a riskier purchase.  

Researchers have identified four main types of consumer behavior. The level of involvement can be high or low, and the distinction between brands further reduces or increases complexity. 

We can break these dynamics down into four categories:

Complex buying behavior (high involvement, unique brands)

Expensive and rare purchases increase complexity, as buyers feel cautious about making very careful, considered decisions. That sentiment is even stronger when the prospective customer is unfamiliar with the choices or the options are plentiful. 

Consumers may commit to conducting more research and even undertake a huge learning process surrounding the whole topic. 

They might also give significant thought to how it may impact their:

• Social status

• Lifestyle

• Appearance

• Long-term expenses

Dissonance-reducing buying behavior (high involvement, uniform brands)

With few differences or choices between necessary products, consumers may be highly invested in purchasing but be unable to refine their choice.

Imagine if a couple needed to furnish a new house, but the only nearby furniture store had a few couches to choose from. They won't wait all year for a comfortable place to sit, so the need to buy is high—but the means to research or compare options are very limited. 

Instead, they may deliberate on their options, weighing the pros and cons of making a quick purchase against finding a new solution (like looking into leasing options instead).

Habitual buying behavior (low involvement, uniform brands)

When a purchase requires low involvement, customers rarely feel much hesitation. That's even more true if the product is central to a daily routine. 

A familiar example is a cup of coffee. Unless the coffee drinker is very particular about Fairtrade organic coffee, they usually have little to consider.

Even if they want a particular option, once they've discovered the right choice for them, they can quickly grab one whenever they want with little thought. 

Habit makes customers more susceptible to frequent repeat business.

Variety-seeking behavior (low involvement, unique brands)

Some consumers are more naturally drawn to unique experiences than others. 

Novelty-seeking can be very useful for companies, especially if you can find highly influential variety-seekers (like social media influencers and trend-setters), but the competition for awareness is also high. 

Whether for a specific brand or a category of products (Starbucks shoppers vs. local café lovers, for instance), several factors often influence consumers to seek variety, including:

• Boredom

• Curiosity

• A sense of novelty

• Pressures to change up a routine

Source: https://www.clootrack.com/knowledge_base/types-of-consumer-behavior

These main types of consumer behaviors encompass an extremely broad range of market forces that affect customer decision-making processes. 

For more useful marketing or product development insights, you'll need to know what makes your customers truly unique.

Each action in a marketplace results from decisions in the context of consumer backgrounds, identities, and mindsets, along with the circumstances those factors play out in. 

It's much easier to research consumer behavior by breaking it down into three distinct categories:

1. Psychological

2. Personal

3. Social

Psychological factors

These characteristics aren't necessarily "hardwired," such as certain personal preferences and social factors. Still, they can exert an enormous influence on buying patterns.

Overall brand perception and exclusivity

How customers perceive your brand can raise or lower its value. We could even say that a product's value depends on how people perceive it.

Influences could include consumer expectations, motives, and even external stimuli at the time of brand engagement.

While a company can try to influence brand perception, perceptions belong to the audience, not the brand or company. 

If the brand is one of a kind (or presented that way), audiences will associate it with a sense of exclusivity. This can also work with time-limited offers, as consumers behave differently when products and deals are more scarce. 

Perceived quality and a desire to buy "the best"

While some measures of quality could be easier to "prove" (like longer-lasting products), customers’ view of a product’s quality holds the potential to profoundly alter brand reputation. 

This could be good or bad, as a white-tablecloth restaurant and McDonald's have unique, deeply ingrained levels of perceived quality.

Unless you have a luxury, world-class product, you can shape services to meet the needs of a specific customer niche. 

For example, if you don't sell the best retail item in its class, you could focus on providing the best warranty coverage.

Perception and individual thinking patterns

Brand perception is an inherently subjective factor of your customers' thought processes: It tells you a lot about their mindset. 

What is their outlook on the world? How does it drive their emotional baseline, thought patterns, and buying decisions?

These factors help you anticipate how consumers respond to certain kinds of messaging and product types.

Personal factors

Compared to psychological and social factors, personal factors include the widest range of permanence and impermanence. 

From totally inflexible traits (age, background) to those highly subject to change (interests) and somewhere in between (culture), personal matters play a huge role in brand perception.

Age

What life stages are more attracted to your brand, and why? 

Be sure to make distinctions between age and age-related lifestyle conditions (for example, the behaviors of school-aged children vs. their behaviors when actually in school).

Gender and sexual orientation

Who are your products, services, and brand oriented toward, and why?

Culture and background

How do customers' social and demographic backgrounds affect how they learn about and engage with your brand? 

This might include ethnicity, geographic location, political persuasions, and other deeply ingrained identity markers. 

Habits, interests, and lifestyle

Potentially as motivating as culture, deeply ingrained lifestyle habits and hobbies usually play a huge role in consumer behavior. 

These are beneficial to know because they are strongly motivating and choice-based. That means brand identity could play a significant role in shaping and modifying these behaviors.

Social factors

Your customer base’s social environment impacts shapes attitudes, purchasing decisions, and brand perception on a wider scale.

Community interactions

Seeing where your customers fit within particular communities reveals how brands play into their most frequent social interactions. 

This could relate to how: 

• Social interactions occur within a community-driven lifestyle

• Present that community is on social media

• You share brand information

Income level

Purchase power greatly affects brand perceptions, including: 

• How consumers perceive your brand in a particular income bracket

• How those in different income levels respond to each product and service you offer

Living conditions

Understanding the unique world your customers live in is essential. 

Focus on how different living conditions present unique challenges and drive a need to solve challenges with various products and services.

Family dynamic

Families exert an enormous influence on consumer behavior, including: 

• Which family members are driving purchasing decisions

• How big your customers' families tend to be

• How families experience the buyer's journey together

These factors could similarly apply to other groups, such as businesses, schools, clubs, or other social units.

Your customers’ psychological, personal, and social underpinnings create an intricate, contextual picture of their internal and external motivators. 

It provides a mountain of data to guide company decisions in lasting, profitable ways.

You can turn this data into actionable insights with a straightforward step-by-step process:

1. Segment your audience Dividing your market segment(s) into distinct categories will make it easier to track unique behaviors and attribute them to different portions of your market.  Later, you can compare and contrast these different groups, looking for signs of how they respond to your brand's marketing or overall business growth strategies.

2. Identify the key benefit for each group Within each market segment, trace their distinct behaviors to the key benefits they receive from your products or services.  If possible, compare it with similar brand-audience dynamics with your competitors.

3. Allocate quantitative data Determine where each objective data point belongs within the previous two steps.

4. Compare your quantitative and qualitative data Each question you ask will depend more on qualitative assumptions or qualitative facts.

5. Apply your data analysis to a campaign The only way to truly test your data-driven conclusions is to apply those insights in a new product or marketing campaign.

6. Analyze the results Once the campaign's complete, you'll have live, custom market data to analyze.  This enables informed decision-making based on how your customers respond to your new marketing or product development approaches.

Once you know more about what drives your customers' behavior, your marketing strategy will likely undergo a sea change of value-adding activity. 

If you know consumers view your product or service positively, your marketing approach should emphasize those qualities. 

When an audience doesn't know about your product's most defining attributes, you should fine-tune your marketing to include those features. Consider building an entire ad campaign around these benefits if they can differentiate your brand from others in the market.

You should base marketing strategies on demographic insights to ensure marketing dollars generate maximum ROI. 

Beyond these general shifts, your marketing team will benefit from examining your wealth of consumer behavior research. They can use this to make granular adjustments to any future marketing efforts.

The more tech- and data-driven your marketing team is, the faster they can weave new insights into their overall strategies and specific brand messaging.

Quite simply, anything can influence consumer behavior. If you can measure something, it may play some role in group behavior.  

The things that modify consumer behavior the most will be factors that alter brand perception when the need for a product significantly rises.

This depends on where in the buying journey the customer is: Different things motivate someone researching a product versus someone actively comparing brands to determine which one to buy. 

Further, the product's qualities and the consumer's perceptions about that product and the brand heavily influence behavior.

1. Theory of reasoned action states consumers act in ways they believe will result in a desired outcome, so rational decision-making is the primary driver.

2. Motivation-need theory plots consumer behavior along Maslow's hierarchy of needs.

3. Theory of buyer behavior emphasizes the reliability of familiar purchasing routines and simplified decision-making.

4. Engel Kollat Blackwell (EKB) model attributes purchasing decisions to four stages: Input, information processing, decision stages, and decision-making variables.

5. Hawkins Stern impulse buying considers impulses equally likely to affect purchasing decisions as reasoned decisions.

The 7 Cs are part of a collaborative marketing approach, which looks at brand-consumer relationships as something that emerges independent of either side's exclusive control. 

In no particular order, the 7 Cs of consumer behavior are:

• Corporation: A whole of either competitors, organizations, or stakeholders

• Commodity: The actual goods and services and their perception

• Cost: How it affects purchasing power and decision-making

• Channel: The marketing channels needed to get products to the customer

• Communication: How two-way dialogue affects consumer behavior

• Consumer: Including their cardinal Needs, Security, Education, and Wants (N, E, S, W)

• Circumstances: The external, largely uncontrollable environmental elements that affect a market

There are numerous consumer behavior examples, but in formal circles, 10 types of consumer behavior models have arisen as the most popular:

1. Traditional models understand economic systems as a whole

2. Contemporary models apply behavioral science discoveries to traditional frameworks

3. The Marshallian model emphasizes how spending varies most directly with income

4. The economic model holds that utilitarian needs wholly govern people

5. Freud's model applies Freud's ideas about the "id, ego, and superego" to behavior

6. The psychoanalytical model considers deep-seated motives affecting buying decisions

7. The Pavlovian model looks at market dynamics through the lens of psychological conditioning

8. The learning model relates to how drives, stimuli, and responses can be actively affected

9. Howard-Sheth model investigates how internal and external stimuli play out with different variables

10. The sociological model studies how society affects consumer behavior