Why do you need to analyse customers and what is the importance of consumer buying behavior? There are many reasons for the same and this article outlines several of them.
Consumer behavior is studied more in sectors which are very concentrated and competitive. FMCG, consumer durables, retail and e commerce are such sectors where many people are employed just to analyse consumer behavior and influence consumer behavior.
Why you need to Analyse consumer behavior?
The primary importance of consumer buying behavior lies in the fact, that you can know how the consumer is going to behave. There are various reasons the consumer is buying your product.
- Impulse – Chocolates, tic tacs, ice cream.
- Need, Wants or Demands – Depending on the status the person is in.
- Lifestyle – What kind of a lifestyle he or she is living. Also connected to needs or wants.
- Necessity – A medical emergency, an insurance requirement.
- Many other reasons to purchase the product.
So if you look at it, when the consumer himself is buying several products for various reasons, then you need to study his behavior so that you can fit the purchase environment with the mindset of the customer. Taking a retail example, lets break it down further
- Impulse – If it is an impulsive purchase, you need to be as close to the entry or exit counter as possible. You need to analyse the customer’s impulsive behavior and ensure you take advantage of it. How many of you have purchased things online impulsively? Just on a whimsy?
- Needs wants and demands – If it is a need, than you can be carefree, but if it is a demand, then the product needs to be marketed in such a manner that the premium crowd can purchase it.
- Lifestyle – Mountaineering products are the best examples of lifestyle purchases. How many of us go hiking regularly? Not many. So these products are specifically targeted to people who are wild life lovers and hence the way they buy the product is important. Similarly, there can be other lifestyle products.
- Necessity – Emergencies can come any time in life and hence the importance of consumer buying behavior lies in the fact, that how do consumers behave in such panic situations, and what can you do to make them behave the way you want them to?
The above examples are only a few in the complete canvas of consumer buying behavior. Each sector is different, and the way to find out how to consumer is going to behave is important.
Now that we have understood the concept, let me straightaway give you pointers on the importance of consumer buying behavior.
What is the Importance of consumer buying behavior?
1) Increase revenue – The importance of consumer buying behavior lies in the fact, that we can improve our sales figures when we study the customers. We can alter the way we sell our products depending on the ways that customers buy them.
2) Brand equity – Why are brand restructuring or image restructuring exercises done in top companies? It is with consumer insight that the brand decides it needs to restructure itself, to change its perception in the mind of people, thereby getting higher turnovers. This too, can happen when you analyse consumer behavior.
3) Product portfolio – Continuous observation of consumer behavior can enable you in finding gaps in your product portfolio, which can in turn help you launch new products to the ultimate satisfaction of your customers. Samsung is an excellent of a company which keeps expanding its product portfolio.
4) Market trends – As the market trend shifts, a consumer analysis will be the first indicator of the same. The recent shift towards environment friendliness, and health food is a trend observed even by the likes of McDonalds who are bring healthier food to their calorie loaded menu.
5) Segmentation and targeting – Your current customers are a clear indication of who your future customers are going to be. If my current customers are 50% impulsive, then the future customers too will be impulsive. If BMW’s current customers are with an income of above 40 lakhs a year, then its future customers will also be with the same income. Segmentation and targeting becomes easier when you are observing consumer behavior.
6) Forecasting – Whether it be demand forecasting or sales forecasting, both of them are possible and therein lies the importance of consumer buying behavior. The company will not waste it resources for a product which is going to sell in summers, because the company knows that the customers are not going to buy it in winters. Hence by analysing consumer buying behavior, the company has saved warehousing costs, manufacturing costs and marketing costs as well. In essence, forecasting as well as proper utilisation of resources is achieved.
7) Competitive analysis – One of the most important reasons to study consumer behavior is to find out which competitor’s products the customer is buying and WHY? What are the attributes and the features that the customer is valuing above your company? And can you cover those gaps to take away these customers from competition? All this can be answered only by studying consumer buying behavior.
Above are some of the reasons that studying consumer buying behavior is important for any company. Not only does it contribute to profits, but we can be rest assured that a company which is in touch with its customers, has a sustainable advantage on its side. Being in touch with customers is an attitude which should be inculcated even when the company is a startup.