What is customer behavior? How to analyze customer behavior?
What is customer behavior?
Customer behavior (sometimes referred to as "consumer behavior") is defined as "the decisions people make to buy or not buy a product, and the things that influence their decisions." Customer behavior includes how people think and feel as they're making their purchase decision, when and how often they buy products, where they buy products, and why they buy products.
What is an example of customer behavior?
Let’s take the use of antiperspirants during hot weather as an example of customer behavior. Many retailers will see their sales of antiperspirants increase over the summer. This is usually because customers are more self-conscious about managing their perspiration when the weather is hot. Also, customers are more likely to buy antiperspirants from pharmacies and grocery stores. Some factors that influence which antiperspirant product consumers are more likely to buy include pricing, brand recognition, and past experience with the product.
The importance of understanding customer behavior
Brands that understand their average target customer's behavior can adapt their marketing efforts to appeal to their core audience. They'll have a better idea as to which new products or services would interest their customers; and once a product or service has been launched, they'll be able to promote it more effectively.
Brands that monitor customer behavior patterns can also make further adjustments when those patterns start to shift. This may allow them to gain an edge over their competition.
Types of customer behavior
There are 4 basic categories of customer behavior:
Also known as extended decision-making, complex-buying behavior is a process that occurs when customers are considering buying a product they rarely, if ever, purchase. Such a product is usually expensive, which motivates the customer to spend an extended amount of time researching the differences between brands and types, thus limiting the risk involved. Purchasing a new mattress is a typical example of complex-buying behavior.
Also known as limited decision-making, dissonance-reducing behavior applies to customers who are looking to buy a product category in which there is limited variety. Price is often a major factor in this type of behavior. For example, customers who are deciding between two types of printing ink will often choose the less expensive option. However, if a brand markets its product as a high-quality offering, customers may be motivated to buy it despite a higher price point.
Habitual decision-making behavior
As the name implies, habitual decision-making behavior refers to purchase decisions made largely based on habit. This typically involves low-cost products that customers use regularly. Many grocery and pharmacy purchases fall into this category. For example, customers who buy breakfast cereal will often buy the same cereal they've bought in the past without thinking too deeply about price, product quality, etc.
In simple terms, variety-seeking behavior is when a customer is motivated to buy something new out of curiosity. Such purchase decisions are often made based on visual appeal (such as vibrant product packaging) or brand name recognition. For instance, a customer who usually buys one type of ice cream at the grocery store may instead opt to buy a different one based on how the pint packaging looks, or familiarity with the ice cream brand's name. It's important to note that variety-seeking behavior may also include products from the same brand (e.g., different flavors of ice cream from the same company).
Factors that influence customer behavior
Some customers who pride themselves on their preference for high-quality products may be inclined to spend more on a purchase. Other customers make a conscious decision to be frugal, and are thus more likely to buy discounted or off-brand items.
Numerous psychological factors may influence how a customer views a potential purchase. For example, companies often use price anchoring to shift the customer's perspective on a product's price point. When a customer looks at one product that has a high price tag (the anchor), they are often more willing to purchase a similar product with a relatively inexpensive price point. For example, a gold ring that costs $2,500 may look like a good deal compared to a similar ring that costs $4,000.
Customers may feel social pressure to buy a certain product or to buy from a certain brand. For instance, someone with several friends who wear brand-name clothing may be motivated to also buy brand-name clothing to better fit in with the group.
Economic and situational factors
Individuals with a lot of disposable income are usually more willing to make expensive or "adventurous" purchases. Of course, customers with limited income are more likely to make their purchase decisions based on cost.
In addition, certain situations will move consumers to make purchases they normally wouldn't otherwise. For example, hungry travelers in an airport may spend more on meals than they would if they were back home.
Marketing and advertising
Marketing and advertising can encourage customers to buy from a particular brand or buy a certain product. For instance, marketing based on price may make customers think they'd get the best deal if they purchase a specific item from the company. On the other hand, marketing based on product quality and durability may convince customers to buy a more expensive item that should last longer than a cheap counterpart.
If a customer has previously had a satisfactory experience with a brand, they are more likely to buy from the brand again. Over time, consistently good experiences result in brand loyalty — i.e., the customer prefers the brand above all others for certain purchase decisions.
Product or service characteristics
High product quality or exceptional customer service will often influence a customer's decision-making process. For example, many consumers buy iPads and iPhones because of Apple's reputation for delivering above-average user experiences.
At times, price is the single most important factor in customer behavior. If customers are on a budget, they may only be able to afford off-brand or discounted items. In addition, when comparison shopping most customers will choose the less expensive option unless they have compelling reasons to spend more on a comparable product.
Technology affects customer behavior in a variety of ways. For instance, customers engaged in complex-buying behavior will often use the Internet to research different brands and products, making online visibility an important component of successful brand marketing.
How to conduct customer behavior analysis
Customer behavior analysis is a qualitative and quantitative observation of how customers interact with your company. It involves at least 6 key steps:
- Segment the company's audience according to key demographics and characteristics (such as age, gender, income level, location, etc.). Many companies use buyer personas, or semi-fictional profiles of "ideal customers," to more easily accomplish this segmentation.
- Identify the key benefit for each customer segment. This could be price, convenience, quality, urgency, or a combination of these and other factors.
- Collect quantitative data about each segment. Such data may include information on past customer purchases, subscription data, and third-party data relevant to the industry.
- Compare buyer personas to collected data. Companies can "map" the typical customer's purchasing journey by examining the data at hand and using it to fine-tune the relevant persona. For example, research may indicate that a product's core buyer is mostly concerned about price, performs extensive online research before making a final decision, and prefers placing an online order rather than buying in-store.
- Apply the findings to marketing and pricing strategies.
- Analyze the results and make adjustments as needed.