Understanding Consumer Behavior to Increase Revenue
Today’s guest post is from Clayton Wood – Enjoy!
Today’s consumers are becoming more perceptive when it comes to chasing value for every purchase. People across the globe have become more adept at determining which brand has the better offer or where to look when making a purchase. This mindset cements the significantly more customer-centric approach that more retailers are using.
Part of this shift in consumer behavior can be attributed to evolving online trends. With the changes in search processes, customers are better equipped for making more informed buying decisions. The rise of smartphone technology and mobile search also creates new paths for information sharing and a streamlined buying experience.
As online processes become more dynamic, customers are brought within reach of their favorite brands. This solidifies their need to buy and remain loyal to a particular brand—continuous interaction gives customers a reason to purchase and come back for more.
This poses the question: how can you increase revenue based on consumer behavior? To ensure your business is in the right position, let’s look at matters from a consumer’s perspective:
The Forces behind a Consumer’s Buying Decision
Contrary to popular belief, a consumer’s buying decision does not revolve around price alone. Different factors come into play before customers make up their minds on whether to buy now or leave the purchase for another day.
Here is a brief look at some of the factors that affect a consumer’s buying decision:
- Cultural Elements (Culture, subculture, social class)
Culture influences values, habits, expectations, and preferences. Consumers are usually inclined to buy a product because it’s the norm or it’s what they are accustomed to do. The bandwagon effect is an example of how culture influences the customer mindset.
- Social influences (Family, roles, reference groups)
Consumers make buying decisions based on social groups, roles, or status. A good example of this is how some customers are easily influenced by familial habits. As customers interact with other consumers, they become more prudent with purchases.
- Personal preferences (Age, occupation, personality, lifestyle)
Consumer behavior complexity is evident in how easily customers change their minds, sometimes after mere seconds. As their habits, lifestyle, and values change, personal preferences become an important factor in making buying decisions.
- Psychological factors (motivation, perception, experience, beliefs, attitudes)
Consumers are often motivated to buy due to different psychological factors. By recognizing the needs that come with these factors, it becomes easier to develop compelling strategies that prompt customers to buy a product or subscribe to a particular service.
The Black Box Model – the Secret to Understanding Consumer Behavior?
Before getting started on driving customers down the buying funnel, you need to further understand what makes them buy or turn to businesses for services. Philip Kotler, a renowned American marketing consultant and professor, applied the Black Box Model to consumer behavior.
The Black Box Model is a concept that pertains to how outside forces relate to actions and choices. Rather than focus on what goes on in a consumer’s mind, this concept emphasizes the input stimuli and the desired output. This concept comprises of three parts – environmental factors, the buyer’s black box, and buyer’s response.
Environmental factors serve as the consumer’s stimuli for buying a product or getting a particular service. These fall under marketing and environmental stimuli:
These stimuli enter the “black box”, undergo the buyer’s decision process, and produce certain responses.
Buyer’s Black Box
This includes the buyer’s characteristics and thought process. As Kotler points out, the buyer’s characteristics are defined by the cultural elements, social influences, personal preferences, and psychological factors. The decision process will be triggered by the stimulus and its corresponding buyer characteristic:
The decision process involves the following steps:
- Problem or need recognition
- Information search
- Evaluation of alternatives
- Purchase decision
- Post-purchase decision
While what goes on inside the “black box” varies from one consumer to another, knowing the basics of decision processing can help you predict responses.
This outlines the consumer’s final purchase or decision points. As the stimulus touches particular buyer characteristics and undergoes the decision process, this may result in:
- Selection of product
- Selection of brand
- Selection of dealer
- Timing and price of purchase
The Journey Down the Buying Funnel: How to Increase Sales and Revenue
Now that we’re clear on how consumer behavior works, it’s time to develop that ROI-driven strategy that will draw customers in.
Here are some reminders to help you get started:
Don’t underestimate the power of market segmentation
Not all customers are the same—this is a thought that most businesses seem to overlook. By failing to segment your market, you can lose opportunities and reduce your competitive advantage. In turn, this creates a domino effect that can have a significant impact on your relationship with customers.
According to SEO Services Australia, market segmentation serves as one of the pillars of your strategy. As a rule, you must group customers, according to buyer characteristics:
- Cultural clusters
- Decision makers
- Product usage
- Age and gender
Consumers taste and preferences change over time, so it’s important to update your market segment regularly. If there are shifts in consumer behaviors or trends, you might need to tweak your market segments to maintain strong value proposition.
Be the trigger—reinforce the need among customers
Customers come to your business for a reason, and it’s up to you to show them more reasons to stay. You need to maintain their interest to do business with you and keep them from turning to others. It’s all about tapping into the buying experience; engaging customers, adding value, providing solutions, but never to the point of overselling.
Make your marketing efforts more effective by providing a refresher for your sales collateral – product sheets, business brochures, a website, and other marketing materials. By continuing to provide updated information relevant to your market’s needs, you will have no trouble keeping those customers close and securing your revenue.
Customer interaction is never a one-time thing
If you think customer interaction ends after a purchase, think again. Customer interaction is the secret recipe to long-term brand loyalty. Neglecting customers will only give competitors free reign on your source of revenue.
Stay connected with customers by investing in an omnichannel strategy. This approach makes consumers the priority in everything you do. Through an omnichannel strategy, you can get a clear view of what customers need most—this allows you to synchronize the strategy into the buying experience.
Post-purchase interactions are also as important as initial queries. Customers think about your business even after finalizing the purchase. They often leave reviews or even make further inquiries, so it’s important to keep your lines open for any possible post-purchase interaction opportunities.
While it’s important to acquire new prospects, it’s also crucial to maintain a connection with existing customers. If you know how to take care of customers, you can expect them not to leave your business anytime soon.
Know Your Consumers, Get Closer to Success
Better familiarity with consumer behavior makes it easier to align revenue-driven strategies for business. With a thorough understanding of how customers make buying decisions, you can work on sales dynamics that will propel your business to greater heights.
Clayton Wood is the marketing director at SEOReseller.com. He has spoken at several online marketing conventions, and is passionate about helping companies and entrepreneurs keep up with the latest best practices in digital marketing and SEO. Connect with him on LinkedIn.