Consumer Behaviour: How to Spot Trends and Shape Decisions

Businesses have been trying to unlock the secrets of consumer behaviour for centuries, but never before have they had so many powerful tools for doing so. Ever since a CD copy of Sting’s Summoner’s Tales became the first item sold on the Internet in August of 1994, customers have left behind a trail of digital breadcrumbs that might tell a tale about their shopping behaviour.

Most of this data was ignored for years. It sat in digital siloes. It vanished into the ether. It was often erased. If customer data was kept, it sometimes presented security concerns, becoming more of a liability than an asset. If anything, data was looked at as a by-product of work, rather than a driver to improve business processes. Now, all that has changed.

For today’s businesses, data is a crucial component of success. And when it comes to analysing consumer behaviour, having the right data is key. Let’s have a look at why consumer behaviour is an important consideration for SMBs, and then look at some ways that your organisation can analyse behaviour to engage its customer base and drive loyalty.

What is consumer behaviour?

Consumer behaviour is the study of why, when, where and how people make purchases. By identifying the decision-making processes and patterns that guide consumers, businesses can improve their offerings, build emotional connections and deliver more relevant products and services.

Consumer behaviour is a key concern for digital marketing. It’s also important for delivering good customer service. But those are just some of the benefits of understanding customer behaviour. Let’s take a look at seven others.

7 benefits of understanding consumer behaviour

1. Increased customer retention and higher CLV (customer lifetime value).
2. More effective development of new products and services.
3. Ability to differentiate audiences and tailor the right offering to the right customer.
4. Better insights into your competitors and why customers may be choosing them.
5. The ability to optimise pricing strategies and increase ROI on marketing activities.
6. Ability to create a next-level loyalty programme that delivers impactful rewards.
7. Better ability to predict market trends and stay ahead of your customer’s needs.

Those are just some ways that analysing consumer behaviour can help your business. It’s important to look at consumer behaviour on both the ‘big picture’ level – why a customer will want to stay with your business for the long haul – and on a granular level – why a customer will choose your product or service at the moment.

To do this, it helps to understand the different types of customer behaviour.

The 4 types of consumer behaviour

1. Limited decision-making. Sometimes, a consumer doesn’t have a whole lot of choice when making a purchase. In these instances, they may be forced to pay more for an item than they usually would, or shop on a channel that they normally wouldn’t use. In other words, limited choices can make buyer behaviour unpredictable.

2. Complex decision-making. If a buyer does a lot of research before making a purchase, they’re displaying complex decision-making behaviour. This is often the case with larger purchases such as luxury items or high-priced electronics when consumers will read reviews, compare products and seek affirmation that they’re making a good choice.

3. Variety-seeking buying behaviour. Consumers who display variety-seeking behaviour will purchase different varieties of similar items, say crisps or t-shirts. This type of behaviour usually revolves around inexpensive items, where the cost to experiment is low.

4. Habitual buying behaviour. Frequently, people purchase items out of habit, not loyalty. For example, things like toilet rolls, milk or bin bags. These are inexpensive, widely available items that don’t normally require much research or thought, and where there’s not much brand differentiation.

What drives consumer behaviour?

There may be four types of consumer behaviour, but there are far more types of consumers. From fashion-forward shoppers to budget-conscious buyers to quality-first customers to impulsive basket-fillers, consumers come in all varieties. But behind every consumer is a bigger story, along with shopping habits that have been shaped by a lifetime of experiences.

Here are some of the things that contribute to consumer behaviour:

• Economic factors.
• Cultural factors.
• Psychological factors.
• Personal factors.
• Social factors.

Understanding your demographics can help you recognise the different factors that may be at play, and position your offerings accordingly.

Consumer behaviour: shape it, or be shaped by it

When it comes to consumer behaviour, businesses can be reactive or proactive. A business using reactive strategies might adapt its offerings to meet shifts in consumer behaviour. Businesses that choose to be proactive can try to influence customer behaviour by launching new products and starting new trends.

Here are some ways that businesses can analyse and shape consumer behaviour to unlock big benefits.

• Put your data in the driver’s seat. Your existing customer data will tell you plenty about the behaviour of consumers. Ensure that your data management is centralised so that you can get a complete picture of all your customers’ interactions, then look for patterns and shifts across time. You may also want to make sure you have the right toolkit for delivering robust analytics.
• Optimise your messaging. As the climate changes, so will the behaviour of consumers. Your brand messaging should not only be able to flex to the consumer but with the landscape. For instance, even quality-first customers might have a positive response to price-first messaging in challenging economic times. And in today’s climate, transparency, values-based spending and the ‘humanisation’ of moments are more important than they were just a short time ago.
• Generate positive word of mouth. One of the best ways to address every type of consumer behaviour is to establish a positive reputation. Advocates, or promoters, are the customers who love your brand and are excited to share that love online. This positive social proof can win over customers who need affirmation before buying or guide consumers who are having trouble differentiating between similar offerings.
• Offer next-level incentives. You can shape consumer decision-making by offering rewards that speak to their unique behaviours. Incentives can drive loyalty and win over ‘habitual buyers’ while providing ‘variety-seeking buyers’ with a reason to regularly stick with your brand.
• Ask the right questions for your business. All organisations will want to know why consumers are choosing one product over another, but they may have different concerns when looking at their data. Some will be looking at price points and conversions. Others will focus on the lifestyle of the buyer. Others may look at the channels used and the stages of the marketing funnel. When analysing consumer behaviour, make sure you know what information will be most helpful.

Ready to give the customers what they want?

Your data will tell the story of how you’ve been building customer relationships up until this point. It will give you keen insights into how and why customers are engaging – and how you can increase that engagement. Look at things like your demographics. Total spend. Add-on items. Whether any discounts have been applied. Look at your social media. Do you have a strong community presence?

After you evaluate your customer engagement, you can send customer surveys and solicit feedback. You can even use this as an opportunity to offer incentives for referrals or create social proof, like UGC (user-generated content).

Once you have this mix of qualitative and quantitative data, you’ll have a pretty good idea of how your consumers are behaving – and how you can adapt to that behaviour to build exceptional relationships.

To see more about how creating a great customer experience can help your business reach its full potential, take a look at our eBook, ‘Thriving in the Experience Economy: How Exceptional Customer Journeys Drive Engagement’.