“The customer is always right.”
You must have heard that quote many times, especially if you are a business owner. Whether it is true or not is a conversation for another day. Today, let us talk about how much your consumer contributes to your business growth and why you need to learn about them. First, let’s talk about a business that has thrived on consumer research.
Starbucks. Fourteen years ago, they created an idea that has kept them on top of the coffee-making business since then. They made a platform called “My Starbucks Idea.” Anyone, including users and competitors, can share ideas on how they think Starbucks should improve in business. Starbucks then turns these ideas into actionable business tips. With this consumer behavior research strategy, Starbucks maintains effective marketing strategies by staying in touch with the consumers’ needs.
Now, what is consumer psychology, and how does it affect your business?
Meaning of Consumer Psychology
Consumer psychology is the study of consumer behavior. Consumer behavior is how individuals, groups, and organizations decide on what they buy, want, and need or how they act concerning a product, service, or organization. It interrogates how and why people make decisions about purchasing goods and services.
Consumer psychology is the point where business and psychology come together to understand the behavior of individuals as they relate to the market and the products and services available to them. In short, it studies why your consumers act the way they do.
Why You Need Consumer Psychology as a Business Owner
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The consumer is, arguably, the most crucial part of your business. They use your product or hire your services. Without them, there is no point in your business. However, the consumer doesn’t always act as you would like them to. You cannot wave a wand to make them do so. Their preferences and needs change due to factors we will discuss later in this piece. Since business and magic wands don’t go together, how do you maximize consumer behavior for your business? The answer is the psychology of consumer behavior.
The psychology of consumer behavior helps you understand your customers' thought processes and motivations. In other words, it shows you what your consumers want, why they want it, how they want it and when they want it. With this knowledge, you can develop marketing strategies and create products and services that better meet the needs and desires of your consumers. This is called the psychology of marketing. For example, consumer psychology can show how consumers respond to different pricing strategies, or choose which products to buy based on their perceived quality or value.
How to Assess Consumer Behaviour Through Research
Sites like Statista and OECD Statistics offer valuable data that can aid business decision-making. However, the data on these sites are not usually customized for niches. You therefore cannot rely on them, if you are looking for high-level accuracy.
In entrepreneurship, both small and big businesses need to understand the psychology of consumer behavior. As a small business owner, you can use simple research methods, such as surveys and experiments, to collect data on consumer behavior. Say your business is an ed-tech company, where you teach digital skills. You want to know what digital skills are the most in demand in a particular period. You can conduct a survey by sending out a link where people can choose which skills they think they need the most.
Problem solved, right? Yes, but only halfway.
The data you collate from your research must then be analyzed to identify patterns and trends in how consumers make decisions. Where you are working with small data, and a compact market section, this simple strategy may work. However, larger and more complex markets require some expertise. That is where professional consumer psychologists and market researchers come in.
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Consumer psychologists often work closely with market researchers and data analysts, to help you understand the latest trends and developments in your niche market. The researcher uses specialized methods and tools to collate data. The data analyst and consumer psychologist sort and analyze the data for, converting them to relevant information for your business. With this information, you can identify new opportunities for growth and stay ahead of your competitors. The Analyst Agency and Branded Research are examples of professional market research agencies you can work with.
Methods of Conducting Consumer Psychology Research
Even if you hire a professional consumer psychology researcher, you should know a bit about research as an entrepreneur. This knowledge will help you guide the research process, to ensure it conforms with your business goals. Consumer behavior can be researched through various methods, which can be broadly classified into two categories: qualitative and quantitative.
Qualitative research methods
If the devil is in the details, qualitative research will fish him out. These research methods provide an in-depth, descriptive understanding of your market. They are often used to explore the underlying motivations, attitudes, and beliefs of consumers, and can include techniques such as focus groups, in-depth interviews, and ethnographic studies.
Quantitative Research Methods
Quantitative research methods, on the other hand, provide a more objective, numerical understanding of your consumer. These methods are often used to collect and analyze large amounts of data and can include techniques such as surveys, experiments, and econometric models.
One of the most common methods used to study consumer behavior is surveys. Surveys can be administered online, via phone, or in person. Surveys allow researchers to collect a large amount of data from a large number of consumers. They can also be used to explore a wide range of topics, such as product preferences, shopping habits, and brand loyalty.
Experiments are another common research method used in the study of consumer behavior. Experiments allow researchers to manipulate one or more variables (such as price or advertising messages) and measure their impact on consumer behavior. Experiments can be conducted in a laboratory setting or the real world and can provide valuable insights into how consumers make decisions.
Econometric Research Models
Econometric models are mathematical models, used to study consumer behavior. These models use economic theory and statistical techniques to analyze consumer behavior and make predictions about how consumers will respond to changes in the market. They can be used to study a wide range of topics, including market demand for goods and services, consumer spending patterns, and the impact of advertising on consumer behavior.
Factors that Affect Consumer Behaviour
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The factors that affect consumer behavior can be broadly classified into three major parts.
- Personal factors
- Psychological factors
- Social factors
Personal factors include the individual's income, age, and education level. Psychological factors are motivation, perception, and learning. Social factors can include cultural influences, family, and social groups.
In addition to personal and psychological factors, social and cultural factors can also play a role in consumer psychology. For example, family, friends, and peer groups can influence an individual's buying decisions, as can cultural norms and values.
Additionally, situational factors, such as the availability of a product and the environment in which a purchase is made, can also influence consumer behavior. Other situational factors may include the time, place, and context in which the buyer makes a decision. The availability of products, the products’ prices, and the presence of competing products can all impact an individual's decision to buy.
Consumer Behaviour Types and How to Influence Their Buying Decisions
Although your target audience may have similar preferences, their behaviors may differ due to some factors. Thus, your marketing effort should envisage as many behavior types as possible. That way, you can aptly target most of the audience, whether you use digital marketing or traditional marketing strategies. This is the psychology of marketing. Here are the seven major buyer types and how you can influence their buying behavior.
- Limited Decision-Making
- Complex buying
1. Habitual Buyers
This buyer makes purchase decisions based on their present need. They hardly go the extra mile to research a product. Your product will appeal better to a habitual buyer if you highlight your most compelling product benefits in a simple, easy-to-find way. Great packaging and ease of access are pluses too. For instance, if you build an eCommerce store with Strikingly, you can showcase your product offering by simply stating the most appealing product features as the product description.
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Impulsive buyers rarely have to need your product. They only have to want it at that moment. They hardly work with a budget and are easily swayed by the fleeting attraction or satisfaction they get, either from the taste, look, or feel of your product or service. Invest well in packaging and proper branding, and you will likely get an impulsive buyer. Read more about brand marketing on this blog post by Strikingly.
This buyer is looking for the easiest and quickest option at the moment. He doesn’t want to spend time fussing over the details. A simple brand design, offer, and satisfaction promise will make you stand out to this type of buyer.
4. Limited decision-making
The absence of diverse options is the major influencing factor for this buyer. There are a few alternatives in the market, so they sometimes choose products they don’t like. If you sell a scarce product or have fewer competitors, good marketing and excellent product quality can turn this buyer into a loyal customer over time.
5. Complex buying
When buyers need an expensive product or service, they usually do a lot of research. Who bought that product before? What are their reviews? This is complex buying. For the complex buyer, your marketing should have a lot of testimonials and product descriptions. Tell all there is to tell about the benefits and features the buyer will enjoy if they get the product.
As the name implies, the variety seeker is looking for a change. They have used a brand for some time and are now looking for alternatives. In your marketing, accentuate your Unique Selling Points. The variety seeker will be more inclined to buy from you if they see how better you are than your competitors.
Expressive buyers want to feel heard and valued. They will judge your business majorly by their transaction experience. A customer-based marketing strategy works well for this type of buyer. With this style, the customer management system leads the company’s marketing efforts. The business places a loud emphasis on consumer feedback and customer care.
Overall, consumer psychology is essential for businesses looking to understand customer behavior and develop strategies for success in the market. Understanding consumer behavior is crucial for your business, as it helps you to create marketing strategies with higher chances of success. By understanding what motivates consumers to buy, you can create products and services better tailored to the needs and preferences of your target market. As a result, your business will increase sales, build customer loyalty and improve your overall bottom line.