Understanding the consumer decision-making process is integral to influencing the outcome of consumer behavior. The consumer cannot be viewed as an abstract, making random decisions based upon convenience, opportunity or chance. Rather, there is ample research to suggest that consumers can be well-understood personas and their behaviors can be - if not overtly predicted - then influenced in a certain direction that will satisfy both their needs and desires along with those of the service or product provider.
What is Consumer Behavior?
The study of consumer behavior is concerned with how individuals and organizations make purchases and support brands. Behavior, motivations, and psychology are the main areas of study in this field. The important thing to know is that the buying journey is composed of countless small and large consumer behaviors that can be influenced to make the final buying decision in the best interests of both the consumer and the product or service provider. Consumer behavior is at the root of the consumer decision-making process, and so it must be clearly understood, defined and acted upon across all service interactions.
Why is Consumer Behavior so important?
Consumer behavior defines what channels the consumer will go through on their way to making a buying decision. What is so important - and interesting - about consumer behavior is that everyone arrives at decisions in their own unique way. But it's not so unique that it can't be studied and predicted. It puts the onus on product and service providers to do the research and understand their target market and their respective consumer behaviors.
It's actually the decision-making process that must be understood and leveraged, and consumer behavior goes hand-in-hand with that. Consumer behavior is the process. When a consumer embarks on the buying journey, they exhibit certain behaviors. They think, feel and take action. These thoughts, feelings, and actions can be "helped along" or guided. It is the understanding of consumer behavior that enables a product or service provider to help the consumer make a satisfactory choice.
In turn, this enables the provider to:
Improve marketing and communication
Understanding consumer behavior enables a product or service provider to improve marketing and communication. For example, a company that makes sports equipment may have identified that their customers are more likely to purchase their products online than in-store. They can then use this information to improve the way they market their products online.
Improve consumer retention rates
Understanding consumer behavior can help a product or service provider identify growth opportunities and develop strategies to improve customer retention. It's also a great way to identify any problems that may be impacting their business, such as an outdated website or slow response times from customer support teams.
Increase consumer loyalty
By understanding their consumers, businesses can create a product tailored to their specific needs. This will increase customer satisfaction, which in turn leads to increased loyalty, or even advocacy.
Improve perception of customer service
Customer service is an important part of any business, and understanding consumer behavior can help businesses offer better service. By understanding how consumers behave, businesses can make changes that will improve customers' perception of their brand. For example, if a large number of customers call in to complain about late deliveries, you might want to investigate why that is happening. You may discover issues with your shipping times or delivery routes. Once you've identified the problem, you can take steps to fix it so that your customers get their products on time.
Better predict trends in consumer behavior
Understanding consumer behavior is a crucial part of running a successful business. Companies need to know what consumers want, when they want it and where they can find it. Understanding how consumers behave can help businesses better predict trends in the market, allowing them to make better-informed decisions about how to operate their companies. Companies that understand the needs of their consumers will be able to provide products and services that are more in line with what those consumers want. This can lead to increased sales and brand loyalty from loyal customers.
For example, suppose you're running a restaurant chain and you know that your customers prefer takeout over dining-in experiences, in that case, you could use this information to determine where you should open new locations and how many tables you need at each location (or whether or not your current number of seats is sufficient). You could also use this knowledge to determine which menu items should be offered as takeout options versus dine-in options based on what your customers want most often.
Increase ability to stay relevant
Businesses can use consumer behavior to stay relevant by understanding how consumers interact with the business and how that can be improved. For example, if you're a restaurant and you notice your customers tend to buy more food when they're seated on the left side of the restaurant, you could move all of your tables there. Or if you notice that people are buying more dessert when it's served on a smaller plate, you could increase the size of the plates—or even change the type of desserts you serve! These types of adjustments help businesses stay relevant because they keep customers happy while also allowing to continue making money.
Understanding consumer behavior is a valuable tool for product and service providers. It enables them to increase sales by identifying their target market, determining the needs of that market, and developing products and services that meet those needs.
Innovate attractive new services and products
It's not enough to simply create a product or service and hope customers will buy it. If you're an entrepreneur, you need to understand what your customers want and how they behave. You also need to know when they'll buy, how they'll buy and how much they'll spend on what you're selling.
This information helps you create innovations that are attractive to consumers. When you know your target audience's needs and wants, you can innovate new products or services that meet those needs better than your competitors' offerings. You can even make them more appealing than other alternatives available in the marketplace.
The key factors that affect consumer decision making
Consumer behavior is influenced by certain key factors. These include personal, psychological, social and situational factors. These factors can be permanent or temporary, but they all affect consumer decision-making, either one at a time or in unison with one or more of the others. In other words, a consumer's decision may be affected by a single factor, all the factors, or in a group with two or more others. Following are examples of each kind of influence as they relate to the hospitality industry:
Personal influences on Consumer Behavior
Personal influences on consumer behavior include demographic factors, personality traits, and other personal characteristics that influence how people respond to products and services. For example, a consumer may prefer a certain restaurant because they offer kosher meals on the menu, have more soup offerings or because the consumer is a senior and the restaurant offers a senior discount.
Psychological influences on Consumer Behavior
Psychological factors include the consumer's perception of their needs, mindset, and perception of the provider and its services and/or products. For example, a consumer may perceive that a certain venue has a higher standard of service than a different one. For that reason, they would choose that venue over another to hold their daughter's wedding reception.
In a negative connotation, a consumer may avoid a particular restaurant in town if they feel that the waitstaff has what they perceive as a snobby "attitude." Note that while one consumer may appreciate an upscale environment, another may make the opposite buying decision based on that same perception.
Social influences on Consumer Behavior
This factor includes social influences. It can be an existing social circumstance or a social circumstance that the consumer aspires to. These include family and friends, acquaintances, and - due to social media - perfect strangers online.
Social influences on consumer behavior can originate from many sources:
- Online recommendations
- Online comments on social forums
- Family and friends' recommendations
- Private conversations
- Chance comments/overheard conversations
- Celebrity/influencer behaviors and choices
- Desire to rise above current social status
A common example of a social influence would be if a Facebook friend posted a picture of their meal and remarked how delicious it was. Then the consumer has both a visual trigger and the recommendation, both of which will influence where they choose to dine the next time they eat out.
Situational influences on Consumer Behavior
Situational influences are most often temporary in nature, but they can be long-lasting. For instance, a situational influence can include where a consumer resides. If they live in a tourist town, they may be more likely to invite friends and family to visit frequently. In the short term, a situational influence might be if a consumer is seeking to get away from the cold weather where they live and travel to some exotic, beachy locale. Other situational influences include holidays, time and moods of the consumer.
Types of Consumer Behavior
The type of behavior that a consumer engages in is determined by what kind of service or product the consumer needs, the level of involvement they have in the decision-making process, and the differences that exist between the consumer's choices. Here are the various types of consumer behavior:
Habitual buying behavior
Consumers' habitual buying behavior is the pattern of their purchasing decisions. When people are comfortable with a product and the associated brand, they tend to buy that product again and again. It is also common with brand-loyal consumers who automatically go to the same travel hotel or always choose the same item off the menu.
This is marked when a consumer seeks variety and purposely chooses different venues or products simply to introduce new things into their lives. For example, this type of consumer might be easily influenced by what a fellow diner is having.
The appeal of variety-seeking behavior is twofold: first, it allows consumers more options within the same product category; second, it introduces them to new products they might not have otherwise tried.
Dissonance-reducing buying behavior
This is when the consumer is heavily involved in the decision-making process and conducts lots of research beforehand. Ultimately, the consumer experiences difficulties making a final determination because they are worried about the buyer's remorse.
Complex buying behavior
This type of behavior is exemplified by a consumer making a decision that they perceive to be complex. Typically, it is a decision that involves several factors. An example would be a consumer trying to decide on a vacation resort where several family members will be joining them. Each family member must be satisfied with the choice, and the venue must meet each member's criteria, so the chances for error are high, according to the consumer's perception.
How to collect data on consumer behavior
Determining how consumers will behave in a certain circumstance is easier when there is data to draw from. Consumer behavior data will include past behavior patterns, thoughts and feelings about brands, and thoughts about past experiences.
There is a multitude of research methods to collect consumer behavior data. They can be used independently or with each other in various contexts. Some of the most common data collection methods with regard to the hospitality industry are:
Customer feedback: Reading comments left by your customers can highlight recurring problems or desires. An example would be to leave comment cards on restaurant tables or by the door.
Opinion sites: There are third-party websites that hire people to review brands and websites and offer their objective opinions. These can be helpful in collecting data on brand perception in an anonymous way.
Surveys: Online surveys gather consumer opinions and can be done in a fun way. Many social platforms, such as Facebook, make it easy to create what they call "polls."
Focus groups/online panels: A focus group is a more organized method to discover what consumers feel and think about. They are most useful for specific services or products, such as a new menu item.
The consumer decision-making process steps
The consumer decision-making process is also widely known as the buyer's journey. The steps in the consumer decision-making process are the same, no matter what the consumer is ultimately buying. In other words, the steps are true whether the consumer is buying a milkshake or a timeshare.
In this first stage, the consumer first becomes aware that they have a problem. The problem is not a problem in the traditional sense of the word; rather, it's a need for something. That need could be a venue to hold their child's birthday party, a meeting place for a board meeting, or the need to choose something from a menu in order to satisfy their desire for something to eat.
In this stage, the consumer feels and thinks about ways to solve their "problem." They are thinking about what they need, perhaps even making a list of criteria that they need. They are open to possibilities in this stage. They are informing themselves and learning about possible solutions to their problem. They might be perusing the drinks menu, asking friends for recommendations, looking at online reviews, browsing a region on Google Maps, clicking through a website, or conducting other kinds of research in order to inform themselves, so they can make what they hope is a good decision.
In this stage, the consumer homes in on their final choice. They will be eliminating, ruling out certain options that don't suit their needs. They are evaluating the hospitality provider, weighing the pros and cons of their choices.
Consumer behavior trends
Consumer behavior trends are the changes in consumer behavior over time. These trends can be modeled by looking at the data points of consumer spending, which is a significant component of the economy. As technology advances and consumer lifestyles change, these trends help us predict how consumers will behave in the future.
The latest consumer behavior trends informing decisions in 2022 are:
Consumer demand for transparency in the businesses they support has increased. Consumers are more likely to do business with companies that align with their personal beliefs and values.
Even before the pandemic, consumers were gravitating more toward online purchases, making reservations and booking hotels via their devices. The pandemic grew this trend exponentially and the travel industry is springing back unexpectedly quickly post-pandemic.
Concerns about online security
More consumers are concerned with their online privacy and more aware of online security's potential dangers. Companies that emphasize consumer online security are looked upon more favorably.
Preference for eco-friendly companies
Climate change is top of mind with consumers, and they are more likely to do business with companies that practice eco-friendly behaviors.
Personalization and customization
Consumers want to feel like they have a unique experience, and they're more likely to buy when they feel like the product is being made just for them.
If marketers can determine what factors influence the buying decisions of their prospective customers, they will be able to refine and tailor their marketing campaigns accordingly. This way, they can avoid wasting money on ads that won't reach potential buyers and know when to switch tactics to appeal to different people at different times. Once the decision-making process has been analyzed, the next step is to use this information in designing the customer journey and how they interact with each touchpoint.
Effective marketers can use this knowledge to guide their strategy and improve how they sell their products and services to their target audience. If consumers have certain habits when making purchasing decisions, understanding them will give you a leg up on the competition because it allows you to reach your target market more effectively.
At EHL Advisory Services, we provide the expertise you need to fine-tune your marketing messages and sales funnel to ensure that customers are making the decisions you want them to. Learn more about Customer Experience and discover our Service Excellence Toolkit.