From my last article titled “Easy and Inexpensive Tools for Data Collection,” I thought it was valuable to elaborate on the importance of research but most notably consumer behavior research. Consumer behavior is a highly complex study and a never-ending process due to the diversity and dynamics among people. However, the acquired knowledge is an essential tool for creating long-term consumer relationships and for future success and development of marketing strategies, business longevity, and competitive advantage. Hence, the aim of this blog is the examine the importance of consumer behavior knowledge for small businesses.
But before going further, we need to define consumer behavior. In essence, the study of consumer behavior involves the decision-making activities of individuals in the search, selection, use, and disposal of the process of a product/service/idea/experience. It encompasses the study of how consumers make selected purchasing decisions to expend their available resources (money, time, and effort) and what factors influence these purchases. Basically, the need to understand consumer behavior entails the what, how, when, and why of purchasing (Walter, 1974; Wright, 2006; Peter, Olson, & Grunert, 1999). It is also important to add to this framework the difference between a customer and a consumer. Note that an individual can be a customer but not necessarily a consumer. Although the terms consumers and customers are sometimes used interchangeably. The difference is that the consumers are engaged in the decision-making process mentioned above, whereas the customer is not directly involved in the said process but makes routine or frequent purchases of a specific brand or from a specific store and or company (Parasuraman & Grewal, 2000).
One of the most commonly quoted sayings of businesses today is “know your customer.” (I am sure we have all heard it). However, many businesses fail in their accomplishment and practice. It is understood that firms that lack consumer behavior knowledge often fail or lose out in the market. So how does understanding or studying your consumer behavior benefit your small business? Here are four benefits that can be achieved – these points are in no particular order.
To Stay Relevant
In this highly competitive and ever-changing marketplace, staying relevant can be challenging for new upcoming businesses and even existing ones. And by staying relevant, I mean keeping up with the market through innovation and effective consumer communication and marketing strategies. Without a rich understanding of your consumer behavior, it is difficult to “stay relevant.” Why? It would be challenging to predict your consumer reactions to product offerings and marketing concepts. And also difficult to communicate effectively with your consumers or “speak their language,” which is an important competitive advantage tool in attracting and retaining new consumers. And lastly, staying relevant relies heavily on improved, up-to-date marketing strategies to better understand your target market needs and how to successfully serve them better than your competition.
To Increase the Impact and Returns of Advertising and Promotion
Understanding how your consumers respond to your promotion and advertising and gaining insights on the different channels they use is powerful consumer information and, if used correctly, can improve business profitability and development. The analytics obtained from this information can assist in making effective business and marketing decisions.
To Build and Retain Loyal Consumers
The deliberate understanding or studying of your consumer behavior leads to a more consumer focus business culture which in turn is a by-product of building and retaining loyal consumers. It is evident that the consumer rules the market. Hence a great deal of your business growth depends on loyal consumers. That is why it is so important to build a consumer group who are faithful patrons of your business, product, and or service. Not only do they return to patronage, but they also share positive feedback about your business offerings (word of mouth marketing) and persuade others the purchasing your product or service. More than ever, in today’s marketplace, businesses need loyal consumers.
Competitive Advantage
There is a lot of talk about competitive advantage these days; it is such a buzzword, but it is very real, vital, and can be somewhat ‘scary’ for many new, small upcoming businesses. Every business has current and future competitors who compete for market share, which is why developing your competitive edge is critical for your business's success. Today, competition has become an even more challenging and critical cause of globalization and the internet, which have significantly impacted the marketplace - consumers' expectations have increased, and their offerings and choices are numerous. One of the most powerful weapons in the achievement of market share success and sustainability in this globally competitive environment is knowledge. Your competitive survival relies on updated market and consumer knowledge relating to your target market, consumers, future trends, rivalries, and market developments. In other words, consumer knowledge can arm you with the right strategies to successfully secure market shares.
So, there you have it, four benefits you can achieve from consumer knowledge. Understanding consumer behavior goes beyond building lasting relationships; it creates a profitable, winning environment for your business. As perfectly stated (Assal, 1995), "Consumers determine the economic viability of the firm through their purchasing decisions." If you have not read my previous blog on data gathering, I strongly urge you to do so, as it will bridge any gaps you may have.
Reference list
Parasuraman, A., & Grewal, D. (2000). Serving customers and consumers effectively in the twenty-first century: A conceptual framework and overview. Journal of the Academy of Marketing Science, 9-16.
Peter, J. P., Olson, J. C., & Grunert, K. G. (1999). Consumer behaviour and marketing strategy. London: McGraw-Hill.
Wright, R. (2006). Consumer behaviour. Cengage Learning EMEA.