5 Factors that Influence Consumer Behavior
Understand, connect, and apply these factors in your marketing campaigns
What is consumer behavior?
Consumer behavior is the study of individuals, groups, or organizations and all the activities associated with purchasing and using goods and services.
By understanding consumers' emotional, mental and behavioral responses, we can design marketing tactics that appeal to our target consumers on a personal level.
That's why creating a detailed ideal customer profile (ICP) is critical to the success of any marketing activity. But, unfortunately, you have no idea how often I consult with "experienced" marketers who have ZERO clue about their ideal customer.
Many have never created an ICP and don't know where to start.
But before we can develop marketing strategies, we need to understand what influences our customers.
5 factors that influence consumer behavior
As you read through the factors that influence consumer behavior, you'll notice many micro-connections: many factors and sub-factors cross-connect.
You can use those connections to pull different triggers and influence consumers differently.
Your visuals (images/videos) could touch on one factor, while your copywriting could hit two different factors. But, the entire package is tightly integrated into a seamless marketing campaign.
A person's family may influence what they purchase. Consumers may buy products similar to those their family members have or use.
Also, positive or negative opinions of products from childhood can impact purchasing behavior as an adult. (Re: nostalgia marketing)
If we understand a person's family background, we can create content that appeals to them.
People often look to reference groups for guidance on what to purchase. Reference groups could be peers, experts, social circles, or celebrities.
Members of a reference group typically have common purchasing patterns and an influencer that provides guidance.
For example, teenagers may look to a specific friend for recommendations on what clothing or cosmetics to buy.
So understanding our ideal customer's reference group helps us target marketing channels that reach them more efficiently.
Roles & status
People's roles and status in society can also influence their purchasing decisions. The higher the status (aspirational too), the more impact it will have on how much we spend.
For example, a senior executive may be more likely to purchase products associated with success and power, such as expensive clothing or jewelry.
Or someone that's in a junior role but wants to move up may purchase the same products to look and feel a part of the club. But, again, they want people to perceive they are already where they want to be.
You've heard the term "Keeping up with the Joneses." That phrase comes from a desire to be perceived as having the same social status as those around us.
So by understanding our ideal customer's roles and status, we can target them with products and services that match their social status or aspirations.
Age & life-cycle stage
A person's age and life-cycle stage can influence their purchasing decisions, as they may want to purchase appropriate products for their stage in life.
For example, young adults may be more likely to purchase products associated with rebellion or risk-taking, while older adults may be more concerned with practicality.
Knowing a person's age and life-cycle stage can determine which social media platforms are appropriate for advertising our products or services.
The higher the disposable income, the more purchasing power a consumer has for luxury products. Here, luxury products are non-necessities with a high price tag.
People with lower incomes may be more price-conscious and spend more on necessities, such as education, food, and clothing.
When designing a marketing campaign, we can adjust our pricing strategy based on the income level of our ideal customer. For example, we may target lower-income households with time-limited discounts or coupons.
A person's occupation can drive a person to purchase products associated with their job.
For example, a doctor may be more likely to purchase medical supplies, while a construction worker may be more likely to buy tools.
But those are easy examples. If we expand our research a little more, we might find that doctors are more likely to purchase other products more associated with status.
And construction workers are more likely to purchase products associated with practicality.
Plus, once we know our ideal customer's occupation, we can determine other groups they may belong to that could influence purchasing our products or services.
Our lifestyle strongly influences our purchasing behavior. Our lifestyle could include anything like the environment where we live, how we spend our free time, or even our values and beliefs.
For example, people who live in high-crime areas may be more likely to purchase products that offer protection, such as security systems.
People who live in rural areas may be more likely to purchase products associated with a simpler lifestyle, such as gardening or fishing supplies.
By understanding our ideal customer's lifestyle, we can design a content strategy around topics that would interest them. And influence their behavior by providing solutions to their pain points.
Personal income is a significant factor that can influence consumer behavior. In this category, we're talking about disposable and discretionary income.
Disposable income is the amount of money we have available to spend after taxes. Discretionary income is the amount of money we have available to spend after taxes and necessary expenses, such as food and shelter.
The higher our disposable or discretionary income, the more money we can spend on goods and services.
People with higher incomes are more likely to purchase luxury items, while people with lower incomes may be more price-sensitive.
If we target price-sensitive consumers, we may want to offer discounts or payment plans. If we're targeting luxury consumers, we may want to focus on the quality and prestige of our product.
For example, I visited a high-end "department" store in the middle east. Nothing, and I mean nothing, had a price tag on it. For their target customer, the price was not a concern.
Family income is the amount of money left over after taxes and other necessary expenses that a total family can spend on goods and services.
Many families have dual incomes. And a family with a higher income may be more likely to purchase a new car for a child, while a family with a lower income may be more likely to buy a used car.
When we design marketing campaigns around dual-income households, we need to account that there may be more than one person making purchasing decisions.
This concept is essential when we're marketing to families with children. We need to consider the needs and wants of both parents and the children in our marketing campaign.
People who expect their income to increase in the future may be more likely to purchase expensive items on credit before receiving the income increase.
While people who expect their income to decrease may be more likely to purchase only necessary items.
During my MBA program, a professor showed research that as MBA students get closer to graduation, they purchase more expensive items on credit. The reason is that they have higher income expectations after graduation.
As marketers, we can use this information to target MBA students with products and services that they may postgraduation but don't necessarily have the disposable income until they graduate.
Consumer credit is when a person essentially borrows money to purchase goods or services. It can be a loan, credit card, or store card. The amount of credit and flexibility depends on the individual's credit score.
People with access to consumer credit may be more likely to make impulse purchases of items that they may not be able to afford with cash. (Not saying this is good.)
Also, people with access to credit and flexible credit terms may be more likely to purchase expensive items.
While people without access to credit may be more likely to purchase only necessary items.
If we're an e-commerce store, we should ensure that our checkout process is optimized for people paying with credit cards. Optimization includes offering multiple payment options and being clear about the terms and conditions.
Liquid assets are cash, stocks, mutual funds, or anything that can easily convert to cash. And a person's liquidity is the amount of liquid assets to cover one's essential expenses for a period without selling any investments.
People with high liquidity may be more likely to purchase expensive items, while people with fewer liquid assets may be more likely to buy only necessary items.
I've seen pricing strategies that offer different prices depending on if you're paying cash versus credit. Even cash versus payment plans. "Pay $550 in cash or three payments of $200."
Savings are considered to be assets that are set aside for a specific purpose. Savings can include cash in a dedicated account, money market accounts, and other investments.
People who have a lot of savings may be more likely to purchase expensive items, while people with fewer savings may be more likely to buy only necessary items.
And if people are in the process of growing their savings account, they may be more likely to purchase only necessary items or wait for sales before making a purchase.
Motivation is a significant factor that can influence consumer behavior. By understanding a person's needs, we can better understand what may motivate them to make a purchase.
Like Maslow, Donald E. Brown studied different cultures to identify common human universals. He created a long list of needs to include:
Physiological needs (air, water, food, shelter, clothing)
Safety needs (security, order, law, limits, stability)
Social needs (belonging, love, affection, friendship)
Esteem needs (self-respect, autonomy, achievement, mastery)
Self-actualization needs (morality, creativity, spontaneity, problem-solving)
People may be motivated to purchase goods or services to fulfill a need or want. For example, someone may buy a car to satisfy the need for transportation.
Or someone may purchase a new outfit to fulfill the want of looking stylish.
If we get very specific, people motivated by a need for security may purchase insurance with $3,000's of disposable income. In contrast, people motivated by social status may use the same $3,000 to buy an expensive watch.
Our perception of a product happens when our brain takes in information through our senses and then interprets that information. Perception can be affected by many factors, such as our prior experiences, biases, and beliefs.
People who perceive a product to be high quality may be more likely to purchase it, while people who perceive it as low quality may be less likely to buy it.
Think about brand and market positioning here.
If we understand how people perceive a product, we can better understand how to influence their purchase decision.
Also, perception is why product reviews and customer testimonials are essential.
How we learn about a product or service can influence our purchase decision. For example, we can learn about products through marketing, word of mouth, or personal experience.
People who learn about a through their social network may be more likely to purchase it. In addition, people that learn about a service by experiencing it themselves may be more likely to use it again if the experience is positive.
If we can determine how and where people learn about products, we can better understand how to influence their purchase decisions.
I conduct a lot of product development and voice of the customer consulting. Much of my research involves understanding how and where people learn about products.
Attitudes & beliefs
Attitudes and personal belief systems subconsciously guide many of our decisions. In addition, our experiences, values, and the people around us shape our beliefs.
For example, people who align with a political party may be more likely to purchase products that support their party's values. In contrast, people who align with religion may be more likely to buy products that support their religion's values.
If we analyze our customer's attitudes and beliefs, we can design marketing campaigns that capture their attention and appeal to their belief systems.
Our culture helps form our beliefs, values, wants, and behaviors.
For example, people who live in a collectivist culture may be more likely to purchase products that benefit their community. While people who live in an individualist culture may be more likely to buy products that help themselves.
By understanding the culture of a broader community, we can better understand the wants and needs of individuals within that community.
A subculture is a smaller group within a culture that shares common values. And a counterculture is a group that goes against the mainstream values of a culture.
People who identify with a subculture or counterculture may be more likely to purchase products that reflect their values.
Some companies have made huge profits by targeting countercultures. For example, Vans was very successful in marketing to the counterculture of skateboarders.
If we understand the subcultures and countercultures within a community, we can better understand how to appeal to their values.
Social class is used to identify and describe groups of people worldwide. One's social class is determined by our background, occupation, education, and location.
For example, people who belong to a higher social class may utilize different avenues to identify or research products. They might have personal shoppers and designers that buy for them.
We can better understand whom to market our products to for each social class by this information.
Now you know the 5 factors that influence consumer behavior. If you want to learn how to apply these factors, read my article on "10 Tactics to Influence Consumer Behavior (+ 1 Bonus)."
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