THEORY OF CONSUMER BEHAVIOR

THEORY OF CONSUMER BEHAVIOR

In the attempt to satisfy wants, consumers make choices as frequently as wants are felt. Should a person wake up early or late? Should he eat rice and eggs or rice and dried fish for breakfast? Play billiards or meet a friend? Call a plumber or do the fixing himself? These are examples of choices that consumers make and they are an important considerations in the study of consumer behavior? The answer lies in how important are profits are to the firms.

It is very crucial for the firm to synchronize its production efforts to match the purchasing behavior of consumers. If they are not able to do so, losses and bankruptcy are highly probable. In acquiring a working knowledge of consumer behavior, understanding the concepts of utility are important preliminary items.

What Is Consumer Behaviour Theory

Trying to understand what goes on in a consumer’s head and exactly what makes them buy is a goal of every business. The only way to do this is by closely studying the buying patterns and building theories and models.

Consumer behavior theory is the study of how people make decisions when they purchase, helping businesses and marketers capitalize on these behaviors by predicting how and when a consumer will make a purchase. It helps to identify what influences these decisions, as well as highlight strategies to proactively manipulate behavior.

There are a few factors that influence consumer behavior, these are:

Psychological

Psychological factors include a person’s attitude, perceptions about a situation, their ability to understand information, what motivates them, their personality, and beliefs.

For example, a person who is actively reducing their plastic consumption will buy differently from someone who doesn’t believe in climate change.

Personal

Personal characteristics include age, gender, financial situation, occupation, background, culture, and location.

An older person will probably shop in a different way to a younger person, for example with a preference for brick-and-mortar stores rather than online shopping.

Social

Social influences can include a person’s friends, family, community, work or school community, or groups they associate with such as a local church or hobby group. It can also include social class, living conditions, and education.

A shopper who is at a school where a certain style of trainers is in fashion might search out similar shoes to fit in with their peers.

Why Consumer Behaviour Theory is Important

Consumer behavior theory allows businesses to understand more about their target audience and so be able to craft products, services, and company culture to influence buying habits.

It allows a business to understand:

What consumers think about your brand versus your competitors
How they choose between different alternatives
Their behavior while shopping
How the environment around them influences their behavior
What marketing messages or pricing strategies do they best respond to
Their preferred methods of paying
What products or services they are searching for to fill a need

Finally, by paying attention to your consumers' purchasing habits, you may develop items and services that they are more likely to purchase. Alternatively, make improvements to retail surroundings or online shopping processes to make them more frictionless, resulting in increased income.

If you have a huge physical store and see that customers pick up things to buy, browse about for a while, become annoyed, then put them down and leave without purchasing, it's possible that you need stronger 'Pay Here' signage guiding them to the nearest till.

The Different Types of Buyer Behaviour

It’s important to understand that everyone is different and makes different buying decisions. However, these can generally be categorized into these four types:

1. Routine response

Brand recognition and repetition play a large part in this type of buying behavior. People will purchase a brand they recognize, have tried before, or like the best. For example, when choosing a loaf of sliced bread, you’ll probably have a favorite that you reach for most often.

This type of buying doesn’t require much thought.

2. Limited decision-making

Often mid-level, occasional buying decisions fall into this category. They require some research and a little amount of thought before making a choice.

For example, you might be going out to the cinema and want to eat dinner beforehand so look at the restaurants nearby. You pick one that’s within your budget, that offers the food you like, that’s within a short walking distance and that has a table for the time you’d like.

3. Extensive decision-making

Buying decisions that involve a big financial investment or personal impact fall into this category. Most buyers will spend an extensive amount of time researching before making a decision.

Buying a house is one example. Many in the market for a new home will research thoroughly, view numerous properties, weigh up different options, visit local areas, check the nearby schools and facilities, etc. before a purchase is made.

4. Impulse buying

An impulse buy has no prior planning. It is a purchase made on a whim and with little thought. It’s often irrational and in the moment.

For example, if you’re waiting in a line to buy your lunch and see a magazine within easy reach with an eye-catching front cover, then you might pick it up and buy it with no in-depth consideration.

Depending on the situation and individual, these 'types' will alter. A customer who is new to a low-fat diet, for example, may take longer to choose a food item by checking the contents online and reading reviews than someone who isn't. An affluent individual may buy a car on the spur of the moment, whilst another may spend a significant amount of time researching different possibilities and taking test drives.

Many people may spend months researching where they want to spend their two-week vacation, while others will decide on the spur of the moment where they want to go and book a vacation at the last minute. And, in some cases, a buyer who is normally a deliberate decision-maker will be forced to make an impulse purchase — for example, when a product is on sale.if their laptop breaks down and they need to buy another quickly without doing their usual due diligence because they can’t operate without one.

This is why buyer behavior is described as being both predictable and irrational.

The Different Types of Buyer

Over the years, psychologists, sociologists, and researchers have come up with different models and theories about different kinds of buyers.

One research theory proposes eight characteristic buyers:

Perfectionist: the customer looks for the best quality of the product.
Brand-aware: the customer prefers brands and designer labels.
Hedonist: the customer treats shopping as a form of enjoyment.
Price-aware: the customer seeks low prices, sales, or discounts.
Fashion-aware: the customer likes to be up-to-date and seeks variety.
Impulsive: the customer is prone to spontaneous purchases.
Confused: the customer experiences too much information or choice.
Habitual: the customer is loyal to brands and follows a routine.

Another model looks at adoption rates of new products, grouping customers into five kinds of consumers based on how they respond to new products and the time it takes for uptake.

Innovators 2.5%
Early Adopters 13.5%
Early Majority 34%
Late Majority 34%
Laggards 16%

Most consumers will only buy a new product once it has become mainstream, so to make a product mainstream, businesses need to focus their early marketing efforts on getting the innovators and early adopters on board.

Analyzing Buyer Behaviour

There are various ways to analyze buyer behavior, however, these questions from the London School of Business and Finance are a great place to start:

Who purchases your products and services? Get a clear idea of your target audience with market research.
Who makes the decision to purchase your products and services? The purchaser might be different from the actual person making the decision, e.g. a painter and decorator will buy paint chosen by their customer.
Who influences the decision to purchase the products? Parents might be the shoppers but they are influenced by their children.
How is the purchase decision made? A person employing a gardener for the first time might be told what specific products to buy by the gardener.
Why does the consumer buy a product? The rationale behind the purchase. For example, a person on a long commute might buy a thick milkshake because it lasts a long time and will keep them occupied during the drive.
Why does a consumer prefer one brand over another? Factors include cost, quality, customer service, previous experience, brand reputation, and packaging, etc.
Where do customers purchase the product? Physical shops, online, face-to-face, via a third party, etc.
When do consumers buy a product? Specific occasions, for example, Valentine’s Day or looking for new gas and electric provider at new premises.
What is the consumer’s opinion of the product? Do they view it as value for money, cheap or expensive; is it cool or functional; is it a throwaway item or do they expect it to be around for years, etc.
What is the role of consumers’ lifestyle in their buying behavior? Fitness fans will be more interested in purchasing technical clothes for exercise, whereas those who love movies might be inclined to purchase a movie streaming subscription.

How Consumer Buying Habits Have Changed

Consumer purchasing behaviors are always changing, and firms' perceptions of them are changing as well. Consumers were thought to be reasonable at first, yet they acted in irrational ways. However, as time went on and more comprehensive research was undertaken, it became clear that consumers frequently act irrationally, owing to a variety of factors influencing their judgments and purchasing patterns.

Consumers were then segregated, and user experiences were examined to see how they influenced purchasing decisions. The customer journey was sketched out from first decision to contemplation, purchase, and post-purchase satisfaction by looking at post-buy activities and habits.

It’s important to look at trends, for example, eating habits have changed dramatically from ‘meat and two vegs’ to an appetite for cuisines from around the world. More people are becoming vegan, and there’s been an increase in demand for plant-based foods.

Payment methods and buying preferences have also evolved. Most people are happy to buy online, however, this was risky back in 1995 when the internet was new and Amazon first launched.

Consumers are now purchasing SaaS services and subscription boxes, streaming movies rather than going to a shop to rent a DVD. And buying their groceries online without ever having to step foot inside a grocery store.

Putting Consumer Behaviour Theory into Practice

Understanding the different types of buying decisions and mapping these against your target audience and buyer personas will help you to craft compelling marketing messages, eye-catching packaging, the right pricing models, deals and discounts, and other benefits to hook in your consumer.

Assessing trends and watching the changes in consumer buying patterns will also ensure you not only sell a product or service that people want but that you can keep up with demand. You’ll be able to make predictions and plan the best times for launches and special offers.

It’s important to understand that there are numerous variables and that not every consumer is the same. Map out different scenarios, and attempt to put yourself in the mind of your shopper. For example, a person who is usually an extensive researcher and is forced to make an impulse decision might appreciate a 30-day cooling-off period, allowing them to return the purchase if it turns out not to be suitable.

Spending time getting this right will see you experience a rush from consumers to buy your new product or service, an increase in customer loyalty and retention, and be able to create the right environments to encourage a purchase.

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