How Evolving Customer Behavior Challenges Companies to Stay a Step Ahead

Group of people analyzing data on computer

If consumers were zoo animals, we might be able to understand them better. Assembled in a confined space, their patterns, habits, and preferences would be easily observable so we could form a comprehensive, detailed picture of customer behavior over time.

But (thankfully) consumers are not zoo animals, nor are they literally or metaphorically stuck in confined areas. Instead, they freely roam the market. They try, buy, and discard at will. And they are far less concerned with brand loyalty these days as they are with personalized offers, service, and other touch points.

Some would argue this evolving customer behavior has resulted in market fragmentation where no single company dominates or can move an entire industry in a certain direction. Others would say that fragmentation happened first when the Internet of Things (IoT) arrived on the scene along with a multitude of new and different ways to buy digitally, and that it was consumers who had to constantly shift and change just to keep up.

The chicken vs. egg debate is an interesting one. But no matter who was responsible for what, the reality is that there is now significantly more competition in the jungle (er, market) and far more choice for consumers. (As an example, consider how several direct-to-consumer brands have created disruption in the U.S. retail market and claimed a good share of it for their own.)

These conditions make it enormously challenging for any consumer packaged goods (CPG), food and beverage, or other type of retail brand to exert widespread influence, let alone lock in customer loyalty.

But if companies are going to stay at the front of the pack, they need to understand what’s driving their customers and apply these insights effectively to product development and marketing.

Consumers in the mall

The significance of customer behavior

How your customers behave — what buying decisions they’re making, what brands they’re following, what types of messaging they respond to, and so on — is the cornerstone that connects product with profitability. Their behavior makes up a large proportion of the audience insight you need to accelerate time to profit, whether through new product development or refinement and reinforcement of existing products.

But their behavior in the aggregate is difficult to pin down, thanks to a segment of younger, more adaptable consumers reliant upon their devices who are shopping alongside an older, less tech-savvy cohort with more traditional expectations of the shopping experience, and everyone else who falls somewhere in the middle — a rumbling of Generations X, Y, and Z on the open plain.

To make it more complicated, consumers can be further broken down into other subsets, revealing (to name just a few):

  • Those who are far more worried about privacy and those who are worried less
  • Those who expect highly personalized interactions and those who don’t
  • Those who want instant gratification and those who are tolerant of a stepped buying process
  • Those who still think “well-established” is a marker of trustworthiness and those who think “upstart” is
  • Those who are quick to take to social media with a complaint and those who simply call customer service

All of which is to say that there are just too many variables among consumers now to treat them as a predictable, or even influenceable, monolith. If there was ever a time when companies expected to steer markets or consumers, it’s now the other way around.

That’s why it’s increasingly important to recognize the significance of consumer behavior within the context of today’s world, and even more importantly within your own target audiences, if you hope to understand your customers’ unmet needs, capture their attention with relevant products and services, and stay competitive.

How to apply customer behavior

But how you go about forming a detailed understanding of your customers’ behavior is another story. With more variables comes more layers of insight that need to be uncovered and examined. In other words: what really makes your customers tick?

One of the best ways to find out is by creating a target market profile for each segment of your target buyers. And since nothing is basic anymore, today’s profiles have to go far beyond general demographics, such as age, gender, household income, education level, and geographic location, into unique psychographic territory like personality, attitudes, and emotional triggers (more about these in a moment).

You can create each profile by using both data science and market research to effectively combine multiple types of data — including big data gleaned from social media, purchasing decisions, likes, videos watched, etc. — with customer survey data and proprietary customer data if it’s available.

This allows you to 1) form a much deeper, richer, and more holistic profile for each buyer segment, 2) identify, capture, and target niche sub-segments that can give you a competitive advantage in the market, and 3) identify similarities across all segments for mass targeting initiatives.

Let’s take a closer look at each of these:

Forming deeper, richer, more holistic profiles

Consumers may not be zoo animals, but they are nonetheless complicated creatures with highly specific personalities, preferences, habits, and interests. Studies and data that uncover not only shopping and buying behavior, but underlying health and wealth indicators, lifestyle and activity choices, and content and media consumption, reveal a rich landscape full of previously unmapped peaks, valleys, and roads — each of which hold key secrets to customer behavior. Instead of just understanding the “what,” you can now understand the “why.”

Remember those psychographic factors like personality, attitudes, and emotional triggers? On the surface, these seem really hard to quantify. But with the wonders of big data, you can start to identify and understand them by juxtaposing data from social media interactions, for example, with the Big Five model of personality traits (openness to experience, conscientiousness, extroversion, agreeableness, and neuroticism) to form a unique picture of your customers that can help explain their motivations and values.

For example, someone who ranks high for agreeableness will behave differently from someone else who ranks high for neuroticism who will behave differently from someone who ranks high for extroversion. By overlaying personality trait findings with basic demographics, lifestyle data, media consumption, and so on, you can begin to arrive at a three-dimensional masterpiece of information and insight for each of your target buyer segments.

Identifying, capturing, and targeting niche segments

Companies are increasingly looking for niche buyer segments to help differentiate from competitors. These niche segments create ready-made customer bases for launching new products and services, and also provide a handy blueprint for you to go out and find prospective customers who match the same criteria.

Once you’ve formed rich profiles for each buyer segment, you can continue to sub-segment further to get more and more targeted with your messaging and products, rather than cast a wide net and risk an overall lukewarm response.

With these niche segments identified, you can then personalize communication, marketing materials, and ads for each of them, which, in turn, can lead to higher conversion rates and greater profitability.

Identifying similarities across all segments

Friends browsing internet on smartphone

In some cases, casting a wide net is preferred, especially if a new product, service, feature, or campaign could have universal appeal, or if budgets and resources are restricted and don’t allow for hyper-niche targeting.

This is why breaking your target buyer segments into smaller and smaller subsets doesn’t just benefit niche targeting. It also allows you to more easily identify the similarities that run across all segments when mass targeting is necessary

Once you know the similarities, you can surface shared customer behavior and expectations, and then determine the messaging or products that might resonate with everyone. Instead of making best guesses with one huge sample of customers, you have the specific data and insights you need right in front of you.

Embracing the evolution

In this digital era where everything moves fast and change seemingly happens overnight, customer behavior will continue to evolve in new ways and new directions, pushing any number of companies to adapt and grow while demanding closer attention to individual wants and needs.

That’s why behavioral science is so critical to market research: when combined with data, surveys, and other types of customer information, it allows you to predict with more precision the buying decisions of your customers so you can get in front of them at the right time and place with the exact products and services that will most likely resonate with them.

It’s important for marketers to understand consumer behavior as well, since half the battle of increasing profitability is communicating effectively with existing and prospective customers alike. Armed with behavioral data and highly detailed target market profiles, marketers can appeal to both mass and niche audiences by delivering specific messaging to specific customers on specific devices or over specific channels to all but ensure better conversion rates and increased sales.

The “evolution,” if you will, is not a matter of keeping up with the wildest of consumer whims or being caught off-guard by the stampeding herds of change. Rather, it’s about staying ahead of it all using market research studies, tools, and data, along with advanced technologies like automation and AI to speed time to insights and deepen your understanding of customer behavior.

The companies who embrace the evolution can expect to enhance customer engagements of all types and provide much higher-quality experiences that authentically spark and hold interest, thus approximating some of the customer loyalty we saw a few decades ago. With more interested, engaged, and satisfied customers, you will find that you can also exert more influence within your industry and pull in front of the competition.

To see an example of how Endangered Species Chocolate took a connected data approach to deeply understand all three of their customer segments and better understand their preferences and behaviors, take a look at the case study below.

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