Being raised in Chiniot, a small, rural town in Pakistan, was certainly an ideal space to pick an entrepreneurial spirit. I was always a curious child. I enjoyed going to the market with my granddad who was a local farmer. I observed the buying and selling environment at an early age. I remember, sometimes, at his prayer’s times, he would leave me at the farmer’s stall, and I will negotiate with few clients. I would charge premium for our produce. On his return I would always have made some extra money which I would keep as my reward of the day! and even refuse to compromise on low prices. At an early stage, I picked the right values to build a business, and it manifested in the later stages of my life.
I have travelled around the world and have lived and worked in several continents. The journey was filled with different experiences, and I got to learn a lot. I ran several businesses successfully and worked in diverse sectors including transportation, consultation, education, technology, and business. With a lot of success, I also confronted a lot of failures, especially when it came to the consumers. The consumer mindset is the critical and deciding factor for a business. Through different entrepreneurial endeavors, I learned a lot about consumer behavior and its implications for the success of a business. I discovered there are several factors affecting the pattern of consumer behavior. Consumer buys for different reasons, and to understand those reasons, you need to dig deeper into the “why’s.
Consumer behaviour refers to how and why individuals look for, buy, select, use, and dispose of products and services. It encapsulates many issues, including motivation, decision-making, consumer attitudes, influences, and perceptions.
The Importance Of Understanding Consumer Behaviour
If you’re a entrepreneur or business owner, the importance of understanding consumer behaviour cannot be stressed enough. In fact, this is essential if you want to be successful in launching or advertising products and services. It’s by understanding consumer behaviour that businesses can effectively market and sell their products and services. Understanding influences on buying behaviour also gives companies insight into influencing their target audience, becoming more competitive, and maintaining a loyal group of customers.
Additionally, consumers now expect companies to better understand them. According to Salesforce, 66% of customers expect companies to understand their expectations and needs. If a company does not do so, this could result in wasted advertising dollars and consumers simply taking their business elsewhere by buying from competitors. Failure to understand consumer behaviour can directly affect sales and, ultimately, a business’ success. In addition to marketing and sales, consumer behaviour analysis is essential for predicting trends, consumer differentiation, and even the development of products and services. Thus, successful organizations take advantage of consumer behaviour insights and use them to grow and thrive.
Factors That Affect Consumer Behaviour
A myriad of factors affects buyer behaviour, whether it’s in making purchases, being likely to repurchase products, or even in deciding not to make a purchase. These range from external influences like culture, family, reference groups, and marketing to internal influences like motives, perception, and emotions.
Situational Factors
Situational factors are factors that are out of the consumer’s control. One example of this is store layout. Everyone knows the all-too-familiar trope of being lost in a store and being unable to make your way out. This is no coincidence. Store layout and design are carefully considered and serve a purpose; to make consumers spend more money. Consider IKEA’s store design, which takes customers through the entire store. Similarly, casinos usually don’t have visible exit signs and are designed in a way that makes gamblers stay longer. Another example is store location. Starbucks has outlets every few blocks and in airports and department stores.
Personal Factors
Aspects such as personality, age, occupation, financial status, values, and stage in life are important factors that contribute to purchasing decisions. Interest and taste in products and services change based on age and what part of their life the consumer is in. For example, married vs. single people, parents vs. people without kids, and those starting out in their careers vs. retired individuals all have different needs and would have differing purchases.
Another personal factor that affects purchasing decisions is one’s lifestyle. Those with busy lives usually look for products and services that make their lives easier, while this is less important to those who are more constrained by money rather than time. For example, someone who is time-constrained may buy more expensive products because they may save time. Multi-tasking products such as combination foundation and sunscreens and hair straighteners that dry hair at the same time are excellent examples of this. On the other hand, those who are more money-constrained will give more weight to price than to convenience.
Occupation, income, and financial situation also affect purchasing habits. For example, a business executive may have the money to buy an expensive personal computer, but the same can’t be said for a college student who is struggling to pay their bills. Additionally, even the same category of a product would differ based on different circumstances. For example, two consumers may both need a pair of shoes, but based on their occupations and financial situation, one may buy off-brand shoes while another may spend money on designer shoes.
Personality traits also come into account since many consumers identify with brand personalities, which influence their buying decisions. Conversely, choosing a specific brand may be less about their personality and more about what they want to achieve. Buying may even be affected by others and their perception of the individual and the brand.
Social Factors
Social factors also affect consumers’ buying behaviour. This includes friends, family, other reference groups, social status, and even social roles. Friends, family members, and other reference groups can influence individuals by exposing them to products and lifestyles or by establishing norms and rules that cannot be broken. This needs to conform may inform buying behaviour. Likewise, social roles and social status can also lead individuals to conform to specific buying behaviour. For example, suburban parents usually choose minivans when it comes to car purchases, while high-powered executives may choose more flashy cars to signify their societal status.
Cultural Factors
Cultural factors consist of a consumer’s culture, subculture, and even social class. Since culture informs individual behaviour and wants, it plays a significant role in purchasing habits. For example, different types of clothing are prevalent in different countries. Additionally, alcohol is a common purchase in Western countries, but not in the Middle East. Even social class plays a large role in purchasing habits since those in the upper class have certain brand preferences and are more likely to purchase luxury items.
Psychological Factors
Psychological factors are an integral part of understanding consumer behaviour and purchase decisions. Motivation, learning, perception, and memory are all essential factors that directly influence individuals’ buying decisions.
Motivation drives consumers to act, but motivation differs depending on needs. For example, Maslow’s Hierarchy of Needs dictates that more urgent needs must be satisfied before moving on to less pressing needs. Thus, basic needs such as sustenance and shelter are more important than esteem needs such as status and recognition.
Learning is yet another factor that affects buyers. Once individuals learn about a product, they change their behaviour. Cues and biases play a role in this, as do companies’ attempts to inform consumers about their products and services. For example, this can be through taste tests, samples, test drives, sales reps, and even brochures and information-focus advertisements.
Similarly, perception drives buying behaviour since consumers perceive information that they use to guide their purchasing habits. This depends on both physical stimuli and how it relates to the surrounding environment. Whether it’s ambiance and music in a store, an especially aggressive salesperson or a product’s looks, a consumer’s perception will guide their actions.
In economics, there’s a basic assumption that individuals are rational and act in their best interests. However, this is not always the case, especially regarding buying decisions. Whether it’s impulse shopping or buying based on emotions, consumer responses and behaviours are not always logical and rational. Companies recognise this and use it to their advantage through emotion-based appeals, nostalgia marketing, and more.
The Consumer Buying Process
The buying process is complex and is influenced by a multitude of factors. Examining the buying process is confusing because it starts long before consumers officially start thinking of purchases. However, when looking at the bigger picture, marketers have come up with a five-stage system that encapsulates the consumer buying process. Fully understanding this process is essential despite it not always holding true or involving all the steps because it provides a frame of reference into the buying journey and how to influence it.
Purchase Involvement And Decision Making
The buying process should be viewed through the lens of purchase involvement and decision-making. This is because the process differs depending on the item and the consumer’s need for it. For example, an individual may not think much about the brand of bottled water they’re buying when they’re thirsty but would spend a lot more time thinking about the home they’re about to purchase. This is where purchase involvement comes in. The phrase refers to the level of interest in or concern about the purchase and the purchase process. It’s important to note that purchase involvement doesn’t depend on the product itself but on the consumer, how interested they are in the purchase, and how important the purchase is to them.
Low-Involvement Consumer Decisions
Low-involvement decisions don’t require a lot of risks, usually aren’t novel, and are thus, straightforward. In fact, these usually lead to a habit, especially when repeating purchases. While consumers do select the product they want and ensure it satisfies their needs, they don’t spend more time or effort than is needed. For example, a consumer buying toothpaste may not go through all stages of the buying process. Instead of spending time contemplating their decision and looking at different brands and claims, they’re more likely to purchase the toothpaste they’ve been using for years. The buying process is this instance is a routine and doesn’t require a lot of time or consideration. Most low-involvement purchase decisions consist of routine products, products that are inexpensive, and those that don’t pose a risk to the consumer.
High-Involvement Consumer Decisions
High-involvement decisions are much more important to the buyer and usually involve some level of risk. These decisions aren’t as straightforward as buying toothpaste, chewing gum, or trash bags. They may include a variety of risks, including financial risks, psychological risks, and social risks. To avoid negative consequences, consumers spend more time and energy when evaluating options and alternatives. Especially high-involvement cases such as buying a house or car involve an extended problem-solving process and may involve going through all the stages of the consumer buying process.
Limited Problem Solving/Limited Decision Making
This falls somewhere between high-involvement and low-involvement decisions. In this case, the consumer usually has some knowledge about a good or service, such as pricing, features, and other options. Thus, while they may do additional research, such as looking up product information online or asking for recommendations, they will come to a decision fairly quickly. Because of this previously existing information, the decision-making process and involvement are lowered. For example, if a consumer has previously purchased a sleeping bag and now needs a new one, they will already be familiar with the options, pricing, and features. Thus, the decision-making process would not take as long as it may for someone who is purchasing a sleeping bag for the first time.
Stages In The Consumer Buying Process
The following are the stages in the buying process. Not all of them are always utilized, and there’s no strict order that must be followed. However, this framework is useful for contextualizing how consumers make their purchases.
Problem Recognition
The first step is the consumer realising that they have a need that must be met. This may be an internal realisation, or it could be triggered by external forces such as family and friends or marketing. For example, an individual may realise that they need a new cell phone. This could be due to their current phone acting up, because their friend or family member just purchased a new phone, or because they saw an online advertisement for the latest iPhone. No matter how this realisation is triggered, the consumer has now recognised a problem and will act upon it.
Depending on the type of purchase, this could be one that is thought about in detail or one that’s made almost immediately. For example, a low-involvement purchase won’t be treated the same as a high-involvement purchase. If an individual is hungry and wants to order food, the decision-making process on this will be much simpler and quicker than buying a new car.
Information Search
Having recognised the problem, the next step in the buying process is searching for information that would help consumers make the right purchasing decision. Before seeking information from external sources, consumers first use memories and past experiences to think about the decision. Once this is done, they move on to external sources, such as friends, family, advertisements, recommendations from professional organisations, and going in-store and handling the item themselves.
The information searching stage isn’t always present for products that consumers are purchasing all the time, such as copy paper or milk. However, it’s usually present when buying something for the first time or if it’s a high-involvement decision like buying a luxury bag or wedding dress.
Alternative and Product Evaluation
While all consumers evaluate products and their alternatives in their own unique way, one thing is common in this process – narrowing down products and services to their attributes. From there, consumers look at the options they have narrowed down and look at the different attributes to assess which brand will satisfy their needs.
When consumers judge products, they usually have a minimum acceptance level in mind, prioritise some attributes over others, determine which ones cannot be compromised, and then decide. It’s important to remember that the attributes consumers are interested in differ from product to product. For example, when buying a car, they may look at attributes such as speed, safety, and seating capacity. However, these attributes would be very different for a hotel, where a consumer may focus on location, amenities provided, cleanliness, and price.
Selection and Purchase Decision
Once the selection is made, it’s time to make other decisions related to the purchase, such as which retailer to buy from, whether there are any discounts available, etc. With low-involvement purchases, consumers usually skip many stages and jump directly from problem recognition to selection and purchase of a product or service. It’s important to note that the purchase decision isn’t always positive – sometimes, consumers decide not to buy a product in order to save money, or may opt for another product altogether.
Post-Purchase Behaviour and Processes
The buying process isn’t over once the purchase is made. Post-purchase behaviour is an essential part of the process and consists of post-purchase actions, satisfaction, and more. When consumers aren’t satisfied with the product, they end up choosing and purchasing, they face post-purchase dissonance or buyer’s remorse. This is usually the case with high-involvement products that are usually novel or rare and more expensive.
It’s in a business’ best interest to ensure post-purchase satisfaction. If not, this may result in returning the product, abandoning it and the brand, or complaining to others about it. If companies keep their customers satisfied, they’re likely to benefit from glowing recommendations and customer satisfaction. Businesses try to combat buyer’s remorse by offering money-back guarantees, warranties, and customer service help. Additionally, they try to do this by setting expectations. This is because meeting expectations only satisfies the consumer. Exceeding expectations will result in much more satisfaction and may even delight. For example, if a repairman tells a consumer it will take four days to fix an item, and they do it in two days instead, the customer is much more satisfied than if it had taken the entire four days.
Thus, it’s essential to understand factors that affect individuals and how individuals go about making purchasing decisions. It’s only then that companies can get the right products to the right people and effectively market and sell goods and services. Once companies understand consumers, they can use strategies to mine this knowledge and use it to ensure their products and services are marketed to the right individuals at the right time.
By understanding the consumer buying process, purchase involvement, and the various internal and external factors that affect consumer behaviour, entrepreneurs can better understand their target audience and cater to them. They can take advantage of their knowledge of consumer psychology and behaviour and use this to increase sales and effectively grow their businesses. Thus, understanding consumer behaviour and why they buy is the key to ensuring consumers buy from you instead of from your competition.
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