Understanding consumer behavior is essential for any business, from start-ups to established enterprises. It is an essential part of effective marketing and product development strategies. To truly understand the concept, it is important to identify the various factors that influence it.
These can be divided into six main categories: psychological, economic, cultural, personal, business, and other factors. Psychological factors refer to the individual’s perception of a product or service; economic factors involve the cost of a product or service; cultural factors refer to the shared beliefs, values, and practices that a person has; personal factors refer to individual characteristics such as age and gender; business factors include marketing activities such as advertising and promotion; and other factors include external influences such as political or legal issues.
The overview of the key influencers, what they are, as well as how they affect purchasing decisions provide businesses with invaluable information that they can utilize to their benefit. By understanding a variety of influences on consumer behavior, businesses create successful marketing campaigns and develop products that meet customer needs.
Psychological Factors: Motivation, Perception, Learning, Beliefs and Attitudes
When it comes to understanding consumer behavior, the first thing to consider is the psychological factors that influence people’s decisions. No surprise there, as we are essentially talking about behavior. Behavioral patterns always have psychological motifs. In this case, such motifs can be summed up in motivation, perception, learning, beliefs, and attitudes.
- Motivation: People make decisions based on their internal drives, needs, and wants. Such motivations can come from within the individual or be externally influenced by family, culture, or other sources.
- Perception: Or the way individuals select, organize, and interpret information to form a meaningful picture of the world around them. It is heavily influenced by personal experiences and expectations.
- Learning: Learning is a key factor in understanding how CB works and is based on the acquisition of knowledge through experience or study.
- Beliefs and Attitudes: Consumers’ beliefs and attitudes are also important drivers of their purchasing behavior. Beliefs are opinions someone has about an idea or concept; attitudes are opinions about objects or people. These two factors shape how a person evaluates information and makes decisions about products and services. To give you an example, a pro-life-er is less likely to purchase a contraceptive than the pro-choice-er.
Economic Factors: Income, Cost, Affordability and Value
Economic factors obviously play a huge role in our understanding of consumer behavior. Consumers make decisions based on their income, their costs, and their ability to afford the goods or services they’re looking for. Moreover, value is a concept that drives much of consumer decision-making.
Specifically, income determines what a consumer can purchase, while cost determines how much of any particular item the customer can actually buy. Meanwhile, affordability is a measure of whether the item fits into their budget, and value is the perceived worth of the product based on its quality and economics—for example, does it last longer or provide more benefit than other similar products?
By understanding these economic factors, marketers are better able to create messaging that resonates with customers and craft products that meet customer needs while remaining feasible in terms of pricing and availability.
Cultural Factors: Culture, Subculture, Social Class, Family and Reference Groups
Culture is one of the major factors that influences consumer behavior. Together with the subculture, social class, family, and reference groups, culture can all have an impact on what people choose to buy and why or when.
Culture
The culture of a given society has a strong impact on what its members choose to buy and use. This includes the customs, beliefs, and values that shape the way that a group of people view the world. For instance, have you thought about why Korean make up brand foundations come in only a few different shapes of light beige? It’s not that the majority of the population has a light skin tone. Quite a few Koreans have naturally darker skin. It’s the Korean culture that encourages fairness which is tied to their history of nobles being shaded from the sun while ordinary people were out working in fields.
Subculture
Subculture refers to smaller groups within a larger culture that share common values and beliefs. Examples of subcultures include religious or ethnic groups and those based on shared interests such as sports or hobbies. These groups may develop their own preferences that differ from those of mainstream society. Think about that one spiky collar necklace thingy that almost all goths own.
Social Class
Social class is another factor that can influence CB. It refers to a group of people with similar levels of wealth, income, or education. Individuals may make purchasing decisions based on what they perceive as being appropriate for their social class or in order to conform to accepted norms within that group.
Ralph Lauren is the perfect example of the so-called “Old Money” aesthetic, so popular nowadays. The aesthetic is now used by people who belong to lower social classes to look like they belong to a much higher one. Again, it’s the aesthetic and not the actual brands who create clothes that look and feel “old money”. Such clothes remain expensive and unaffordable for those with low incomes. On the other hand, fast fashion companies have started to copy the looks because they are clearly selling well.
Family
Families often have a strong influence on what members purchase due to shared values or goals among family members. It is not uncommon for individuals to base their buying decisions on what other family members have bought before them or are currently using. Think of the scent of your childhood. Have you purchased a perfume that reminded you of your favorite scent growing up? Maybe even a perfume your family member used to wear. The same thing can be applied to clothes, (even) food (“we used to eat brown eggs only, so now I have to purchase brown eggs over the white ones”), and household items.
Reference Groups
A reference group is any group that an individual uses as a point of comparison for making buying decisions. This can include friends, work colleagues, or experts in the field who may serve as role models for certain behaviors, such as buying certain types of products or using particular brands. Say you have recently started an illustrator job at a small startup. There are three other people working with you, each with more years of experience. They all own a certain model of a drawing tab. You are likely to purchase the same one because it’s “common for the job you do/everyone else is using it, so it must be a good one”.
Social Factors: Family, Friends, Opinion Leaders and Status
Tied to the above-mentioned factors come the social factors. Your purchasing decisions are heavily influenced by those around you, such as family members, friends, and opinion leaders. These people shape the way you think and act by providing feedback and mirroring your behavior.
Family
Family members can have a positive or negative influence based on their beliefs, values, and attitudes, which play an important role in influencing CB. When you move from South Europe to East Asia, you might have a hard time giving up on all the dairy products that are uncommon in these countries that you used to consume a lot of back home.
Friends
Friends provide real-time support that can be used to encourage or discourage certain behaviors. They can provide feedback and even competition when it comes to buying products with which they are familiar. Something as simple as having a friendship necklace or annually purchasing gifts for your close friends on their birthdays and holidays.
Opinion Leaders
These individuals have a direct influence on the purchase decision process by providing advice about products or services. They often act as a source of information for those looking for information about a product or service. They often act as role models for buying decisions or lifestyle choices.
Modern-day influencers. There are countless examples of a product getting sold out in seconds after a particular celebrity demonstrates using it. Even if the demonstration was not intentional. Like that one time Jungkook used a fabric softener from a certain brand and the next day none of the stores across major Korean cities had them.
Status
Consumers also turn to their communities as a source of status validation, often relying on certain brands to signal their social standing. In this way, consumer purchases reinforce their perception of self-worth and belonging in a group setting. Surely, someone from the royal family of Monaco would not wear fake diamond earrings out in public. Not saying they would never purchase something cheap or fake because we don’t know these people personally! But it’s just a status thing not to wear anything fake out where the world can see you.
Personal Factors: Age, Lifestyle, Personality and Self-Concept
Personal factors are a key element in the decision-making process for consumers. Your age, lifestyle, personality, and self-concept all go into how you make decisions. Even when doing marketing on social media, companies or brands need to consider which platform to choose according to the major demographics they are targeting. Surely, a product that could go viral among teenagers, is better advertised through TikTok than Facebook.
Age
Age can have an influence on what products or services you choose to buy. Younger generations may have different buying habits than older generations due to changes in technology and culture. Younger audiences pay a lot of attention to trends, which come and go day in and day out. There’s no course or degree that can teach you how to correctly market to Gen Z. You just have to be online and aware of all the trends.
Lifestyle
Your lifestyle plays an important role when it comes to consumer decision-making. Consumers with an active lifestyle might be more likely to purchase items that will help them stay fit, while those with a more sedentary lifestyle might favor items that provide comfort and relaxation. Fitness instructors or YouTubers are more likely to consistently purchase new workout outfits, so partnering up with them as a brand means you get your products exposed to their audiences, which may result in increased sales. Rather than if you sent a PR package to someone with a primary focus on ASMR content creation.
Personality
Your personality can also drive your buying behavior. People who are more impulsive or daring may be prone to making fast purchases with little thought put into them, while those with a cautious nature may take longer before they commit to certain purchases. There are so many viral personality quizzes, with MBTI at the top. And astrology has become quite viral as well. A lot of brands have started incorporating such elements into their marketing campaigns or even new product launches.
Self-Concept
Finally, your self-concept is highly influential when it comes to buying behavior. If you have a negative self-image, you might be more likely to purchase things that make you feel good about yourself, such as high-end items or luxury goods, as part of an effort to boost your confidence. On the other hand, people with strong self-esteem are less likely to seek validation through material goods and services than those with lower self-esteem.
Business Factors: Product, Price, Place, Promotion, Process, People and Physical Evidence
Business factors are, of course, the basis for how brands use CB to their advantage. These factors include, but are not limited to, the product being sold, the price of the product, its availability (or lack thereof), how it is promoted to potential customers, how it is processed for purchase, who is involved in providing customer service and support, and any physical evidence that supports the product or service. Let’s break down each one:
Product
The product must meet consumer demands and expectations. It should be user-friendly and offer long-term value. It should also possess unique features that set it apart from its competitors.
Price
The pricing should meet both the customer’s budget and the company’s profit goals. It should be consistent with other similar products on the market and be competitive enough to gain a significant market share.
Place
This describes where consumers can access the product. This includes stores as well as online retailers, marketing channels, and distribution centers. Physical stores often use merchandising techniques to entice customers, such as placing products close to cash registers or at eye level on shelves.
Promotion
Promotions are an essential component when communicating with customers about a new product or service offering. This can range from traditional advertising (TV commercials or print ads) to more modern methods like social media marketing or influencer campaigns.
Process
This includes all of the steps a customer must go through in order to purchase a product or service. This includes evaluating alternatives, selecting a product or service offering, completing payment, and receiving delivery of the goods or services purchased. Companies should strive for an easy-to-navigate process with
Other Factors: Religion, Politics, Wars & Conflicts, Holidays
Religion, politics, wars, and global conflicts can also affect consumer behavior. To a large extent, consumer decisions are often shaped by beliefs and values that are rooted in religious teachings. For example, during Ramadan and other holy periods of observance, religious Muslims may conduct fasting, which could mean they reduce spending during specific timeframes. More than that, companies and brands that value inclusivity and target wide audiences should somehow acknowledge holidays and fasting periods.
In addition, local and global political events can influence how consumers behave. Political unrest in volatile regions may lead to changes in spending habits in those areas. This is due to fears of war or economic collapse. Similarly, international events such as elections and trade wars can change the level of consumer confidence depending on the outcome of those events.
Finally, there are special dates often associated with increased spending on gifts and entertainment as people celebrate national or cultural holidays with family and friends. During holidays like Christmas, there is usually an increase in retail sales from people purchasing gifts for their loved ones or items they need for holiday trips and vacations.
Conclusion
Consumer behavior is a complex mix of psychological, economic, cultural, personal, and business factors. Each comes along with a variety of other influences. It is important for businesses to understand these influences and how they may shape their interactions with consumers. Monitoring trends, understanding the sentiment, and responding to feedback, businesses can tailor products and services to meet the changing needs and behaviors of their customers. Doing so, they can ultimately increase sales, establish a loyal customer base, and stay competitive in a fast-paced and ever-shifting marketplace.
