Understand consumer behavior & retain customers

Understanding and influencing consumer behavior: What you need to know about your e-commerce customers

Why and where do people buy which products? This mystery is like the Holy Grail of e-commerce. Understanding your customers is the key to success for any online store. Not so easy when direct feedback at the counter is not possible.

So, how do you better understand your customers and offer them the experiences and products they deeply want? This blog post will introduce you to the fascinating world of consumer behavior.

The basics of consumer behavior

We all make (consumer) decisions every day. What should I wear today? Which perfume should I wear? What am I going to eat for lunch?

In fact, we are constantly faced with the choice of buying this or that. These decisions, as insignificant as they may seem, give marketing experts sleepless nights. Because if we decipher the processes behind them, we can use this information to increase our sales enormously.

And this is only possible if you study consumer behavior.

What is consumer behavior and why is it important to you?

The object of investigation in purchasing or consumer behavior are the processes that consumers use when selecting, using (or consuming) and disposing of products and services. This includes emotional, mental and behavioral reactions.

The analysis of consumer behavior incorporates approaches from various sciences, including psychology, biology, chemistry and economics. All of this together also helps e-commerce retailers to better understand why consumers choose one product over another. It is this understanding that enables you to present products in such a way that their appeal reaches customers and persuades them to buy.

Types of consumer behavior

Customers usually make their purchasing decisions based on many factors, such as their individual personality, location or preferences. If you know the different behaviors of consumers, you can better understand why which products or services are chosen.

By researching your target group, you can develop marketing strategies that focus on these buying habits and thus increase your sales. The following types of consumer behavior are the fundamental basis for understanding buying behavior:

1. Extensive consumer behaviorThis type of behavior occurs when it comes to expensive, rarely purchased products. Consumers are very involved in the buying process and the preliminary research before making a decision. Examples include buying a house or a car.
2. Habitualized consumer behaviorHabitual purchases are characterized by the fact that consumers pay little attention to the product or brand category. A simple example is going to a well-known, regularly frequented store to buy your favorite type of bread. Purely habitual behavior, without much thought.
3. Limited consumer behaviorIf consumers want to buy a particular product but there are only a few brands offering it, this means that there are only limited options available. However, these are carefully compared with each other. The one that best suits their needs is chosen.
4. Impulsive consumer behaviorPeople who make impulsive purchasing decisions usually take little to no time to select a product. These quick decisions are often based on factors such as celebrity testimonials, slogans, logos or advertising materials.
5. Diversity-seeking consumer behavior: In this case, consumers buy a different product not because they were dissatisfied with the previous one, but because they are looking for a change. For example, when they try out new shower gel fragrances to introduce something new into their daily routine.

There are several other categories that can be helpful, for example the so-called dissonance-reducing consumer behavior. But the crucial point always remains: if you know why and how your customers make purchasing decisions, you can align your business model accordingly and thus attract and retain more customers.

What types of buyers can be distinguished?

The observable types of behavior are closely associated with certain types of buyers. It is therefore important to know these as well in order to tailor your offer as precisely as possible to your target group. The following types of buyers are usually distinguished:

• Quality buyerswho only decide on the basis of quality or purely emotionally. In any case, the available budget plays a subordinate role at best.
• Bargain hunters:inside look primarily at prices and are always on the lookout for special offers. However, this is sometimes anything but rational. For this type, even a perceived bargain releases happiness hormones.
• With Smart shopper:inside the focus is on value for money. These consumers inform themselves, weigh up the options and go where they can get "the most for their money".

Factors influencing consumer behavior

There are numerous approaches to explaining consumer behavior. One system that names eight constructs comes from the business economists Homburg and Krohmer:

1. Activation is a term from psychology. It refers to psychological activities triggered by stimuli that marketing tries to influence. One example is the reduction of stimuli in order to prevent so-called banner blindness in online advertising.
2. Motivation deals with why consumers act the way they do. A well-known tool in this context is Maslow's pyramid of needs, which states in very simplified terms: only when an individual has satisfied their basic needs (food, security) does their motivation turn to needs such as self-actualization.
3. That Emotions play a decisive role in many purchasing decisions should be common knowledge. Who hasn't bought something enthusiastically and then asked themselves the next day: why?
4. Involvement refers to the extent to which consumers are actively involved in their purchasing decisions. The types of purchasing behavior, for example impulsive or purely rational, also play a role here. Marketing can either try to involve consumers more or adapt certain strategies, such as distribution channels, to the degree of involvement found.
5. Also SettingsThe marketing can try to influence the consumer's inner attitude towards certain products or services.
6. The Customer satisfaction should, according to Homburg and Krohmer, be increased to such an extent that it results in customer loyalty. However, this should not go so far as to create unfulfillable expectations among customers.
7. Personal and social Values and LifestylesThese factors naturally also influence purchasing behavior. In this context, ecological aspects are currently of the utmost importance. For example, people want to avoid certain nut nougat creams containing environmentally harmful palm oil and prefer sandals with an ecological image.
8. In terms of physical, social and cultural Environmental factors There is a whole range of approaches to explaining consumer behavior. These include, for example, copycat effects or the impact that opinion leaders such as influencers have on certain consumer groups.

How digitalization and the Covid pandemic are changing consumer behavior

It's no secret that the internet has changed the way we shop. But the coronavirus crisis has also brought to light some interesting changes in consumer behavior.

Digitization and the ROPO effect

In traditional marketing, there was no online part of the customer journey. If you wanted to buy something, you had to somehow get in personal contact with sales staff to discuss the features and benefits of the products.

Now consumers only need to click "[product name] rating" on Google or YouTube and tap on "Enter". A page with reviews and comparisons of various products will open. In other words, consumers now do their own research on the internet.

And this is where the ROPO effect comes into play. The acronym stands for "Research Online, Purchase Offline" and describes the consumer behavior of finding out about a product online but then buying it in a store.

However, the same also applies in reverse, i.e. the ROPO effect in the sense of research "offline, purchase online". In extreme cases, consumers go into a store and examine a purchase object on site, pull out their smartphone, scan the product and buy it somewhere else in the store - online.

In the meantime, ROPO has become the dominant behavioral pattern as "Research Online, Purchase Online". In all its forms, the ROPO effect is an interesting example of the change in consumer behavior.

COVID-19 pandemic

Certain behaviors came to the fore during the coronavirus pandemic. For example, compulsive, impulse and, above all, panic buying as well as revenge shopping emerged as coping strategies.

Panic buying is when consumers buy more than usual due to negative feelings such as fear, anxiety and uncertainty in connection with a crisis or an incident. We all remember the empty toilet paper shelves with horror.

Revenge shopping sounds brutal; it can be observed when stores reopen after lockdown measures. This is particularly true for luxury goods stores. Customers "take revenge" for not being able to shop for a long time by shopping all the more with a "now more than ever" mentality as soon as it is possible again.

How to adapt to modern consumer behavior as an online retailer

The changes in consumer behaviour that have been triggered by digitalization and reinforced and modified by the pandemic are here to stay.

According to a study by Accenture the proportion of consumers who already exhibit the following behaviors (and also plan to maintain them) is as follows:

The shift of transactions to the online space is accompanied by dwindling brand loyalty and a shift in values towards more sustainable, regional and high-quality products. As an online retailer, you need to respond to these changes.

First and foremost, this means:

• Continuously analyze and understand the consumer behavior of your target group.
• constantly update your digital strategy. This includes measures such as adding new sales or marketing channels and adapting marketing to consumer behavior.
• Making a value proposition: As a result of the ongoing crises, the "cheap is cool" mentality, with which customers treat themselves to the latest smartphone from China every year or a new outfit from Bangladesh every week, is likely to become less important. The winners will be e-commerce retailers who respond to sustainable consumer behavior accordingly.

To avoid misunderstandings: The focus should not be so much on influencing consumer behavior in your favor. Rather, it should be on adapting to the needs of your customers.

The fine art is to find out what really helps customers. This is not always the same as what customers want. But one thing is clear: your success as an online retailer will be most sustainable if you succeed in making your customers' lives easier, better and happier in some way with your offering.

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