Consumer Behavior

At the heart of a business is the consumer; they are what makes a business a business. Understanding consumer behavior is crucial as it helps businesses attract new buyers and retain current ones by catering to their needs and preferences.

The goal of studying consumer behavior is to understand people’s wants and consumption patterns, which come together to form the backbone of the business’s marketing strategy and subsequent decision-making. Knowing valuable information about consumers’ purchasing behaviors and motivators can help create targeted marketing campaigns for products. The data can also be used to segment the market into different segments, which comes in handy to tighten up the marketing efforts.

Psychological Factors  

Let’s look at the three factors that impact consumer behavior. The first is psychological factors. These are the subliminal elements that influence the consumers’ perceptions, decisions, and ultimately their buying behaviors.¹ Consumers’ perception of a brand plays a significant role in determining what they buy. For instance, those attracted to exclusivity may be happy to splurge on expensive branded items because of the associated status symbols.

Also, consumers' preference to buy what they perceive as the best in the market, coupled with the phenomenon of social proof (where individuals rely on the actions and opinions of others to guide their own behavior), may incline them to choose one brand over another despite both offering the same product.² So, your peers think that Apple is the best technology company, you may be more likely to buy an Apple laptop for your studies.

Emotion also plays a major role in influencing purchasing decisions. Ever wondered why you purchased something? More and more research is showing that logic and rational thinking is not the sole driver of our buying choices. In fact, it seems that 95% of our purchasing decisions are made in the subconscious mind.³ We like to think that we make purchasing decisions by comparing brands and different price points but really, as Harvard professor Gerald Zaltman indicates, this is not exactly the case. Unconscious urges, guided by our emotions, significantly drive the choices we make.⁴ 

Personal Factors

Demographic information like age, gender, and lifestyle have been shown to affect consumer behavior.⁵ Parent organizations will often segment their secondary operations by age and gender. For example, the retail giant, Abercrombie & Fitch Co., has another brand called Hollister Co. that specifically markets toward the teen consumer in terms of clothing styles, pricing, and advertising. And the sports brand, Authentic Brands Group, has subsidiary clothing lines that cater to different market segments—Roxy, which primarily targets women, and Quicksilver, which primarily targets men. In terms of lifestyle, most obviously, we buy things that are in line with our hobbies and habits. For example, marketing waterproof jackets to hiking enthusiasts may find more success than to individuals working remotely.

Social Factors

Income level is closely correlated with purchasing patterns.⁶ Socioeconomic status is likely a driving force in whether a family bases their purchases on wants versus needs. Those who have the desire to fit into the community, such as teenagers in a highschool, may be easily influenced by trends or what is commonly found in their social group. And finally, family dynamics are shown to impact purchasing decisions where survey results reveal that children and parents name each other as a key influencer in their purchasing decisions.⁷

What is Consumer Behavior Research? 

To conduct consumer behavior research, we would use the same methods employed in market research: surveys, interviews, and focus groups. But, because consumer behavior aims to garner a wide and comprehensive set of data about the consumer, other methodologies have become increasingly popular. These include ethnographic research, consumer neuroscience, machine learning, and customer relationship management (CRM) databases. For example, studies on consumer neuroscience have revealed the influence of the brain’s emotional center, the limbic system, on purchasing decisions.⁸ CRM databases have also been used to unify customer information and track their interactions with the company.

Complex-buying behavior: This is when an individual buys a costly and rarely bought item such as a car. Consumers are typically very engaged with this type of purchase, dedicating time to explore the differences between brands. These purchases often lead to a strong sense of buyer commitment because of their costly nature.

Dissonance-reducing buying: This type of consumer behavior occurs when a consumer is highly involved in buying an item but finds it difficult to distinguish between brands. For example, when someone wants to buy a new laptop but all the models in the market offer similar features. The “dissonance” comes from the fear that they have made the wrong purchasing choice. To alleviate this tension, consumers often seek additional information and reassurance, like reviews and recommendations, to justify their purchasing choice and reduce the likelihood of experiencing regret.

Habitual buying behavior: When a consumer regularly buys an item without having any strong emotional connection to a particular brand. These products include items like milk, eggs, and gasoline.

Variety-seeking behavior: This kind of consumer behavior takes place when a consumer chooses to buy a different product in the same category, such as buying a new brand of sunscreen. But, this behavior arises out of the desire to try something new, not the dissatisfaction with their previous choice.

The history of consumer behavior parallels the evolution of marketing. The Roaring Twenties marked a shift in the business landscape—we moved away from production to focus on sales. With that, market research was born to improve the effectiveness of advertisements in swaying consumers’ minds.⁹ American psychologist, Daniel Starch, created the Starch Test to help companies determine whether their ads were effective and how they performed against competitors.

During World War II, the business landscape did a 180°. Unsurprisingly, consumers were making more rational spending decisions. This is when the Homo Economicus business model emerged, reflecting the widespread desire to purchase useful products at low prices, but it failed to account for the attraction to expensive and luxurious items like jewelry.¹⁰

Post-WWII, consumerism boomed once again—people were no longer fixated on being the “rational customer.” This new customer was “irrational,” “impulsive,” and “influenced” by advertising. The increased manipulation of marketing campaigns led to consumer activism in the 1960s and 1970s, led by President John F. Kennedy and his government to protect consumers from misleading advertising. The movement succeeded in providing greater access to information for consumers, broadening their choices. As a result, companies created products with the consumer in mind rather than the company themselves. This shift was largely attributed to the change in perception from irrational consumer to the cognitive, problem-solving consumer.¹¹ 

In the 1980s, with more people working longer hours, consumers opted for satisfactory purchasing decisions which meant buying cheap or name brands. These choices were made out of convenience because of the less free time people had to shop.¹²

With the onset of the Digital Revolution, we see a fundamental change in consumer behavior. The sophistication of technology and the internet made purchasing easier and more global. Social media has provided a platform for people to share their opinions on products and to advertise, enabling the consumer to conveniently engage in research before making purchases. Social media also appears to be influencing purchasing decisions.¹³ The present-day consumer behavior is, in essence, driven by the internet’s convenience and information. The passage of time has come to show us how consumer behavior aligns with technological innovation. 

Daniel Kahneman: A Nobel Memorial Prize recipient and a major figure in the field of cognitive psychology, Kahneman’s work on behavioral economics profoundly influenced the study of consumer behavior. His development of prospect theory alongside his frequent collaborator Amos Tversky, describes how people make choices involving risk and uncertainty. It challenges the traditional economic theory that people always make rational decisions aimed at maximizing utility.

Amos Tversky: A cognitive psychologist who made ground-breaking contributions to our understanding of human judgment and decision-making processes. Tversky is best known for prospect theory which was created in collaboration with Daniel Kahneman.

Consumerism makes the buyer the center of business practices. What are the insights we can gain from studying consumer behavior?

1. Product Strategy: Changes in consumer behavior could result in changes in their needs and wants. Products offered by businesses may end up obsolete because of a lack of demand. This would mean that businesses need to adjust their product strategy to coincide with the evolution of consumer behavior to keep meeting their needs and wants.
2. Price Strategy: Sometimes consumer behavior can vary with the pricing of products. This is especially prevalent as we cycle through the different stages of the economy. A recession may cause consumers to spend more conservatively due to reduced disposable income. So, companies can respond by lowering prices, offering coupons and deals, and providing free shipping.
3. Marketing Strategy: Consumer behavior determines the relevance of content. This means that businesses must continually evolve their advertising and marketing strategies to effectively reach their target consumer. For example, as people are watching less TV than they used to, this signals to businesses to perhaps move their advertising content to social media platforms instead.¹⁴

As much as psychological, personal, and social factors drive consumer behavior, biases manage to weave their way into consumers’ perceptions and decision-making. Studying consumer behavior in a research setting provides valuable information for companies and reveals the unpredictable aspects of consumer behavior that are influenced by biases. So, what are they? 

1. Reputation bias: Reputation is one of a company’s most valuable assets. This bias tells us that a consumer's perception and evaluation of a brand are influenced by their current reputation. What can happen is that consumers end up putting undue weight on prior opinions or established reputations rather than considering new information objectively. For instance, a consumer may buy a product from a popular brand over a lesser-known one even though the latter offers a better product at a cheaper price.
2. Online perception bias: This bias is the tendency for people’s judgments and decisions to be influenced by the way information is presented online. The bias can be the result of numerous factors in the digital context, from the website’s design, to online interactions, and feed algorithms. Given the digital revolution and the rise of online shopping, the online perception bias is increasingly prevalent.
3. Procurement process bias: Personal preferences, preconceived notions, or external influences can taint the objectivity of the procurement process of a good or service. In essence, consumer behavior can negatively impact businesses’ approach to acquiring goods. The consequences include favoritism, suboptimal supplier selection, higher costs, or lower quality goods.

Apple’s Brand Loyalty

Apple has intelligently leveraged consumer behavior to build a cult-like following, transforming the brand into a lifestyle essential. It is hard to find someone in our social circle who doesn’t own an Apple product. Apple has masterfully tapped into consumer psychology through the functionality of its products and its marketing strategies.

Apple’s brand strategy of prioritizing emotional connection over advertising the technical specifications of their products is a smart move. They emphasize how their products can make life easier and more enjoyable, making consumers think that owning an Apple product would provide personal enrichment… and who doesn’t want that.¹⁵

Apple’s design aesthetic is also extremely minimalist. Their stores feature large wooden tables displaying only a few phones. Their product design and function are meant to be simplistic to enhance usability. This simple aesthetic requires minimal cognitive effort when interacting with Apple’s product and its brand. And so, consumers’ appeal towards convenient and easy-to-use products is met.¹⁶

A24’s Marketing Strategy

A24 is a film studio that went from producing small indie films to receiving over 50 Oscar nominations for their films. Some of their movies include Moonlight (2016), Midsommar (2018), and, Best Picture of 2023 Everything Everywhere All at Once (2022). They have taken the industry by storm (and arguably people’s Halloween costume roster). Part of their success comes from their marketing strategy.

The company chose to forgo traditional movie marketing methods and instead rely on viral marketing and word of mouth. Their focus on creating buzz and excitement through social media interaction has made their methods unconventional but successful.¹⁷ 

As we mentioned earlier in the History section of this article, the digital revolution has affected consumers’ behavior by altering where they get their information from and how they are making their purchasing decisions. Consumers are relying more on opinions gathered from social media platforms to influence their consumption. A24 leveraged this fact and essentially made their consumers do the marketing for them. 

Not only have they saved on big-budget marketing, but it also increased the likelihood of their film content going viral online. Viral content spreads like wildfire and before you know it, a snippet of a film has reached millions of online users in a matter of days.¹⁸

Framing Effect

The framing effect is a cognitive bias where people's reactions to a choice are influenced by how the information is presented. This bias demonstrates that the way information is framed can significantly impact our judgments and perceptions. For example, people are more likely to favor an option framed positively, such as a 90% survival rate, over an option framed negatively, like a 10% mortality rate, even though both present the same information.

UX Research

UX research is a specific method of understanding consumer behavior to benefit an organization’s UX design. It involves studying how users interact with digital products to ensure the designs meet their needs. Key concepts such as user personas, usability testing, and qualitative and quantitative research are essential to UX research.

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14. Cranz, A. (2023, August 15). It’s official, people aren’t watching TV as much as they used to. The Verge. https://www.theverge.com/2023/8/15/23833516/nielsen-tv-cable-50-percent-decline-viewership-bum-bums
15. Ratra, G. (2023, September 12). Case Study: The Apple Phenomenon - How Consumer Behaviour Shapes Brand Loyalty. LinkedIn. https://www.linkedin.com/pulse/case-study-apple-phenomenon-how-consumer-behaviour-shapes-ratra/
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