Behind Every Purchase: Customer Behavior Analysis
- Understanding your customers. Consumer behavior shapes buying decisions, influenced by marketing strategies.
- Buyer types. Customers exhibit diverse behaviors — habitual, novelty-seeking, or research-intensive — impacted by personal and situational factors.
- Analytical need. In-depth customer behavior analysis aids in personalizing interactions, predicting lifetime value and optimizing marketing strategies.
At its core, consumer behavior is all about understanding how your customers make buying decisions. Because the customer journey is made up of countless behaviors and small decisions that can be influenced by marketing and other factors, understanding them can help you nudge buyers in the direction you want them to go.
The types of customer behavior you will often encounter fall within more or less predictable lines. For example, habitual buying behavior is when your customer is so invested in the brand they buy again and again. Continually staying at the same hotels, consistently flying with the same airline and repeatedly buying the same brand of jeans are all examples of habitual buying behavior. The preferences of these types of buyers are often hard to change.
Someone who is more interested in novelty and has multiple product or service choices available on the market in their price range will choose products or services just to try them out. This type of customer might be easily influenced by a suggestion from a friend or social influencer on YouTube.
Yet another type of buyer is heavily invested in the decision-making process. They love to research and comparison shop before making a decision. Because they fear buyer’s remorse, this type of buyer often has a hard time making a decision and is often swayed by information they feel is credible and accurate.
Factors Affecting Buying Behavior
Of course, none of these personas is fixed in stone and can change depending on circumstances such as budget, urgency and other extenuating factors, according to Ana McFee writing for EHL Insights. Buying behavior is also influenced by things such as personality, politics, psychological, social, job status, health and other situational factors. Sometimes these factors, such as a political disagreement with a brand, may be short-lived or they could trigger long-term changes. These factors often can combine in novel ways that result in entirely new behaviors.
For instance, personal traits, like maintaining thriftiness despite affluence, or demonstrating extravagance in spending irrespective of limited resources, significantly influence individuals’ spending habits. A wealthy eater may prefer chain restaurants because they offer big portions for the money (aka, value), gluten-free meals or senior discounts. On the other end of the spectrum, a buyer who likes upscale restaurants may or may not be wealthy but may find a great deal of enjoyment from spending what money they do have on experiential dining.
The customers’ perceptions also play a major role in their buying behavior. In terms of brand and value, the adage “perception is reality” holds true. If a customer perceives one brand as providing greater value compared to another, they are likely to select the former.
Social influences today can be very powerful behavior modifiers, as well. Social influencers can make or break a product with a single video. (Power marketers can only dream of this.). And it’s not just online influencers. Friends and family, and acquaintances (the original social influencers) will, as they always have, influence where your customers choose to spend their money.
Related Article: Psychology and Science Behind Modern Customer Experience
Why Businesses Need Customer Behavior Analysis
It goes without saying that understanding customer behavior is critical to business success today. Because of ecommerce and the global marketplace, customers, depending on the product or service, have almost unlimited choices.
While each individual’s buying journey is unique, there exist common patterns that can be analyzed and predicted. This understanding equips businesses with the necessary tools to subtly influence a buyer’s decision toward their brand.
When a customer starts their buying journey, they do so in a predictable way. First, they think, then they feel and then they take action. If you know your customers’ behaviors, each of these steps can be influenced by the creation of better marketing programs and new services and products their customers will crave.
Understanding your customers will help you build loyalty through activities such as hyper-personalization and omnichannel marketing and sales. In competitive markets, personal relationships can mean the difference between making a sale and wasting your marketing budget. According to a recent McKinsey study, 71% of customers not only want but expect companies to deliver personalized interactions. Seventy-six percent said they get frustrated when this doesn’t happen.
Another benefit of uncovering buying behavior is the ability to predict lifetime value by the identification of ideal customer characteristics. Organizations can then use this information to target these personas to optimize marketing campaigns to focus on their most valuable customers while engaging with them via their preferred channels. As an added bonus you will uncover friction points for each persona. Removing them will help with upselling and cross-selling.
Related Article: 3 New(ish) Ways to Think About Customer Loyalty
What Is Customer Behavior Research and Analysis?
Customer behavior analysis is how organizations uncover buying habits and the factors that impact them such as demographics, social media, friends and family, religion, the media, and a host of situational factors such as location, time of day, employment status, etc.
Customer analysis also unearths how often your customers buy or visit your stores or websites, their buying history and product preferences, and how well your marketing and other offers are being received. This type of research can also tell you how customers use your products and if they intend to purchase again. You can also glean insights into more esoteric details such as how your customers feel about your brand and if it conflicts or aligns with their values.
How to Conduct a Customer Behavior Analysis
The first step of a customer behavior analysis project is segmenting customers into personas, according to marketing platform provider HubSpot. Then observe each group at each stage of their journey to see how each persona buys.
This can be accomplished by utilizing demographic data like age or gender, as well as psychographic information encompassing values, attitudes and interests. Location data or other factors such as product use, preferred media channels and online shopping habits also contribute to this data set.
Next, identify why they bought from you. Was it simply convenience or did they actively seek out your brand? Was it an impulse buy or something more substantial? How much did they spend? By understanding context, you can find ways to improve the overall customer experience.
To get to the answers outlined above you will need good data. It’s a good idea to use internal and external data sources to get a complete picture of your buyers and what is impacting their decisions.
Internal data can come from subscription data, social media insights data and product usage reports. Third-party sources can offer things such as consumer reviews and competitor analytics. There are a lot of ways to collect consumer data for analysis, said McFee, but some of the most common are:
- Direct customer feedback: If they are available, read your customer’s comments on your website.
- Opinion and review websites: These sites are helpful in collecting anonymous brand perception data.
- Survey your customers: Surveys are great ways to gather opinions.
- Marketing focus groups and online panels: Focus groups have been used by marketers for years to uncover customers’ opinions and buying habits.
Once you have enough data, the next step is to analyze it for trends. Look at each persona and determine what they bought, when they bought it and where they bought it. Along with common data points such as purchase location and products or services purchased, look for outlying data that could be indicative of points of friction that occur at different buying stages. Take note of any unique behaviors specific to a customer type to understand what behavior stands out and how to encourage or minimize it.
There are many modern AI-based analytics tools and technologies marketers can use to understand and predict a lot of what customers do. These technologies compile and examine enormous quantities of data — beyond what any human could possibly manage — to establish links between widely dispersed data points. The results can be used to optimize the buying journey for existing customers but also point to opportunities to develop new products, services, or even new lines of business.
With so many buying options available to your customers today, understanding their behavior is more important than ever. Fortunately, the data and tools to do so are abundant and readily available. However, applying the insights derived from such a massive amount of data can be challenging, considering the plethora of options and channels marketers must utilize to reach customers and who now seem more fickle and demanding than ever before.