Before committing to a purchase, consumers will make tens or hundreds of micro-decisions. They’ll weigh the available options and consider which products will give them the most value for their money.
Some of these decisions are obvious — like when a consumer researches several phones to find one with the features they want. Other decisions are extremely subtle and can be hard to track. In some cases, consumers may not even realize they’re making a decision at all.
In the past, marketers didn’t always have enough information to know how these decisions were being made, or to spot patterns between things like consumption, identity, purchasing decisions and mood.
Now, however, most businesses have access to a massive amount of data on how customers behave. Information from social media analytics, business websites, storefronts like Amazon.com, and digital ad campaigns can all provide unique insights into how your customers are thinking about the purchases they make.
What Is Consumer Behavior?
When put together and analyzed, this information provides a window into the mind of your audience. It allows you to create more effective advertisements or products. In some cases, it can even help you influence how customers behave and think about your brand.
Customer behavior is typically used to refer to the habits of individual consumers. These habits include how often they buy certain products, when, and which factors may be influencing their purchases.
By studying this behavior, you can get a much better understanding of why customers make the decisions they do — and how you can better meet their needs.
In contrast to demographic information, customer behavior doesn’t describe your audience directly. Instead, it tells you how they’re shopping. This may include how they navigate a store, how they research products, and what causes them to abandon a purchase they were close to making.
Why Analyze Customer Behavior Data?
Why put in the work if you feel like you know what customers need? Primarily because insights into customer behavior can help you create more effective marketing.
For example, targeted marketing that’s based on individual consumer preferences isn’t really possible without in-depth consumer behavior research.
Having deep insights into how your audience thinks can also make your marketing more effective in general. Any time you or your marketing team set out to create a new campaign, information on behavior can help you tell who you’re targeting, what they’re interested in, and which of their needs may still be unmet.
Key Factors That Impact Customer Behavior
When analyzing consumer behavior, businesses typically break down factors influencing consumer behavior into a few main categories: three that are almost always used, and another two that are helpful in the right contexts.
The big three are:
- Social: Trends, peer pressure, and buzz.
Social factors come from a person’s social groups and push them towards one decision or another.
For example, a person may have a greater awareness of products relevant to their friends, co-workers, and family. People in a social group owning a particular product may also push them towards a purchase.
- Psychological: The deeply personal thoughts and feelings that consumers may not even be aware of.
Psychological factors may include a person’s motivations, their belief system, and temporary psychological influences, like their mood.
- Personal: Factors that are unique to a person’s life.
These factors may include a person’s experience, the demographics they belong to, and family history that may shape how they shop and respond to advertising.
The other two factors are less commonly used but can also help you categorize influences on consumer behavior:
- Cultural: Cultural factors are similar to social and personal factors but are typically held more deeply by a consumer.
Considering these factors can be tricky — rarely can you boil down a person’s entire cultural background into a handful of traits that explain consumer behavior.
In certain cases, however, identifying different cultural attitudes towards shopping or products can help you understand the performance of certain products or ad campaigns with consumers.
- Situational: Factors that depend on a temporary situation the customer is in.
For example, a customer who’s in a hurry may behave differently than one with time to spare.
These factors are typically short-lived or change so frequently that you can’t really consider them as inherent to a particular consumer. However, they occur often enough that you may need to consider certain issues — like time constraints, money constraints, or seasonal demand — when developing a marketing strategy.
How Businesses Analyze and Influence Customer Behavior
Typically, the process starts with qualitative research. Companies using current knowledge on their customer base will segment their audience, breaking them down into essential categories like age, income bracket, region, or education level.
They’ll also identify which of these groups is most valuable to the business using metrics like customer lifetime value.
Capturing quantitative data can be tricky, but there is a wide variety of data sources that companies can take advantage of. For example, a larger company might draw from a combination of:
- Website analytics data.
- Mobile app data.
- CRM data.
- Reviews and surveys.
- Focus groups.
- Keyword research.
- Email campaign analytics.
- Help desk records.
- Sales data.
The business might also supplement this information with pre-existing consumer data sets, or with consumer information purchased from companies like Nielsen, DataSift, or Axciom.
You likely have more of this info than you think. Many digital e-commerce platforms, for example, automatically capture certain kinds of behavioral data. Your business is also definitely keeping track of sales information, or should start in order to avoid the consequences that can come with failing to properly report sales income and taxes.
Depending on the sources a company can take advantage of, they may actually have a massive amount of information. The amount of data can be an impediment if you have enough — making it harder to root out poor-quality data. This may give the data set you build a poor representation of your actual consumer base.
In general, it’s best to aim for high-quality data that comes from a mix of internal and external sources. These practices will help ensure the best quality of data possible, helping you come to more accurate conclusions about how your consumer base really thinks.
For this reason, companies often rely on consumer behavior analytics platforms, typically in the form of customer relationship management tools (CRMs). These tools can also help businesses organize qualitative data, making consumer segmentation and value analysis easier.
Analyzing Consumer Buying Behavior
Once you’ve built up a good data set, you’ll need to find a way to analyze it. Typically, this means taking the market segments you’ve already identified and using data to understand how they differ.
In some cases, you may also need to revisit your segments as you learn more — adjusting how you divide up your consumer base as you find new patterns in consumption habits.
For example, you may want to see if there is any correlation between specific segments and product usage patterns. In another situation, you might want to compare the effectiveness of social media advertising campaigns depending on consumer age.
Because you have a lot of information to work with, using the right tools and asking the right questions will be essential. Depending on the amount and variety of data you have, the best software will vary.
Smaller companies may be able to get a lot of mileage out of popular and accessible tools like Google Analytics, KISSmetrics, and native social media analytics platforms.
Medium-size companies may want a dedicated solution — a CRM, when used in tandem with site analytics and other data, is often a good idea here.
If you have significant volumes of data to work with and a decent tech budget, you may want to turn to a data management and analysis solution — like big data analysis tools Vertica, Google BigQuery, or IBM’s Db2 suite.
Influencing Consumer Buying Behavior
Influencing is more challenging than analyzing, but it is definitely possible — and, for many businesses, a crucial part of their advertising strategy.
Branding is a great example of how companies work to influence behavior. Colors, logos, and other design choices often work together to pair a brand with certain values — like professionalism or out-of-the-box thinking.
A company that executes a branding strategy well will quickly convince customers they’re aligned with those values.
For businesses that depend on repeat customers and serious consumer loyalty, good customer service can be a major asset — in part because it can show how a company is looking out for its audience, possibly inspiring trust and stronger relationships.
A company may also want to focus on the situational factors they can control.
For example, imagine two competing bakeries. One is bright, clean, and smells like fresh bread — situational factors that put customers in a good mood and may get them thinking positively about the products the bakery might offer.
Compared to a bakery that is dim and dirty, the first is much more effective at convincing customers to give their products a try.
Similarly, the design or look of an online storefront can have a big impact on user experience, or prime consumers to make a certain purchase.
How Customer Behavior Analysis Fits Into Your Overall Marketing Strategy
What is consumer behavior? Now you know. And you know a little more about how to influence it, too. Customer behavior analysis is essential for any business that wants to create effective marketing and build strong customer relationships.
With the right combination of data and analytical approach, you can identify what your customers need, and how they think when they’re making a purchase.
This information will be an essential asset if you want to create more targeted ad campaigns. It can also help you start to influence consumer behavior with better branding and by taking advantage of situational factors that affect how customers act.