Who, exactly, is a consumer? Before we understand the psychological factors driving consumers' buying behavior, it is important that we understand who consumers are. Consumers can be a single consumer, or a consumer can be an organization. Consumers can be any legal person that's buying goods and services from you. These are economic goods and services, and are typically paid for with a widely recognized currency. Typically, the consumer is also the end user or end target of the goods and service a business produces. There are three main definitions for a consumer. You can define a consumer singly or as a combination of these definitions.
- A consumer is an organization or an individual targeted by a company to sell their services or product to.
- A consumer is an organization or an individual that pays a price to use the services or products that are produced by your organization.
- A consumer is an organization or an individual who is the final user of the services or products of a company or organization.
The consumer is often seen as the king of the economic system, and its chief decision maker. Consumers make a diverse range of decisions, including the following:
- Whether or not to buy a product they come across at a store.
- Whether or not to be influenced by marketing campaigns and advertisements for the products and services of a company. It’s important to note that marketers get better every day at persuading consumers to buy their products, often without consumers' active awareness that they are being influenced, because advertisers and marketers have a better understanding of the psychological influences in marketing.
- What to buy and when to buy it.
- Which competitor, among several competitors, to buy from.
The power to make decisions is the central power that is given to a consumer. In fact, everyone has been a consumer at some point in their lives. The main determinant of the consumer market is that everyone has the right, as well as the power, to choose how, when, why, on what, and where to spend their money. Even something as simple as buying a plate of French fries makes you a member of the consumer market because you will pay a certain sum in exchange for the French fries. You are making a decision. You decide to part with some of your hard-earned cash in exchange for a plate of French fries. You also decided to buy from a specific vendor and not a different one. In effect, you chose between competitors. The more active the consumers of an economy are, the more active the economy will be in general.
If a consumer is anyone who makes economic purchase decisions, then what is consumer behavior and how does it affect organizations and the overall economy? Why is it so important?
Consumer behavior is, for the most part, a psychological process and the psychology of buying behavior is deeply related to the emotions that the consumer goes through. First, the consumer will begin by recognizing the fact that they are in need of the product. They will then find some way to solve their needs. They will find out where they can get the product, how much it costs, which vendors are the best to buy it from, when is the best time to buy it, and so on. Once the consumer is satisfied with all the information they have gathered on the matter, they will implement the plan and make a purchase of the product.
Of course, the process is outlined rather mechanically which gives the implication that consumers approach their buying decisions with a certain academic air and take a lot of time to make the decisions. They do not. In fact, most buying decisions are made in an instant because a lot of the things that consumers buy are neither so expensive nor so important that they need such a detailed thinking process before their purchase is considered. However, for the few things people buy that are expensive and important enough, such as a house, a car, or even an engagement risk, the actual process that they go through before they make the decision is quite similar to the one outlined.
Consumer behavior is a psychological phenomenon that can easily change with even the slightest change in the surrounding environment or the within the consumer themselves. As such, there are many factors that influence it.
Culture is a complex set of beliefs and principles held by a given society and which clearly defines the roles played by the members of the society. It also defines the traditions and customs of the society. The culture of the society within which a consumer is contained will easily determine what their buying behavior is and so should be thoroughly studied by the business that seeks to persuade them to buy its products or services.
Every society typically has some social classes that exist within it. When you want to sell your products and services to consumers within a given society, then you have to know which social class you are targeting as the buying behaviors of the members of the same social class will be similar. Social class is determined by income, level of education, and a whole host of other factors.
A reference group is a group to which the consumer associates their buying decisions. It is usually the case that a consumer will buy a product or service simply because members of their reference group are buying the same product or service. The reference group could be their family, friends, other members of the same industry, or some social class to which they associate themselves Reference groups will have a varying impact across different products as well as brands and will typically include one or more opinion leaders who guide the group’s buying decisions.
The buying behavior of a consumer will be affected by their families and by the opinions of their family members. Whenever a group of people begins to live together, whether because they are related by blood or by marriage, their buying behaviors will begin to rub off each other.
People who belong to certain cliques, groups, clubs, or organizations will find themselves playing different roles within those groups. The status and role that they have to maintain within their group will influence the buying decisions they make.
The age of a consumer, as well as the stage of life the consumer is at, are very important as to the buying decisions they make. When consumers are of different ages and life stages, the motivations behind a consumer's purchases will differ from those consumers who do not have the same profile.
The occupation of a consumer will affect their buying decisions in so far as it will determine their income, social status, and their interests, as well. As a result, many companies segment their consumers according to their occupations.
Typically, people who come from different occupations, social classes, and cultures will have lifestyles that differ from each other. Their lifestyles will inform as to what they prefer for their activities, interests,and opinions. Typically, different lifestyles will be attached to different kinds of consumer behavior.
Every consumer is different, and each consumer views herself in a unique way. The way that consumers view themselves, coupled with their personalities, will determine which products and services they prefer.
Ever wondered why your choice of a product or service might be different from the choice of say, your friend or a family member? Maybe you prefer a Gucci purse while your friend prefers that bag she purchased at the local store near her house. What causes are driving her choices and how are they different from yours?
These causes are the critical factors that steer the wheels for consumer behavior. These are the factors fixating on which marketers determine who their target customers are, whether they shop each day or every so often and whether they research what they wish to buy or if they purchase on a whim.
You might wonder why having knowledge of these components is important? Being aware of what sways the customers into making a purchase allows marketers to understand how they can connect with them on an emotional basis and build up a long-lasting relationship, which in turn offers them the additional perks of gaining referrals from their family and friends. This sort of knowledge becomes an excellent approach for achieving profitability.
What are the factors influencing consumer behavior?
In a general scenario, we’ve got five main factors that determine consumer behavior, i.e these factors regulate if a target customer purchases a product or not. These factors are namely Psychological, Social, Cultural, Personal, and Economic factors.
1. Psychological Factors
Interestingly, human psychology is actually an integral factor that influences consumer behavior although these factors aren’t exactly easy to measure. A few integral psychological factors driving the behavior of consumers are :
Motivation actually becomes a considerable defining factor influencing a person’s buying behavior. A popular motivation theory is Maslow's theory of hierarchy of needs in which he developed a model that lays the foundation for 5 different levels of human needs where he lays the base with psychological needs and moves on to safety needs, social needs, esteem needs and finally heading to self-actualization needs. Amongst these requirements, our basic requirements and security needs are generally put above all needs.
For instance, The U.S. Army’s famous “Be All You Can Be” slogan and advertising campaigns encouraged young adults to join the army (self-actualization).
Be All That You Can Be In The Army commercial 1982
Our perception is shaped when we gather information regarding a product and examine it to generate a relevant image regarding a certain product.
Whenever we see an advertisement, review, feedback or promotion regarding a product, we form an image of that item. As a result, our perception plays an integral role in shaping our purchasing decisions.
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Being in the times where we are gathering constant information by simultaneously surfing through the Internet, watching TV, and exploring through our cell phones, the perception we gain through all these resources plays a definite role in regulating our consumer behavior.
Every time we purchase a product we get a deeper knowledge about it through experience. This learning mainly depends on our experience, knowledge, and skills.
This learning can either be cognitive or conditional. While in cognitive learning, we use our knowledge for finding satisfaction and fulfilling his needs with the item we purchase, conditional learning is where we get constantly exposed to a situation, enabling us to respond towards it.
For instance, we all seek resources through nonexperiential learning as we read reviews for books and products on platforms like Amazon, learn about film reviews through platforms like Rotten Tomatoes, and explore restaurants through Yelp.
We’ve all got certain attitudes or beliefs that consciously or subconsciously prompt our purchasing decisions. For instance, while your friend who believes caffeine is adverse for one’s health may prefer tea, you who believe that caffeine energizes us, may prefer coffee. Our attitude and what we believe influence our behavior towards a product and also play a key role in shaping the product’s brand image. So understanding a consumer’s attitude and belief becomes useful for marketers to design their marketing campaigns.
Factors influencing consumer behavior
2. Social Factors
We are all social animals so of course our purchasing decisions are impacted to some extent by the people around. We are constantly working on imitating other human beings, longing to fit in our surroundings. As a result social factors influence our buying behavior regarding items. Some of these factors include :
Our families actually have a considerable role to play in impacting our purchasing behavior. We form an inclination or aversion towards certain products from our childhood by observing our families use that product and persist in using those products as we grow up.
For instance, if our family members are fond of Papa Jones, we would subconsciously end up choosing Papa Jones over say, Pizza Hut or Domino’s.
Reference groups are basically groups of people with whom we associate ourselves. These include clubs, schools, professional or playgroups, churches, and even acquaintances or a group of friends, etc. The people in the reference groups normally have a common pattern of purchasing and an opinion leader who influences them in terms of their buying behavior.
We are all of course influenced by the role that we hold in society. The higher position we hold, the more our status affects what and how much we purchase. For instance, the CEO of a company and a normal employee would have a varied buying pattern.
3. Cultural factors
We all have our values and ideologies that are shaped by the values and ideologies of the society we exist in and the community we belong to. Our behavior is consciously or subconsciously driven by the culture followed by that particular community.
For instance, let’s take the example of McDonald's India
India has a massive consumer base with McDonald’s has adjusted its menu to match the tastes and preferences of the local community in whose vicinity it resides. For instance, on account of cows being sacred and widely worshipped in India, chicken has been put in place of beef. The fast-food corporation introduced McCurry Pan in India, a baked menu item consisting of curried vegetables.
A few significant cultural factors include :
Our cultural factors are basically basic requirements, values, wants behaviors, and preferences that are observed and absorbed by us from our close family members as well as other significant people around us.
Amongst a cultural group, we have several subcultures. These groups share a common set of values and beliefs. They can consist of people from varied nationalities, religions, caste, and geographies. An entire customer segment is formed by this customer segment.
We’ve taken an easy example of Burger King here. In their advertising strategy, the platform wished its “Ramadan Kareem” implying to have a generous Ramadan.
Burger King has adapted to the Muslim culture and created its advertisement in Ramadan style by showing a mostly eaten burger, presented in the shape of a crescent moon.
Source - islamicity
Each society all over the globe is defined and known by some form of social class. This social class is determined collectively by our family backgrounds, occupation, education, and residence location. Our social class is another component holding the reins for consumer behavior.
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4. Personal Factors
Alongside social, psychological, and cultural factors, we all have factors that are personal to us that influence our choices. These factors vary from person to person, introducing varied perceptions and behavior.
Some of these personal factors include:
Age is one of the primary factors that impact our preferences. The vibrant and flashy purchasing choices of a teenager would obviously differ from what an elderly person purchases. Meanwhile, we have middle-aged people who are naturally more focused on purchasing properties, houses, or vehicles.
For instance, as Baby Boomers proceed for retirement they are targeted by marketers with messages regarding prescription drugs as well as other health care items such as home, financial security, or insurance, all of which are relevant issues with regard to their age.
Our income definitely impacts our purchasing behavior. The higher our income, the more purchasing power we hold and vice versa. Higher disposable income compels us to spend more on luxurious items while a lower or mediocre income makes us spend more on our basic needs like education, groceries, and clothing.
Our occupation largely steers our purchasing decision making. We all tend to purchase the items that are relevant or suitable for our profession. For instance, a businessman would have a different clothes purchasing pattern in comparison to an artist.
Our way of life is one of the most powerful influencers that controls our choices. Our lifestyle dominates our buying behavior quite significantly. Suppose we are on a diet then the products we purchase will also complement our diet, from food, weighing scale to using protein.
For instance, Oprah Winfrey’s brand has been developed to charm women that are socially conscious seekers, readers, idealists, self-helpers, working women, who work towards achieving balance and self-fulfillment.
5. Economic Factors
The purchasing quirks and decisions of the consumer largely rely upon the market or nation’s economic circumstances. The more that a nation is prosperous and its economy stable, the larger will be the money supply of the market and the consumer’s purchasing power.
A strong, healthy economy brings purchasing confidence while a weak economy reveals a strained market, marked by a weakened purchasing power and unemployment.
Some significant economic factors include:
Our personal income is the criteria that dictate the level of money we will spend on buying goods or services. There are primarily two kinds of personal incomes that a consumer has namely disposable income and discretionary income.
Our disposable income is mainly the income that remains in hand after removing all necessary payments such as taxes. The greater the disposable personal income the greater would be the expenditure on several products, and the same would be the case when it is the other way round.
Meanwhile, our discretionary personal income would be the income that remains after managing all the basic life necessities. This income is also used when it comes to purchasing shopping goods, durables, luxury items, etc. An escalation in this income leads to an improvement in the standard of living which in turn leads to greater expenditure on shopping goods.
Our family income is actually an aggregate of the sum total of the income of all our family members. This income also plays a considerable role in driving consumer behavior. The income that remains after meeting all the basic life necessities is what is then used for buying various goods, branded items, luxuries, durables, etc.
It's not just our personal and family income that impacts our buying behavior, our future income expectations also have a role to play. For instance, if we expect our income to rise in the future, we would naturally spend a greater amount of money in purchasing items. And of course, in case we expect our income to take a plunge in the near future, it would have a negative influence on our expenditure.
The credit facilities at our behest also impact our purchasing behavior. This credit is normally provided by sellers, either directly or indirectly via banks or financial institutions. If we have flexible credit terms as well as accessible EMI schemes, our expenditure on items is likely to increase and in less flexible credit terms would result in the opposite.
Even the liquid assets we’ve maintained influence our purchasing behavior. In case you are wondering, these are the assets that get promptly converted into cash such as stocks, mutual funds, our savings or current accounts. If we have more liquid assets, there is a greater likelihood of us spending more on luxuries and shopping items. Lesser liquid assets meanwhile result in lesser expenditure on these items.
The savings generated from our personal income are also regulating our buying behavior. For instance, if we take the decision of saving more from our income for a certain period of time, our expenditure on goods and services would be lesser and for that period and if we wish to save less, our expenditure on such items would increase.
We undertake purchase decisions nearly every day, be it big or small. For every buying decision made, we think of fulfilling a need. This need can be steered by a range of factors, which have been elaborately highlighted here. Every one of these factors can be leveraged as a weapon by businesses for enhancing their sale prospects. We hope that we’ve been able to give you a coherent idea about these factors through this blog.