Most of us know our best friends pretty well - what they like, what they don't, where they shop, why they like certain brands, and even what they'd buy.
Wouldn’t it be great to know your customers this well, too? What are their shopping preferences? How often do they shop? How do they prefer to contact you? There is no end to the list of questions...
This is where customer behavior analysis comes in. Understanding what your customers think, how they interact with your product, and how they respond to your social media advertisements.
This article will explain how to conduct a customer behaviour analysis, its importance, and how using the right data can enhance revenue and customer lifetime value.
What Is Consumer Behavior?
An individual's buying behavior includes social trends, frequency patterns, and background factors that influence their decisions. The objective of businesses is to understand their target audiences and create products and services that entice them.
Customers' behavior does not describe who shops in your stores, but how they shop. Among the factors considered are the frequency of shopping, product preferences, as well as how your marketing, sales, and service offers are perceived.
Consumer behavior isn't solely determined by one factor. It is derived from a variety of factors, including psychology, biology, and economics.
The allocated budget and the way they want to leverage the resources within it are examples of economic factors.
These factors are considered by most businesses based on our experience in data analysis.
Factors That Affect Customer Behavior
Personality Traits
A customer's behavior in your store is heavily influenced by their background, upbringing, and personality. There will be some who are jovial and outgoing, others who are quiet and collected, and others who will fall somewhere in between.
Similar to this, some customers may prefer long product demos and specialized onboarding, whereas others may get frustrated.
Understanding your target audience's position in this category is critical to understanding their behavior.
Psychological Responses
It can be challenging to predict psychological responses, but they play a significant role in customer behavior because perception and attitude can change daily depending on the situation.
Suppose you got a promotion, you're having a celebratory dinner, and the server accidentally spills water on your shirt. Because you're in a good mood and having a good day, you might be more forgiving. In contrast, if you've just been fired, you might be more frustrated.
You can have a patient and satisfied customer one day, but the next, they're pressing your representative on an urgent issue. De-escalating stressful situations and preventing churn can be achieved by understanding that a customer's psychological response is not representative of who they are as individuals.
Social Trends
A social trend is an external influence that customers follow, such as peer recommendations, societal norms, or fads. Customers can be affected by some of these influences temporarily, while others can be affected permanently.
After discussing some factors that influence customer behavior, let's examine some data-backed examples of consumer behaviors that directly impact customer service.
Consumer Behaviors That Impact Sales [New Data]
A great example of how consumer behavior impacts sales is the way different audience segments discover new products from the businesses they purchase from. HubSpot Blog's 2024 Consumer Trends Report asked 700 U.S. consumers about their preferences and actions.
Social media is the future of commerce, according to the study. By 2024, Gen Z and Gen X will discover more products through social media than anywhere else.
According to the following image, product discovery on social media differs by generation:
More than 25% of social media users prefer buying on social media this year, with Gen Z and millennials being the most active.
Moreover, 21% of the 700 respondents believe that influence recommendations have influenced their purchasing decisions. In spite of the number of social media channels, Facebook remains the most trusted social media platform for shoppers.
In the next section, we'll learn how to analyze customer behavior now that we've discussed how it impacts customer buying habits.
What Is a Customer Behavior Analysis?
In a customer behavior analysis, you observe how customers interact with your company on a qualitative and quantitative level. By identifying the shared interests of your customers, you segment them into buyer personas. Observe how each persona interacts with your company at their respective stages in the customer journey.
As a result of this analysis, we are able to gain insight into the variables that influence your audience and the motivations, priorities, and decision-making methods that customers consider as they move through the customer journey. Additionally, it helps you understand how customers perceive your company and whether that perception aligns with their values.
There are certain frameworks or models that help create the shopping patterns and how consumers make purchases in consumer behavior analysis.
Why is customer behavior analysis important?
Customer behavior analysis provides businesses with granular information about their customers and their buying patterns, which gives them an edge over their competitors.
For businesses, customer behavior analysis is important for the following reasons:
Identify Behavioral Patterns
The reason your customers are your customers is likely because they have something in common. Businesses can tap into a large segment of customers by identifying their patterns of behavior.
According to a Salesforce survey of over 6,000 consumers, 66% expect businesses to understand their needs and expectations, while 82% of respondents in a Redpoint Global survey expect businesses to meet their expectations.
Starbucks, for example, bases its consumer behavior strategy on understanding its customers' personal, cultural, and social backgrounds. As a result, Starbucks caters to the needs of its customers, such as understanding their local tastes and modifying its offerings accordingly.
Content Personalization
56% of consumers will become repeat buyers after a personalized shopping experience, according to Nojitter research. When you understand customer behavior, you can create targeted content and craft your product or service better than your competitors.
In addition, the patterns can be used to segment your customers and create a unique personalized experience for each segment. Customers' feedback is another successful strategy most businesses use to customize their content.
Perhaps you've even seen the survey from YouTube at the beginning of a video. This data helps YouTube improve its search engine and suggest more personalized content.
Customer Retention
How do you keep your customers coming back? Is there anything they like about your product, and what would they like to see improved? Do your existing customers want any missing features? An analysis of customer behavior provides answers to all of these questions at once.
Your customers will gain a deeper understanding of what they like and don't like. Your team can reduce customer churn by identifying good and bad customer traits through a behavior analysis.
Improve the Buyer’s Journey
In shaping your customer journey, customer behavior analysis can deliver phenomenal results. By identifying the optimal customer experience, you can deliver it to them.
Optimizing the customer journey means removing roadblocks, improving areas of confusion, and improving what you already do well. If most of your customers pay by credit card, you can use this insight to suggest credit cards as the preferred payment method.
If customers buy two products together often, bundling them together can make their lives easier and increase sales.
How to Conduct a Customer Behavior Analysis
1. Segment your audience
Segmenting your audience is the first step in a customer behavior analysis.
There are several segmentation models, including demographic (age, gender, etc.), psychographic (personality, values, etc.), geographical (country, town, etc.), and behaviors like frequent actions, product use, and preferred media channels.
In addition, you should identify the characteristics of customers that are most valuable to your business. An RFM analysis can help you determine how frequently and how recently a customer purchases from you.
2. Identify the key benefit for each group
The reason each customer persona chooses your business is unique, and it's imperative to identify it. You should consider the external factors influencing the customer's buying decision in addition to the product or service.
Was it a convenience purchase, for example? Did they consciously seek out your brand? How urgent is the purchase, and how much are they willing to spend? To improve the customer experience, we find it helpful to think about the context of customers' needs.
Learn how customer profiling can help you better segment your customer base using qualitative data.
3. Allocate quantitative data
In order to get an accurate picture of both micro and macro consumer trends, it is important to draw information from both internal and external sources.
Statistics such as blog subscriptions, social media insights, and product usage reports can be retrieved from within your company. Consumer reviews and competitor analytics can be offered by secondary outlets. An industry's statistics are derived from third-party data since it does not pertain to a particular company. When you combine all three, you'll have a broad range of information to analyze customer behavior.
4. Compare your quantitative and qualitative data
When you have collected your data, it is time to compare the qualitative data with the quantitative data.
Using the data sets as a guide, create a customer journey map. Analyze which persona purchased what product, when, and where. Did they return for a second visit? You can develop a deeper understanding of your customer's journey by comparing the two sets of data to the customer experience.
You should be able to identify recurring trends by comparing data. Look for common roadblocks that appear at different lifecycle stages and note any unique customer behaviors. You should circle back to your high-value customers and flag anything that stands out with their purchase behavior.
5. Apply your analysis to a campaign
Your findings can be used to optimize your content delivery, as we discussed earlier. Take advantage of opportunities to customize the customer experience by choosing the best delivery channel for each persona.
Maintain a positive customer experience throughout the entire customer journey by responding to roadblocks in a timely manner. Your customer behavior analysis should give you a good idea of where to update your marketing campaigns based on the insights you gained.
Use your analysis to determine what your customers will think about your new initiatives before implementing them.
It is human nature to resist change, even if it is for the better. The loyalty of these customers is higher, so you should do everything you can to keep them. Make changes to these customers in a variety of ways, and remember to be receptive to their feedback.
6. Analyze the results
You'll probably want to know if your changes worked after you've given ample time for testing. To determine the effectiveness of your updated campaigns, use metrics such as conversion rate, acquisition cost, and customer lifetime value.
As technology, politics, and events continually change, you need to continually analyze your results. It is important to revisit your analysis frequently to ensure that you are capturing any new trends in the customer's journey.
3 Customer Behavior Analytics Platforms
Using HubSpot's CRM and reports, you can gain insight into both customer characteristics and engagement activity.
Its reporting tools let you view web traffic for contacts and create lists based on their engagement history. A contact can even be automatically attributed to a certain characteristic or attribute once they complete an action in HubSpot.
Price: Starts free; up to $3,200/month.
With Alteryx's analytics platform, you can analyze your customer data in-depth using AI insights. In order to identify trends and outliers, the tool creates an automated visual representation. After analyzing the data, it makes predictions and suggestions for improving customer service.
Price: Starts free; variable for premium tiers.
Various resources can use Opentext Vertica to process high-volume data requests. By taking advantage of underutilized servers in your data center, the tool helps you organize your data quickly and cost-effectively. By doing this, you can upload more data about your customers without sacrificing any time. As well as Google and Microsoft cloud servers, Opentext can also sync data between them.
Price: Starts free; variable for premium tiers as reported by G2 Crowd.
Getting Started
Your business strategy no longer has to be a guessing game with a customer behavior analysis. Surveying your customers and analyzing the qualitative and quantitative data you collect will allow you to better reach each segment of your audience, meeting their needs in marketing, sales, and customer service.
Analysis of customer behavior can help you better serve your clients and increase your business' success.