MODULE II

THE CONSUMER’S CULTURE AND PSYCHOLOGICAL CORE

Overview
This week we will continue our in depth understanding towards the implications of psychological
factors in consumer behavior. After reading and viewing the module content you will complete your
second written assignment and/or accomplish a quiz. Everything that you need to successfully complete
this assignment is located in the Module Assessments, but if you have questions – please, do not hesitate
to ask.

Learning Objectives
After your complete the required assignments you will be able to:
1. Provide a more comprehensive definition to the psychological factors of consumer behavior;
2. Discuss the components of psychological factors; and
3. Practice psychological factors in influencing consumer’s decision.

Content

Consumer Psychology is now (more than ever) highly applicable to the world in which we live.
Consumption has indoctrinated Western culture and it is now an integral part of society. Consequently,
from a business and people’s point of view, it is important that psychologists have a clear understanding of
how it affects human behavior. So what is Consumer Psychology? How are individuals influenced by
consumption? When did scientists start researching consumer psychological questions? Who were the
researchers who created the underpinnings for Consumer Psychology as we know it today? These are all
questions that will be addressed in this topic.

What is Consumer Psychology?

Consumer Psychology is about understanding why and how individuals and groups engage in
consumer activities, as well as how they are affected by them. A large part of this discipline is focused on
the cognitive processes and behavior involved when people purchase and use products and services.
Without knowing how people process information and how they subsequently act, it would be difficult to
explain consumer behavior.
Consumer Psychology is an interdisciplinary subject area and it combines theories and research
methods from Psychology, Marketing, Advertising, Economics, Sociology, and Anthropology. There are
many areas of specialization and throughout the years they have been rapidly growing. Some of the more
commonly researched areas include decision-making, consumer judgment, perception and attention,
information processing, motivational determinants of consumer behavior, attitude formation and change,
and influences of advertising on consumer responses. The aforementioned areas are most commonly linked
to how marketers, manufacturers, and advertisers can attempt to influence consumer decisions to purchase
a particular brand or product.
However, there are also areas of consumer research that are not necessarily linked to the increase
in sales of products and brands. Such areas include the impact of consumption on children, how products
may shape an individual’s identity, and how consumption affects the environment.
 When learning about Consumer Psychology, it is important to establish a broad understanding of
why consumers behave and think the way they do. The more you know, the easier it is to explain consumer
behavior.

How Do Psychological Factors Play a Role in Consumer Behavior?

There are four psychological factors that influence consumer behavior: Motivation, perception,
learning, and attitude or belief system. Motivation speaks to the internal needs of the consumer.
Understanding how to motivate your customer is a powerful tool. The way your target customer perceives
the world or learns about your product, whether online or in person, can also influence behavior. Finally,
belief systems have the ability to influence all of the above. For example, some people learn best visually.
Professional pictures and images of your product or service can communicate a thousand words regardless
of belief system. This explains why pictures and images are so important for marketing.

Consumers make purchase decisions every day. When they make a decision about your product,
they’re thinking about solving a need. That need may be driven by a variety of factors. Each of the factors
listed above can be tied back to ways a small business can leverage its storefront or website to increase the
probability of a sale. Keep these factors in mind when designing your marking materials.

Types of consumer behavior

There are four main types of consumer behavior:

1. Complex buying behavior
This type of behavior is encountered when consumers are buying an expensive, infrequently bought
product. They are highly involved in the purchase process and consumers’ research before committing to a
high-value investment. Imagine buying a house or a car; these are an example of a complex buying
behavior.

2. Dissonance-reducing buying behavior

The consumer is highly involved in the purchase process but has difficulties determining the
differences between brands. ‘Dissonance’ can occur when the consumer worries that they will regret their
choice.

Imagine you are buying a lawnmower. You will choose one based on price and convenience, but
after the purchase, you will seek confirmation that you’ve made the right choice.

3. Habitual buying behavior

Habitual purchases are characterized by the fact that the consumer has very little involvement in
the product or brand category. Imagine grocery shopping: you go to the store and buy your preferred type
of bread. You are exhibiting a habitual pattern, not strong brand loyalty.

4. Variety seeking behavior

In this situation, a consumer purchases a different product not because they weren’t satisfied with
the previous one, but because they seek variety. Like when you are trying out new shower gel scents.
 Knowing what types of customers your e-store attracts will give you a better idea about how to
segment customer types.

Customer behavior patterns

Buying behavior patterns are not synonymous with buying habits. Habits are developed as
tendencies towards an action and they become spontaneous over time, while patterns show a predictable
mental design.

Each customer has his unique buying habits, while buying behavior patterns are collective and offer
marketers a unique characterization. Customer behavior patterns can be grouped into:

1. Place of purchase
Most of the time, customers will divide their purchases between several stores even if all items are
available in the same store. Think of your favorite hypermarket: although you can find clothes and shoes
there as well, you’re probably buying those from actual clothing brands.

When a customer has the capability and the access to purchase the same products in different stores, they
are not permanently loyal to any store, unless that’s the only store they have access to. Studying customer
behavior in terms of choice of place will help marketers identify key store locations.

2. Items purchased
Analyzing a shopping cart can give marketers lots of consumer insights about the items that were
purchased and how much of each item was purchased. Necessity items can be bought in bulk while luxury
items are more likely to be purchased less frequently and in small quantities.

The amount of each item purchased is influenced by the perishability of the item, the purchasing
power of the buyer, unit of sale, price, number of consumers for whom the item is intended, etc.

3. Time and frequency of purchase

Customers will go shopping according to their feasibility and will expect service even during the
oddest hours; especially now in the era of e-commerce where everything is only a few clicks away.

It’s the shop’s responsibility to meet these demands by identifying a purchase pattern and match its
service according to the time and frequency of purchases.

One thing to keep in mind: seasonal variations and regional differences must also be accounted for.

4. Method of purchase
A customer can either walk into a store and buy an item right then and there or order online and
pay online via credit card or on delivery.
 The method of purchase can also induce more spending from the customer (for online shopping,
you might also be charged a shipping fee for example).

The way a customer chooses to purchase an item also says a lot about the type of customer he is.
Gathering information about their behavior patterns helps you identify new ways to make customers buy
again, more often, and higher values.

Customer Behavior Segmentation

Customer segmentation and identifying types of buyers have always been important. Now that
personalization and customer experience are factors that determine a business’ success, effective
segmentation is even more important.

Only 33% of the companies that use customer segmentation say they find it significantly impactful,
so it’s important to find the segmentation technique that brings clarity and suits your business.

Traditionally, most marketers use six primary types of behavioral segmentation.

1. Benefits sought
A customer who buys toothpaste can look for four different reasons: whitening, sensitive teeth,
flavor, or price.

When customers research a product or service, their behavior can reveal valuable insights into
which benefits, features, values, use cases, or problems are the most motivating factors influencing their
purchase decision.

When a customer places a much higher value on one or more benefits over the others, these primary
benefits sought are the defining motivating factors driving the purchase decision for that customer.

2. Occasion or timing-based
Occasion and timing-based behavioral segments refer to both universal and personal occasions.

Universal occasions apply to the majority of customers or target audience. For example, holidays
and seasonal events when consumers are more likely to make certain purchases.
Recurring-personal occasions are purchasing patterns for an individual customer that consistently
repeat over a while. For example birthdays, anniversaries or vacations, monthly purchases, or even daily
rituals such as stopping for a cup of coffee on the way to work every morning.
Rare-personal occasions are also related to individual customers, but are more irregular and
spontaneous, and thus more difficult to predict. For example, attending a friend’s wedding.

3. Usage rate
Product or service usage is another common way to segment customers by behavior, based on the
frequency at which a customer purchases from or interacts with a product or service. Usage behavior can
be a strong predictive indicator of loyalty or churn and, therefore, lifetime value.
4. Brand loyalty status
Loyal customers are a business’s most valuable assets. They are cheaper to retain, usually have the
highest lifetime value, and can become brand advocates.

By analyzing behavioral data, customers can be segmented by their level of loyalty so marketers
can understand their needs and make sure they are satisfying them.

Loyal customers are the ones who should receive special treatment and privileges such as exclusive
rewards programs to nurture and strengthen the customer relationship and incentivize continued future
business.

5. User status
There are many different possible user statuses you might have depending on your business. A few
examples are:

 Non-users
 Prospects
 First-time buyers
 Regular users
 Defectors (ex-customers who have switched to a competitor).

6. Customer journey stage

Segmenting the audience base on buyer readiness allows marketers to align communications and
personalize experiences to increase conversion at every stage.

Moreover, it helps them discover stages where customers are not progressing so they can identify
the biggest obstacles and opportunities for improvement, even on post-purchase behaviors.

Besides these traditional ways, another type of segmentation is the RFM model. This approach is
popular among eCommerce marketers because it helps them create customer experiences around the
information they’ve got about each customer segment.

RFM is a behavioral segmentation model and the three letters come from Recency, Frequency, and
Monetary Value.

Here’s what these variables show you:

Recency = how recent a customer placed the last order on your website;
Frequency = how many times a customer purchased something from your website in the analyzed period
of time;
Monetary Value = how much each customer spent on your website since the first order.

The RFM model analysis can be executed in 2 ways:

Manually – exporting your database in a spreadsheet and analyzing your customers following the rules for
RFM analysis;
Automatically – through certain tools that are creating RFM dashboards.
rfm soulmates

RFM segmentation and analysis can reveal who your most loyal and profitable customers are and
also:
 Reveal what brands and products are dragging your business down;
 Build custom recommendations for your customers;
 Solve certain Customer Experience problems.

Before making decisions based on gut feeling regarding your customers and your audience, observe
their behavior, listen to them and build a relationship that will make them stay loyal no matter how
aggressive your competitors are.

References:

Consumer Psychology (2010) by Cathrine V. Jansson-Boyd.

Understanding Consumer Behaviour: The Four Factors (2018) by QuickBooks Canada Team.
Consumer behavior in marketing – patterns, types, segmentation (2019) by Valentin Radu.