What Is Consumer Behavior?
Consumer Behavior studies individual, group, and organizational behavior concerning consumer and household expenditure on goods and services. The study of customer behavior is methodologically diverse, spanning economics, psychology, sociology, and marketing. The concept of customer behavior is also related to the idea that consumers prefer different types of goods and services.
Importance of Consumer Behavior
Consumer Behavior analysis provides a contemporary understanding of how consumers choose their products. When organizations understand how their products are being used and the specific needs that individual consumers have, they can design new products and services to meet these needs. Consumer Behavior should be understood when companies want to develop a good marketing strategy. Below are some importance of consumer behavior
- Consumer Differentiation
Brand differentiation is the ability to distinguish and identify a product because of its value to the consumer. The creation of a good brand name leads to an increase in business profit. Creating different products for different cultures, religions, or income creates better market opportunities for the organization. This is done by understanding what consumers want from the product and how they want to be marketed by differentiating the products and services.
- Information Analysis and Decision Making
Understanding how consumers think and act in purchasing goods and services enables the management to improve operations, increase sales, cut costs, and develop products and services that achieve consumer preferences. The management should use this knowledge to promote improved consumer understanding of products and services and their needs. Knowing the consumer’s requirements for a product or service helps organizations market more effectively.
- Retention of Consumers
Customer retention and customer behavior are also known as customer relationship management. The retention of a customer is of utmost importance to an organization because they are the key to helping an organization retain the target market share. Apart from that, customer retention is vital to an organization because these customers are the source of information for analyzing and planning future marketing strategies to attract new customers. Retention of a customer is necessary because these customers are advertisers, referral sources, and may be prospective clients.
- Demand Management
In this process, managers use the information and other resources to determine how much each product or service should be sold at a specific price. By reducing the sales price at a low level and increasing it at a high level, companies can increase their sales but not lose customers by lowering their costs to attract potential customers. Understanding customer behavior is required to estimate demand. The essence of demand management is designed to increase sales volume (or market share). Supply and demand are both essential aspects of the concept of their behavior.
- Predicting Market Trends
Consumers tend to change their behavior concerning new products or services. The managers can use this behavior analysis to provide a better understanding of how consumers react to new products and services. They can make decisions on how to develop, price, and market their products based on current behavior trends.
Businesses are increasingly becoming more focused on understanding customers behavior to react better to the changing market. It is often used as a means for customer segmentation, customer profiling & development of customized marketing strategies for different groups of customers.
The study of customer behavior is methodologically diverse, spanning economics, psychology, sociology, and marketing. Categorical, descriptive, and open-ended approaches have been used to study it. Descriptive research, focus group interview, case studies, and ethnographic methods are also used to study customer behavior. The distinctive feature of the descriptive approach is that it focuses on analyzing data from individual consumers, groups, or organizations. The purpose is not to establish causal relationships but to describe or explain the behaviors. It can be used for market research or internal planning purposes within an organization.