Consumer Behavior

Consumer behavior is the pattern of response or action of consumers while purchasing goods and services. The pattern might be related to habits, frequency, market trends, etc., influencing purchasing decision-making. However, it relates more to what the consumer purchases than who buys.

Organizations study the buyers’ behavior patterns to understand what factors influence their buying decisions, which helps identify the target market and plan production accordingly to meet demand. As a result, the business can maximize sales and profit at minimum cost and optimum utilization of resources. Thus, it aids in meeting consumer expectations.

• The consumer behavior theory explains how buyers respond or decide while purchasing any product or service.
• It is a pattern related to frequency, market trends, or habits, which strongly affect how they choose products or services from a broad basket of goods available in the market.
• Consumer behavior analysis helps businesses identify the target customers and plan their production accordingly to meet maximum demand at minimum cost.
• It also helps in the optimum use of resources to meet customer expectations and maximize sales and profits.

Consumer behavior refers to consumer attitude or preference during buying decisions. It is an essential field of study from a business perspective which helps formulate a successful marketing strategy. It is a mixture of economics, marketing, and human psychology.

Consumer behavior research aids companies while making production and marketing decisions. These processes can give expected results if a company does planning after proper market analysis, which is the fundamental essence of consumer behavior theory.

The study of buyer behavior and consumption patterns investigates market trends, lifestyle, income, product availability, etc., which shape the buyer's demand. Unfortunately, it is challenging to anticipate, even with expert knowledge.

However, nowadays, with technological development, various software, online questionnaires, etc., are used to follow the choice patterns and anticipate demand and sales of products. Databases are created and maintained, which aids a business, and are kept as assets for consumer behavior research purposes.

Some factors influencing consumer behavior are as follows:

1. Seasons and weather – The weather or seasons, like holidays, festivities, etc., influence consumers to buy more or less of a product because of their changing needs.
2. Store location – The location of the market/store is critical because if the store is far away or in a remote location, people may skip buying goods even though they need them and look for alternatives.
3. Store service – If the buyer gets good service from the shop, they are likelier to go to that store to buy the same product.
4. Availability of products – Goods in demand should be readily available for consumers, or they may postpone or cancel their purchase and go for the next best alternative.
5. Consumer lifestyle – Consumer lifestyle influences buying decisions to a great extent. Buyers are more likely to purchase expensive fancy products if they have a busy social life and are avid partygoers.
6. Ethnic or religious background – Religious background influences decisions significantly. For example, most people will not purchase goods even though they are more beneficial because their religion or ethnic culture will not support them.
7. Family and friends – Consumers and family can influence purchase patterns. For example, buyers often prefer purchasing such items already in use in their friends or family circle because it makes them believe that the product is genuine.
8. Income – If consumers' income level is high, they are more likely to buy costlier products or services.
9. Occupation – If the buyer's employment is highly paid or involves media and publicity, it will influence the buyer to buy expensive, designer goods.
10. Advertisements – Attractive advertisements influence customers to try new products.
11. Prior purchase experience – If a buyer has already purchased a product, had a good purchase experience, and found the product useful, they might become regular customers.
12. After-sales service – An excellent after-sales service is vital in attracting consumers.

The different types of consumer behavior in economics are as given below:

1. Quality consciousness – Customers who are particular about quality tend to buy goods that have quality, not paying much attention to the price.
2. Shopping as entertainment – Some buyers use shopping as entertainment, thus buying goods even though they do not need them.
3. Price consciousness – Consumers who are price conscious will check the price tag first to confirm that it is within their budget.
4. Brand consciousness – Some buyers are attached to brand names and only go for branded products they already use.
5. Impulsive purchase – Some buyers habitually spend money impulsively. As a result, they end up purchasing goods they may not need.
6. Fashion Consciousness – Some fashion-conscious people shop for the latest fashion goods instead of going for outdated designs.
7. Brand loyalty – Brand loyalty influence people a lot. People who buy goods from a particular brand will try to stick to it because they have faith and trust in those products.
8. Confusion due to vast choices – Some consumers get confused with the wide range of goods and services. It is difficult to predict such buying patterns.

Consumer behavior in economics follows certain principles. They are as follows:

1. The power of labeling to gain customer loyalty – Labelling customers, like extra facilities or discounts if they are long-time buyers, leads to more purchases.
2. Understand the types of buyers – It is essential to understand the buyer type, like they are brand loyal, spendthrift, fashion conscious, etc.
3. Targeting conservative spenders by reframing the price – Sometimes, companies reframe prices. For instance, $100 is quoted as $99.80. It gives a sense of paying less and attracts buyers.
4. Bundling various facilities in one product – Different facilities into one product saves buyers time and money, thus making the product more attractive.
5. Rephrasing marketing taglines to influence buyers – Playing with the words in a slogan helps gain customer emotions and attract them.
6. Taking ownership of weaknesses – Companies should take ownership of any defect or negative consequence of their products, which makes them more trustworthy.
7. Highlighting the urgency – To increase sales, creating a feeling of urgency is necessary, as consumers will gain a lot if they buy them immediately.
8. Influencing minds by giving extra – Sometimes companies offer gifts, cashback, etc., to gain more buyers.

Consumer behavior analysis has some practical applications, as follows:

1. Shape new habits – Consumer behavior pattern is used to teach new habits that are friendly and good for society.
2. Sustain good habits – It helps sustain or continue with the good habits once made, like using hand sanitizers since the pandemic's start. Such practices will continue to exist, leading to a healthier lifestyle.
3. Consumer survey – To analyze consumer behavior, companies conduct interviews, answer questionnaires, rating products, etc. This process is helpful since it gives insight into purchase patterns quickly.
4. Select target market – Businesses can select the target customers based on such analysis and understand the demand level to plan production.
5. Design strategy for marketing – Companies can use this analysis to design marketing and advertising strategies, thus increasing sales and profit.

Let us look at some examples to understand the concept.

Example #1

Classic Retailers is a global household items distributors have a chain of retail outlets in different cities worldwide. They deal in grocery items, home furnishing, home cleaning, etc. The company has noticed that with the advent of online shopping, footfall in physical stores has considerably reduced. Thus, classic retailers sell their products online through mobile applications to keep up with the competition.

The retail chain has noticed that due to the higher income of millennials, there is a rise in preference for branded home furnishing items with the latest designs, irrespective of the price.

The above example proves that income technological development influences consumer behavior and purchases.

Example #2

The companies in the “Buy Now Pay Later (BNPL)" business is trying to capture the market in two ways. First, they advise their clients that this is a responsible and safe way to purchase. But they advise investors and retailers that BNPL is a way to make consumers purchase more. This business model has dramatically impacted the business world since they are similar to taking loans for purchase without interest payment, unlike credit cards. Thus, it is yet to see how it influences society at large.

Example #3

There has been a shift in consumer behavior due to the COVID-19 pandemic. It has led to changes in both buying preferences and buying methods.

People now prefer to make purchases online in the comfort of their homes, being able to choose from a wider variety of products from their favorite websites. They also shop for household cleaning supplies, indicating that people are becoming more hygiene conscious.

Businesses need to analyze consumer behavior due to the following reasons:

1. Customer retention – A business can retain more customers if it can study the purchase patterns and plan the product types accordingly. Then, people will prefer to buy their products instead of switching to competitors.
2. Customer loyalty – Planning production based on consumer behavior analysis helps understand consumer needs, which allows for gaining customer loyalty.
3. Inventory planning – Businesses plan their manufacturing process and arrange as much as required.
4. Meet sales target – Consumer behavior provides valuable insight into the demand, thus increasing sales through proper marketing and distribution.
5. Increase in profit – An increase in sales will increase profits because the cost is controlled due to proper production planning.
6. Better communication – Customer purchase analysis leads to a better communication since businesses can understand buyers and supply them with products per their demand.
7. Understand peer competitor strategy – It also leads to competitor analysis since it is necessary to analyze competitors’ strategies to retain and make new customers.
8. Reduce wastage – Wastage is significantly reduced since planning inventory and resources is possible, using what is required.

This article has been a guide to what is Consumer Behavior & its definition. We explain its factors, types, principles, applications, examples, and importance. You may also find some useful articles here -

• Behavioral Economics
• Consumer Confidence
• Consumerism