What is the meaning of consumer behavior

Consumer behavior is the study of consumers and the processes they use to choose, use (consume), and
dispose of products and services, including consumers’ emotional, mental, and behavioral responses.

Consumer behavior incorporates ideas from several sciences including psychology, biology, chemistry,
and economics.

In this guide we’ll take a look at the different aspects and facets of consumer behavior, and we’ll discuss
the most effective types of customer segmentation.

Why is consumer behavior important

Studying consumer behavior is important because this way marketers can understand what influences
consumers’ buying decisions.

By understanding how consumers decide on a product they can fill in the gap in the market and identify
the products that are needed and the products that are obsolete.

Studying consumer behaviour also helps marketers decide how to present their products in a way that
generates maximum impact on consumers. Understanding consumer buying behaviour is the key secret
to reaching and engaging your clients, and convert them to purchase from you.

A consumer behavior analysis should reveal:

What consumers think and how they feel about various alternatives (brands, products, etc.);

What influences consumers to choose between various options;

Consumers’ behavior while researching and shopping;

How consumers’ environment (friends, family, media, etc.) influences their behavior.

Consumer behavior is often influenced by different factors. Marketers should study consumer purchase
patterns and figure out buyer trends.
In most cases, brands influence consumer behavior only with the things they can control; like how IKEA
seems to compel you to spend more than what you intended to every time you walk into the store.

So what are the factors that influence consumers to say yes? There are three categories of factors that
influence consumer behavior:

1. Personal factors: an individual’s interests and opinions that can be influenced by demographics (age,
gender, culture, etc.).

2. Psychological factors: an individual’s response to a marketing message will depend on their

perceptions and attitudes.

3. Social factors: family, friends, education level, social media, income, they all influence consumers’
behavior.

Types of consumer behavior

There are four main types of consumer behavior:

1. Complex buying behavior

This type of behavior is encountered when consumers are buying an expensive, infrequently bought
product. They are highly involved in the purchase process and consumers’ research before committing
to invest. Imagine buying a house or a car; these are an example of a complex buying behavior.

2. Dissonance-reducing buying behavior

The consumer is highly involved in the purchase process but has difficulties determining the differences
between brands. ‘Dissonance’ can occur when the consumer worries that they will regret their choice.

Imagine you are buying a lawnmower. You will choose one based on price and convenience, but after
the purchase you will seek confirmation that you’ve made the right choice.

3. Habitual buying behavior

Habitual purchases are characterized by the fact that the consumer has very little involvement in the
product or brand category. Imagine grocery shopping: you go to the store and buy your preferred type
of bread. You are exhibiting a habitual pattern, not strong brand loyalty.

4. Variety seeking behavior

In this situation, a consumer purchases a different product not because they weren’t satisfied with the
previous one, but because they seek variety. Like when you are trying out new shower gel scents.

What affects consumer behavior?

Many things can affect consumer behavior, but the most frequent factors influencing consumer
behavior are:

1. Marketing campaigns

Marketing campaigns influence purchasing decisions a lot. If done right and regularly, with the right
marketing message, they can even persuade consumers to change brands or opt for more expensive
alternatives.

Marketing campaigns can even be used as reminders for products/services that need to be bought
regularly but are not necessarily on customers’ top of mind (like insurance for example). A good
marketing message can influence impulse purchases.

2. Economic conditions

For expensive products especially (like houses or cars) economic conditions play a big part. A positive
economic environment is known to make consumers more confident and willing to indulge in purchases
irrespective of their personal financial liabilities.

Consumers make decisions in a longer time period for expensive purchases and the buying process can
be influenced by more personal factors at the same time.

3. Personal preferences

Consumer behavior can also be influenced by personal factors, likes, dislikes, priorities, morals, and
values. In industries like fashion or food personal opinions are especially powerful.
Advertisements can, of course, help but at the end of the day consumers’ choices are greatly influenced
by their preferences. If you’re vegan, it doesn’t matter how many burger joint ads you see, you’re
probably not gonna start eating meat because of that.

4. Group influence

Peer pressure also influences consumer behavior. What our family members, classmates, immediate
relatives, neighbors, and acquaintances think or do can play a significant role in our decisions.

Social psychology impacts consumer behaviour. Choosing fast food over home-cooked meals, for
example, is just one of such situations. Education levels and social factors can have an impact.

5. Purchasing power

Last but not least, our purchasing power plays a significant role in influencing our behavior. Unless you
are a billionaire, you will take your budget into consideration before making a purchase decision.

The product may be excellent, the marketing could be on point, but if you don’t have the money for it,
you won’t buy it.

Segmenting consumers based on their buying capacity will help marketers determine eligible consumers
and achieve better results.

Customer behavior patterns

Buying behavior patterns are not synonymous with buying habits. Habits are developed as tendencies
towards an action and they become spontaneous over time, while patterns show a predictable mental
design.

Each customer has his unique buying habits, while buying behavior patterns are collective and offer
marketers a unique characterization. Customer behavior patterns can be grouped into:

1. Place of purchase

Most of the time customers will divide their purchases in several stores even if all items are available in
the same store. Think of your favorite hypermarket: although you can find clothes and shoes there as
well, you’re probably buying those from actual clothing brands.
When a customer has the capability and the access to purchase the same products in different stores,
they are not permanently loyal to any store, unless that’s the only store they have access to. Studying
customer behavior in terms of choice of place will help marketers identify key store locations.

2. Items purchased

Things to consider: the items that were purchased and how much of each item was purchased.
Necessity items can be bought in bulk while luxury items are more likely to be purchased less frequently
and in small quantities.

The amount of each item purchased is influenced by the perishability of the item, the purchasing power
of the buyer, unit of sale, price, number of consumers for whom the item is intended, etc.

Analyzing a shopping cart can give marketers lots of consumer insights.

3. Time and frequency of purchase

Customers will go shopping according to their feasibility and will expect service even during the oddest
hours; especially now in the era of e-commerce where everything is only a few clicks away.

It’s the shop’s responsibility to meet these demands by identifying a purchase pattern and match its
service according to the time and frequency of purchases.

One thing to keep in mind: seasonal variations and regional differences must also be accounted for.

4. Method of purchase

A customer can either walk into a store and buy an item right then and there, or order online and pay
online via credit card or on delivery.

The method of purchase can also induce more spending from the customer (for online shopping, you
might also be charged a shipping fee for example).

The way a customer chooses to purchase an item also says a lot about the type of customer he is.
Customer behavior segmentation

Only 33% of the companies that use customer segmentation say they find it significantly impactful.

Customer segmentation, types of buyers, has always been important, but now that personalization and
customer experience are factors that determine a business’ success, effective segmentation is even
more important.

Traditionally, most marketers use six primary types of behavioral segmentation.

1. Benefits sought

A customer who buys toothpaste can look for four different reasons: whitening, sensitive teeth, flavor,
or price.

When customers research a product or service, their behavior can reveal valuable insights into which
benefits, features, values, use cases, or problems are the most important motivating factors influencing
their purchase decision.

When a customer places a much higher value on one or more benefits over the others, these primary
benefits sought are the defining motivating factors driving the purchase decision for that customer.

2. Occasion or timing-based

Occasion and timing-based behavioral segments refer to both universal and personal occasions.

Universal occasions apply to the majority of customers or target audience. For example holidays and
seasonal events when consumers are more likely to make certain purchases.

Recurring-personal occasions are purchasing patterns for an individual customer that consistently
repeat over a period of time. For example birthdays, anniversaries or vacations, monthly purchases, or
even daily rituals such as stopping for a cup of coffee on the way to work every morning.
 Rare-personal occasions are also related to individual customers, but are more irregular and
spontaneous, and thus more difficult to predict. For example attending a friend’s wedding.

3. Usage rate

Product or service usage is another common way to segment customers by behavior, based on the
frequency at which a customer purchases from or interacts with a product or service. Usage behavior
can be a strong predictive indicator of loyalty or churn and, therefore, lifetime value.

4. Brand loyalty status

Loyal customers are a business’ most valuable assets. They are cheaper to retain, usually have the
highest lifetime value, and can become brand advocates.

By analyzing behavioral data, customers can be segmented by their level of loyalty so marketers can
understand their needs and make sure they are satisfying them.

Loyal customers are the ones who should receive special treatment and privileges such as exclusive
rewards programs to nurture and strengthen the customer relationship and incentivize continued future
business.

5. User status

There are many different possible user statuses you might have depending on your business. A few
examples are:

Non-users

Prospects

First-time buyers

Regular users

Defectors (ex-customers who have switched to a competitor).

6. Customer journey stage

Segmenting the audience base on buyer readiness allows marketers to align communications and
personalize experiences to increase conversion at every stage.

Moreover, it helps them discover stages where customers are not progressing so they can identify the
biggest obstacles and opportunities for improvement, even on post purchase behaviors.

Besides these traditional ways, another type of segmentation is the RFM model.

RFM comes from Recency, Frequency and Monetary Value.

Recency = how recent a customer placed the last order on your website

Frequency = how many times a customer purchased something from your website in the analyzed
period of time

Monetary Value = how much each customer spent on your website since the first order

The RFM model analysis can be executed in 2 ways:

Manually – exporting your database in a spreadsheet and analyse your customers following the rules
for RFM analysis

Automatically – through certain tools that are creating RFM dashboards

From the RFM segmentation and analysis you can not only reveal what are your most loyal and
profitable customers or less profitable customers but also:

Reveal what brands and products are dragging your business down

Build custom recommendations for your customers

Solve certain Customer Experience problems

Before making decisions based on gut feeling regarding your customers and your audience, observe
their behavior, listen to them and build a relationship before your competitors do.

5 Essential Marketing Concepts You Should Know

The five basic marketing concepts are a key part of putting together any new marketing campaign.
Here’s what you need to know.

The Production Concept

The production concept is the most operations-oriented than any of the other marketing concepts on
this list. It speaks to the human truth that we prefer products that are easily available and inexpensive.

This concept was founded during the production era of early Capitalism in the mid-1950s. During that
era, businesses concerned themselves primarily with production, manufacturing, and efficiency issues.
This is also the time when the “Says Law” was created exciting the idea of supply and demand.

The basic idea of this concept is that businesses will want to produce widely cheap products in
maximum volumes to maximize profitability and scale. Businesses assume that consumers are primarily
interested in product availability and low prices while customer’s needs might not be fully addressed.

Such an approach is probably most effective when a business operates in very high growth markets or
where the potential for economies of scale is significant.

The problem with this concept is that businesses run the danger of not creating quality products and
might have customer service problems with impersonal production. An example of this is the use of
developing country to output cheaper products in higher quantities. Another historical example is Ford
automobiles that manufactured a ton of cars through its assembly line but all came out the same
without customizations or user input.

The Product Concept

The product concept is not so much about the production and business output but focuses more on the
customer.

Potential customers favor products that offer quality, performance, or innovative features.

This marketing concept believes in potential customers and how their brand loyalty is closely tied to
options of products, the quality of those products and the benefits they get from the product and the
business they invest in.
This is seen most commonly with our obsession with Apple products and looking forward to their new
gadgets and features upon launch!

In this marketing concept, businesses will concentrate on making superior products and improving them
over time. The problem is many businesses do not balance the need for a product all while realizing
what the marketing needs. There is a fine line between focusing on the customer and still defining your
role and leadership in the industry.

The Selling Concept

The selling concept is the bread and butter of marketing efforts as it believes that people will not buy
enough of a business’s product so businesses need to persuade them to do so.

Of course, in today’s marketing, we know that selling is not the way to full marketing success. We more
so find this marketing concept popular in the days of WWII where there was aggressive advertising to
promote people to buy bonds and different products.

This concept puts a lot of power into the hands of a business who has a whole plan to effectively
stimulate more buying with its potential customers. A lot of the time we also see this action used when
a business has to deal with overcapacity and needing to sell what they make rather than what the
market needs or wants.

Businesses that choose to use this marketing concept must be good at finding potential customers and
emotionally sell them on the benefits of their “not needed product.”

The Marketing Concept

The marketing concept is the concept of competition. It is a marketing concept that believes that the
success of a business depends on the marketing efforts that deliver a better value proposition than its
competitors.

This concept focuses on the needs and wants of target marketing as well as delivering value better than
its competition. Through marketing, it’s your goal to be the preferred option compared to your
competitors. Competitive advantage is key!

We find typically this in the 1950s era of companies trying to carve themselves out in the industry. We
also can look at modern-day competition between Pepsi and Coke who sell similar items but their value
propositions are completely different!

Pepsi: Focuses on winning over the younger generations

Coke: Focuses on winning over everyone in a more holistic approach!

The marketing concept has evolved into a fifth and more refined company orientation: the societal
marketing concept.
The Societal Marketing Concept

The societal marketing concept is the most progressive and modern-day applicable marketing mindset
to have. It is a marketing concept that believes in giving back to society by producing better products
that help the world be a better place.

This orientation arose as some questioned whether marketing and businesses are addressing the
massive problems society has like environmental deterioration, resource shortages, population growth,
poverty, and social disruption.

For example, McDonald’s and other fast-food restaurants and not really getting this “societal marketing
thing…” Most fast-food companies offer tasty but unhealthy food. (The bane of our existences)

Elements of Marketing Mix- the 4 Ps

1. Product

A product is the heart of the marketing mix. All marketing activities begin with the product. The product
is not a physical entity alone; it captures the whole tangible and intangible aspects like services,
personality, organization, and ideas. Example, a KFC chicken product will include the look of the food,
the shiny red buckets with the smiling face of Colonel Sanders, the wording on the combo pack like
“Friendship Bucket,” “Triple Treat.

Without a product, we have nothing to price, promote or place. Hence, of all the 4 Ps the Product is the
most elemental P.

Here, it is essential to understand the term product mix concerning marketing. The product mix is the
whole range of products a company offers to its customers. Say, for instance, Apple an authority in
electronic brand commands loyalty as a pioneer of mobile technology and e-devices. Suppose, Apple
decides to expand its product line with a new Apple sports shoe. Thus the product mix of Apple.Inc will
cover mobile phones, tablets, iPods, watches and the new one in line the Apple shoes.

The decisions regarding product mix will depend on many factors like :

Design

Features

Brand name

Product variety

Quality

Services
Packaging, returns, etc.

2. Price

Price is the monetary value that has to be paid by a customer to acquire or own the product of a
company. It is the critical revenue-generating component of the firm.

Pricing decisions should be taken with great care, as it is a double-edged sword. If your product is priced
too high, it may exude a feeling of high quality. At the same time, it will make your product placing to
limited and standard stores. So the marketer must know the art of wielding this dangerous sword of
pricing. The second P, pricing strategies have been used by Jio Reliance company in India to get the
deepest penetration. It almost washed away all the mobile service providers out.

The pricing mix decisions need to consider the below marketing variables :

Methods of pricing; policies; strategies

Allowances

Discounts, rebates

Payment period

Credit policy

The pricing strategy of your organization must align with the overall goal of your organization to blend
smoothly. Whether you want market penetration or skim over all this depends on your pricing strategy.

3. Promotion

It aims to serve two objectives. One, it informs the potential customers about your product and
secondly, it persuades them to buy your product. The promotion mix will thus include the various means
that you can use to communicate with the target audience. An effective promotion mix will ensure good
sales and a marketer must strive to create a conducive environment. The third P is the Promotion, for
example, the Coke leveraged the World cup 2010 and K’naan’s theme song so much that, Coca Cola and
football have all become synonymous.

The main elements of a promotion mix are:

Advertising

Personal selling

Public relations

Direct marketing

Publicity -social media, print, etc.

Sales promotion
4. Place (or Distribution)

Place or physical distribution deals with the transfer of ownership of the product from the manufacturer
to the customer.

The margin of your profit depends on how quickly you can turn over the goods. The more swiftly the
products reach the point of sale, the more likely are the chances of satisfying the customers and
increase brand loyalty. Hence the Place factor is crucial in ensuring your product’s competitiveness in
the market. The Place or Distribution is the fourth P. Examples: Apple iPhones are found easily in
renowned e-commerce stores like Amazon and not in Zepo and less known stores.

The following are the elements of a distribution mix :

Channels of distribution

Warehousing decision

Product handling

Transport

Inventory control

Order processing

Coverage

Some Additional Ps of Marketing mix

People

The people are of two categories. One, those who are inside the organization includes your employees
from the lowest rank to the top. They are the bricks that sustain the whole structure.

Secondly, they include external people or customers. The customers are the very purpose of your
organization. Their need is your work and their satisfaction your ultimate reward.

Process

It involves the range of activities involved in the creation and delivery of goods. The need to improve
and upgrade technology today is indisputable. The very competence of your product depends on the
efficiency of your process. The speed of production, quality, numbers, etc all revolve around process
efficiency.

Physical evidence

It is one of the essential factors in choosing the marketing mix for a service product. The service
products are usually intangible and thus lacks a material presence. However, marketing is vital for the
actual sale of formless service products. Therefore, instead of focusing on the intangibles, the tangible
elements associated with the services are considered:
Environment

Layout

Furnishing

Decor

Atmosphere

The 6 Stages of the Product Life Cycle

1. Development

The development stage of the product life cycle is the research phase before a product is introduced to
the marketplace. This is when companies bring in investors, develop prototypes, test product
effectiveness, and strategize their launch. Due to the nature of this stage, companies spend a lot of
money without bringing in any revenue because the product isn't being sold yet.

This stage can last for a long time, depending on the complexity of the product, how new it is, and the
competition. For a completely new product, the development stage is hard because the first pioneer of a
product is usually not as successful as later iterations.

2. Introduction

The introduction stage is when a product is first launched in the marketplace. This is when marketing
teams begin building product awareness and reaching out to potential customers. Typically, when a
product is introduced, sales are low and demand builds slowly.

Usually, this phase is focused on advertising and marketing campaigns. Companies build their brand,
work on testing distribution channels, and try to educate potential customers about the product. If
those tactics are successful, the product goes into the next stage — growth.

3. Growth

During the growth stage, consumers have accepted the product in the market and customers are
beginning to truly buy-in. That means demand and profits are growing, hopefully at a steadily rapid
pace.

The growth stage is when the market for the product is expanding and competition begins developing.
Potential competitors see success and want in. During this phase, marketing campaigns often shift from
getting customers to buy-in to the product to establishing a brand presence so consumers choose them
over developing competitors.

Additionally, as companies grow, they'll begin to open new distributions channels and add more
features and support services.
4. Maturity

The maturity stage is when the sales begin to level off from the rapid growth period. At this point,
companies begin to reduce their prices so they can stay competitive amongst growing competition.

This is the phase where a company begins to become more efficient and learns from the mistakes made
in the introduction and growth stages. Marketing campaigns are typically focused on differentiation
rather than awareness. This means that product features might be enhanced, prices might be lowered,
and distribution becomes more intensive.

During the maturity stage, products begin to enter the most profitable stage. The cost of production
declines while the sales are increasing.

5. Saturation

During the product saturation stage, competitors have begun to take a portion of the market and
products will experience neither growth nor decline in sales.

Typically, this is the point when most consumers are using a product, but there are many competing
companies. At this point, you want your product to become the brand preference so you don't start to
enter the decline stage.

Again, marketers need to focus on differentiation in features, brand awareness, price, and customer
service. The competition reaches its apex at this stage.

6. Decline

Unfortunately, if your product doesn't become the preferred brand in a marketplace, you'll typically
experience a decline. Sales will decrease during the heightened competition and are hard to overcome.

Additionally, consumers might lose interest in your product as time goes on, just like the CD example I
mentioned earlier.

If a company is at this stage, they'll either discontinue their product, sell their company, or innovate and
iterate on their product in some way.

To extend the product life cycle, successful companies can implement new advertising strategies, reduce
their price, add new features to their increase value proposition, explore new markets, or adjust brand
packaging.

The best companies will usually have products at several points in the product life cycle at any given
time.
Example of a Product Life Cycle

Similar to the CD example above, let's follow the product life cycle of the typewriter:

Development: Before the first commercial typewriter was introduced to the market, the overall idea had
been developed for centuries, beginning in 1575.

Introduction: In the late 1800s, the first commercial typewriters were introduced.

Growth: The typewriter became a quickly indispensable tool for all forms of writing, becoming widely
used in offices, businesses, and private homes.

Maturity: Typewriters were in the maturity phase for nearly 80 years, because this was the preferred
product for typing communications up until the 1980s.

Saturation: During the saturation stage, typewriters began to face fierce competition with computers in
the 1990s.

Decline: Overall, the typewriter couldn't withstand the competition of new emerging technologies and
eventually the product was discontinued.