Understand Consumer Behavior to Increase Sales
When companies are looking to develop a product, penetrate a market, or diversify their business portfolio, it is crucial for them to understand how consumers make purchases and what motivates their purchasing decisions. Navigating the complex structures of consumer decision-making and consumer behavior requires accurate perception and thorough understanding of pre- and post-purchase thought processes.
The generally accepted Consumer Decision-Making Model articulates a five-step process that depicts how consumers purchase goods and services:
- Problem Recognition: Consumers identify a gap between their current and desired state
- Information Search: Consumers search for appropriate information (from internal and external sources) to make a reasonable decision.
- Product Evaluation: Consumer compares different product/service choices using evaluative criteria (miles per gallon, processing speed, calorie content, etc.) obtained during information search
- Purchase: Consumer decides on purchasing alternative, buying the product/service that best closes the gap between their current and desired state
- Post-Purchase Activities: Consumer is either satisfied with purchase decision, or dissatisfied with product, leading to cognitive dissonance (anxiety or regret after purchase)
Prudent managers and marketing decision-makers maintain an up-to-date and accurate understanding of this decision-making process at it evolves over time. The decision-making process does not take place without influence of external factors. Cultural and social influences have a dramatic impact on which purchases consumers make and why. Today, for example, companies have largely shifted toward inexpensive products or services that better correlate with the wants and needs of the overall market in the economic downturn. Target’s “Frugalista” campaign exemplifies an recent attempt to make high-fashion at a low price a hot trend. Check out this recent Target television spot:
In 2007, when the economy was booming and luxury status-symbol retailers like Saks Fifth Avenue and Neiman Marcus were experiencing drastic increases in sales, this ad would never have run. A conusmer need/desire for frugality didn’t exist on a wide scale, so ads appealing to this unmet need would likely have resulted in a small or negative ROI. Advertisements at that time largely appealed to desires for high-quality, luxury products and services that projected a specific image to others. Time periods have a major impact on which products and services are sold, and how they are marketed to consumers.
Understanding macroeconomic, social, and cultural trends is vitally important if companies intend to remain competitive n the rapidly-changing global economy. Perhaps even more important is an accurate understanding of how customers are affected by these trends, and in which ways their decision-making and purchasing behaviors are transformed by them.
Posted on March 27, 2010, in Uncategorized and tagged Advertising, Consumer Behavior, Consumer Decision Making, Global Economy, Macroeconomics, Marketing, Neiman Marcus, Purchase Behavior, ROI, Saks, Target, Television. Bookmark the permalink. Leave a comment.