Consumer Behaviour

Overview of consumer behaviour

Consumer behaviour refers to the study of how individuals, groups and organisations select, purchase, consume and dispose of goods, services, experiences or ideas to satisfy their needs, wants and desires.

To simplify the explanation even further, think of consumer behaviour as the process that determines the Why, What, Who, and How a consumer purchases. Consumer behaviour answers the following questions:

• Why do customers buy?

• What internal and external factors influence their purchase?

• Who do they buy from?

• When do they buy?

• How do they purchase?

It is a multi-stage process in which consumers will be impacted during these stages by things including personal views and values, social interventions, marketing campaigns, product features and other environmental factors.

Importance of understanding consumer behaviour

Understanding how consumers behave towards a decision to buy a product or use a service is highly crucial for any business to create marketing plans and develop marketing strategies that target the right customers with the right message at the right time in order to satisfy customers’ wants and needs.

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Better marketing and communications

A company’s marketers need to know what factors affect customers’ buying habits to better align their messages, channels and approaches with the preferences and needs of their target audience.

• Tailored messaging – By knowing what motivates consumers (e.g., price, quality, convenience), companies can highlight the specific product features or benefits that appeal most to their audience, making the message more compelling.

• Effective targeting – With consumer behaviour insights, companies can target specific groups with customized campaigns and increase the efficiency of marketing efforts.

• Improved brand positioning – By studying how consumers perceive brands, businesses can create a brand image that resonates with the target audience and differentiate themselves from competitors based on attributes that consumers value.

• Channel optimisation – Understanding where and how consumers prefer to receive information helps businesses choose the most effective communication channels (e.g. social media, TV ads or emails).

Improve customer retention

It is far more beneficial to retain an existing customer and create strong relationships than to gain new customers. It’s also easier to sell new products and services to existing customers than to find new ones.

• Personalised experiences – Personalization, such as tailored product recommendations or customized communication, helps build loyalty by showing customers that the brand understands and cares about their specific needs.

• Addressing pain points – By identifying customers’ pain points such as frustration with product delivery or complicated return processes will help businesses improve the overall customer experience, reducing dissatisfaction and increasing the chances that customers will remain loyal.

• Creating a customer-centric culture – When every aspect of the company—from product development to marketing—is designed to respond to consumer behaviour, it leads to stronger relationships and higher customer retention rates.

Increase customer loyalty

Customer loyalty can prove to be a promoter of the businesses and spread positive word of mouth. Satisfied customers will share their happy experiences with their friends and family.

• Emotional connection with the brand – Consumers are more likely to stay loyal to brands that align with their values or that they feel emotionally invested in, whether through shared values like sustainability or a commitment to social causes.

• Loyalty and incentives – By analysing purchasing patterns, businesses can design more effective loyalty programs that resonate with customer preferences and foster repeat business.

• Create trust and transparency – Consumer behaviour data allows businesses to identify what builds trust with their customers. Transparency about business practices, such as fair pricing or ethical sourcing, can help enhance customer loyalty.

Better plan inventory

Researching customer attitudes helps companies plan inventory and stock raw materials.

• More balanced demand and supply forecasting – By analysing consumer purchasing patterns, preferences, and seasonal trends, businesses can better predict future demand for products and plan inventory levels more accurately.

• Optimised product mix – By studying consumer behaviour, businesses can determine which products or categories appeal the most to their target consumers and adjust their inventory mix accordingly.

• Cost saving and efficiency – Understanding consumer behaviour consequently leads to better inventory management, which in turn reduces storage costs, improves overall operational efficiency, minimizes waste, and improves cash flow.

Increase sales

Ultimately, knowing who is buying rather than selling to anyone will help companies have higher chances of satisfying the potential target buyers, generating sales and profitability with a selective action or a combination of:

• Targeted Marketing – Tailors strategies to different consumer segments.

• Product Development – Guides the creation of products that meet consumer needs.

• Customer Experience – Enhances interactions to boost satisfaction and repeat purchases.

• Pricing Strategies – Sets prices that align with perceived value and drive sales.

• Effective Communication – Creates messages that resonate with the audience’s values.

• Anticipating Trends – Identifies and responds to emerging market trends.

• Building Brand Loyalty – Strengthens connections and encourages repeat business.

Research competition

Another advantage of studying consumer buying behaviour is that it helps businesses understand the competition landscape and plan on how to position their products and services to offer comparative values.

• Identify competitors’ strengths and weaknesses – Understanding consumer behaviour allows businesses to see how consumers view and interact with competitors. By knowing where competitors excel or fall short, businesses can refine their own strategies to capitalize on these insights.

• Spot Market Gaps – Analysing consumer behaviour helps identify unmet needs or dissatisfaction with existing products and services, creating opportunities for businesses to introduce products or services that fill these gaps and attract customers looking for better options.

• Enhance Customer Experience – The knowledge of how consumers experience competitors’ services or products will help businesses improve their own customer service and user experience to stand out from competitors and build stronger customer loyalty.

References

Adi, B n.d., Consumer Behavior Definition: Understanding the Basics, Question Pro, available at <https://www.questionpro.com/blog/consumer-behavior-definition/>.

College Vidya, 2023, Consumer Behaviour Explained: Key Concepts and Theories, College Vidya, available at <https://collegevidya.com/blog/consumer-behaviour-explained/>.

Joubert, J.P.R 2013, Chapter 1: Introduction to Consumer Behaviour, Introduction to Consumer Behaviour, Juta and Company, South Africa, pp. 1–10.

Laura, L 2011, Consumer Behavior For Dummies, Wiley, pp.12-18, available at <https://www.google.com.au/books/edition/Consumer_Behavior_For_Dummies/TvzD62snedgC?hl=en&gbpv=1&dq=consumer+behavior+in+marketing&printsec=frontcover>.

Psychology Today n.d., Consumer Behavior: An Overview, Psychology Today, available at <https://www.psychologytoday.com/au/basics/consumer-behavior>.