Market Psychology: Everything You Need to Know About Consumer Behavior for Business Growth

Have you wondered what goes on in a customer’s mind before deciding to purchase a product? This knowledge is crucial to the survival and growth of any business, and one way to lay hold on it is to understand consumer behavior.

What is consumer behavior?

Consumer behavior in marketing is defined as actions and choices customers make when choosing a product or service. It includes the who, where, when and how of consumption and determines how consumers make buying decisions. This includes everything from their initial decision to purchase a product, how to use it, and whether to continue patronizing a business. Identifying your potential customers, how they think, and the reasons behind their purchasing decisions will help you better understand consumer psychology.

For instance, Disney studies how customers interact with the brand across all their channels, which has made them more successful than their competitors over the years. Through psychographic segmentation, it could understand its potential customers’ personality traits, lifestyles, preferences, and motivations such as how they react to emotional stimuli and how they choose a particular product. This helped Disney identify the right market segments, create marketing strategies personalized to micro-market segments and develop products that appeal to a larger audience.

Why is consumer buying behavior important for your business?

Suppose you need a computer; how would you satisfy that need, where would you turn to for information, how would you prepare your budget, and from where would you buy the computer? These are decisions consumers face every day and each consumer will answer these questions differently. The answers to these questions will help guide computer companies on the types of computers to manufacture, the price they should set per computer, and where they should sell their products.

Staying relevant to a target market is a huge challenge for businesses, irrespective of how long they have been in the marketplace. Understanding consumer behavior is important for businesses for the following reasons:

1. Making better decisions about products and services

As businesses better understand why people purchase certain products and how they use them, they become better at making their customers happy by adapting their offerings to better suit the preferences and needs of their target market. Consumer behavior helps you anticipate your customer’s consumption needs and gives you insights into what motivates your consumers to make purchases and the benefits they value most.

2. More effective marketing and advertising campaigns

You do not want to take a scatter-gun approach in your marketing campaigns. The knowledge you have gleaned from consumer behavior can help your business create more effective and strategic marketing campaigns that are better at reaching and influencing prospective consumers and retaining old ones. Marketing is beyond advertising. It involves marketing research which improves understanding of consumer behavior in your market and influences the product and service you create. The more you know about your audience’s most important decisions, the thought processes, emotions, and motivational factors behind them, the more likely you are to win them over.

3. Retaining customers

Are your customers loyal to your brand? Are there issues driving them away or reducing patronage? What cues and actions convince them to stay?

Understanding consumer behavior will help you identify pain points and develop effective solutions. Based on your target audience’s preferences, motivations, likes, and concerns, you can improve their journey and experience. This will help you reduce the number of customers who stop using your products or services because you will be reducing their frustration and giving them reasons to stay.

Staying relevant to both old and new customers would require asking and providing answers to questions such as:

• What do customers buy, when do they make purchases, and how often does this happen?
• Why do customers buy and use certain products?
• What are their preferences, likes, dislikes, and expectations?
• Why do they tend to buy one product and not the other?
• Do consumers act differently individually and in groups?

Factors that influence consumer behavior

Consumer behavior is never static. As personal, social, cultural, and psychological factors change, so does consumer behavior. All consumers are unique and behave differently. For example, some may be frugal even when they increase their spending, while others will spend beyond their means.

Furthermore, given the difference in behavior, consumers will also have different brand preferences. For example, your car brand is likely different from your neighbor’s. What factors influence your buying decisions and why do they differ from one person to another? Every decision we make, whether it is a decision to fly to a warm vacation destination, buy a house, have children or go to the café on a Saturday, is influenced by our psychology.

Many factors can influence consumer behavior. Some of them include the following:

• Psychological factors such as motivations, preferences, perceptions, and learning. A consumer’s level of motivation to do something strongly influences whether they do it immediately or in the future. Maslow’s well-known hierarchy of needs, although not a marketing model, gives a peek into what motivates human behavior by outlining five levels of human needs organized according to their level of importance. Marketers can use it to understand their customers’ unique needs and motivation levels. At the bottom of the pyramid are the most important needs consumers typically attempt to satisfy like food, clothing, shelter, and other vital needs for survival. Consumers can only move onto higher-order necessities like psychological and self-fulfillment needs after satisfying their basic needs. How motivated a customer is to do something is the point of tension between where they are now and where they want to be.
• Social factors such as social status, family, friends, and reference groups. As humans, we are social creatures and have learned to survive by working collaboratively. Rightly or wrongly, we place high importance on our social status and what people think of us. So, naturally, our purchasing decisions reflect this. Family, for instance, is a reference point for many people. If your family approves of your new friendship, it is game on. In many cases, the same is true in food and beverage categories. Certain traditional brands make it into the coveted family brand status, so you may consider getting on a family’s good books to influence their buying decisions.
• Cultural factors such as religious affiliations, ethnicity, and traditions. Our behavior is largely learned. These learning experiences tend to come from people and places where we share the same culture and values. Culture and tradition, therefore, shape who we are, influencing and determining our values and purchasing decisions.
• Personal factors that affect consumer behavior are circumstantial, behavioral, and situational. They include age, gender, occupation, education, lifestyle, and upbringing and provide insight into the target customer’s life. For instance, a 14-year-old teenage girl is less likely to spend money on kitchen utensils than she would at the age of 27. This is just a simple consideration of age as a factor that affects buying decisions. The occupation of a person also influences consumer behavior. For example, an accountant working in the finance district will be far more likely to purchase formal outfits than a construction supervisor working on a building site. The next personal factor to consider is lifestyle. A consumer’s lifestyle gives an idea of how they live, including extracurricular activities and how they engage with people and the world around them. Certain brands that promote ideal lifestyles aim to influence their target customers’ buying decisions by aligning with the lifestyle they are passionate about.
• Economic factors such as personal income, family income, income expectations, and savings plans play a huge role in consumer behavior as they determine the resources available to your customer. There are certain purchases consumers will not make, not necessarily because of a lack of desire to buy what is on offer but because of their financial status. How much a consumer earns determines the means they have at their disposal and the freedom they have within their buying decision.

These are the core decision-making factors that influence consumer behavior. So, as you determine your audience or create a customer persona or avatar, take a deeper look to find out what factors are most important to them in their buying decision.

Your customer’s lifecycle

The customer lifecycle describes the various stages consumers go through when interacting with your business before, during and after they complete a transaction. It begins the moment your offering gets the attention of a potential customer. Managing and maintaining the customer lifecycle is crucial for your business to remain competitive in the marketplace. While consumption is at the forefront of all marketing campaigns, creating, retaining, and converting people into loyal, paying customers remains the overall goal of business.

The customer lifecycle is as follows:

1. Prospect

This is the first stage in the cycle. Here, customers have not made any purchases yet. They are exploring options that can satisfy their needs, desires or wants. At this stage, factors that stimulate prospective buyers to make a purchase include dissatisfaction with their current service or product and the onset of new needs and wants. For example, some consumers will purchase a new house or a vehicle because the family got bigger. Other consumers will only make routine purchases to satisfy their weekly needs.

Businesses must therefore target this kind of prospect and create awareness campaigns about their products and services, so whenever consumers make buying decisions, their offerings and brand will come to the top of their audience’s recall.

2. First-time buyer

Now that the prospect is convinced after making a purchase for the first time, they must be given a stellar experience that will make them a repeat buyer. At this stage in the cycle, the first-time buyer will compare their experience with the product or service and its perceived value with their expectations like quality, functionality, and price. This is called expectancy disconfirmation; it is a strong driver of satisfaction and will determine their next purchase decision. For instance, if consumers regret their choice, they are unlikely to choose the same brand again for their next purchase.

3. Repeat buyer

At this point in the cycle, the customer is pleased with the product or service and finds value in the offer. However, you cannot be relaxed because your customers can easily be poached by your

competitors if they find a better value proposition. Your brand must be persistent in giving the best value to the consumer for them to keep patronizing your business.

4. Core buyer

This is the buyer every company wants. These customers are few but are consistently loyal to your business. They are happy with your brand and act as ambassadors. Your business’ paramount goal should be to keep these customers satisfied because you get maximum profitability from them. Accordingly, your loyalty programs should be woven to keep them. Core buyers are often the first to buy any new offerings from your company and, typically, most firms try to give new products and offerings to these customers first.

5. Defector

These are customers or consumers who are out of your funnel. They are dissatisfied for different reasons and have transferred their loyalties to your contenders. These consumers might have found better value from your competitors’ offers, were unhappy with your product or service, had unresolved complaints, or had a negative customer service experience. You must always be careful in dealing with these customers. If your business does some damage control and succeeds in recovering some of these defectors, it would be considered a great achievement.

What is a buyer persona? And how to create one?

A buyer persona is a fictionalized character representing your potential customer. It is based on customer insights and market research and takes into account details like demographics, personal background, values and goals, challenges, interests, and needs. Creating a buyer persona for your business can help you bring your marketing plan to life, a deeper understanding of the customer, bring in more qualified leads, and create a better customer experience.

Here are the steps you can take to create a buyer persona:

• Choosing which customers to contact: Identify your target customers either by sharing surveys with them or interviewing them directly.
• Setting up a research panel: Your panel should consist of people who represent your sample target population and who have agreed to take surveys on a regular basis.
• Designing your survey: Your survey should include open questions that cover your customer’s motivations, values, and goals.
• Fielding your survey: Share the survey to your panel, along with any prize you are offering in return for customer details.
• Analyzing your data: Review your survey data to establish trends, patterns, and correlations; this will be useful in strengthening your conclusions and improving your marketing campaigns and the customer lifecycle.
• Creating buyer profiles: With the insight from your data analysis, create an illustrative buyer persona. You may give each buyer a name to bring individual personas to life. Here is an example of a buyer persona for a clothing brand:

Tracy 27

Tracy is an artist who works long hours in the studio. She likes to hike on weekends and spend time with her friends. She enjoys visiting the cinema and going out for drinks. She is active on social media and she follows a lot of photographers and fashion bloggers.

Interests: Movies, cinemas, hiking, socializing

Needs: Smart, trendy clothes

Wants: Stylish clothes that make her feel confident.

As you can see, there is much psychology behind a customer’s buying decisions. The better a business understands how this works, the better it can grow and serve the customers in its market.