The Complete Guide to Understanding Consumer Psychology

Why do we buy things? What drives us to become customers and clients and to commit ourselves to one brand over another? These are the questions we rarely ask ourselves before a purchase. Sure, we'll consider our options and weigh one product against another, but seldom do we ask why we feel the need to buy one thing or another. The answers to questions like these lie in the subtleties of consumer psychology.

Consumer Psychology Principles

While consumer psychology can be as complex as the individuals and behaviors it attempts to explain, there are also some basic principles and patterns that have proven to be reliable. For example, as consumers, we love to feel as though we have a variety of options to choose from. At the same time, too many options can feel overwhelming and our brains feel much better when we can make a decision intuitively as though the choice was clear to us from the start. So, while freedom of choice sounds good to us, a narrower list of options can be more appealing, proving our choices are more subconscious than we think.

Similarly, the less pressure on the decision maker the better. When there is less pressure or the decision is open ended and likely to change, an individual is likely to come to a conclusion quicker because they spend less time worrying about the consequences of making the wrong choice.

This is also why people behave differently in hypothetical situations because they come with no consequences at all. It's all about building a relaxed state of mind in a consumer. One which makes them feel comfortable with their ultimate choice, but also balances time pressures and scarcity that could speed up the decision making process.

A person’s state of mind immediately before making a decision is a major contributing factor to their ultimate choice. This is why emotional appeals often work far better than intellectual or logical ones. Appeals to logic assume that the decision maker has prior knowledge of all the facts or otherwise requires you to inform the consumer. In reality, people make emotional decisions based on incomplete information and 'that gut feeling' telling them to act. The consumer knows their own emotions best. Emotion doesn't require prior knowledge.

For this reason, marketing is often about world building. Creating an atmosphere that elicits certain emotions in the consumer. Something that prods at our nostalgia or tugs at the heart strings.

Furthermore, we are creatures of habit that give in to cognitive bias. Cognitive bias is the tendency for a decision maker to make the same choice they made in a similar situation rather than risk an unknown outcome. It's our tendency to be drawn toward comfort and the path of least resistance.

Even among those who feel they are independent thinkers and value this as one of their defining traits, social pressures and the desire to be an individual within a group can affect the decision making process. We want to be individuals, but we also like to be praised for the unique choices we make.

Data-Driven Consumer Psychology

With availability of consumer data offered by social media, online marketplaces and resources like Google Analytics, our insight into consumers' mindset, purchasing patterns and needs has never been greater. Now more than ever, businesses have a data-driven window into consumer psychology that can help them offer better services to consumers, giving them exactly what they want when they want it.

Market Research

For any business operating online, it's a good idea to keep up with Google Analytics and identify what people are searching for in your industry when they turn to their pocket computers for answers. At the same time, your own website could be a tribe of insight. Pay attention to what users are searching for on your site, the pages and products they spent the most time on and the unmet needs your business could be filling. What products and investments are bringing the greatest return in the long run and what’s worth spending a little more money on for a greater ROI.

It's also important to learn from the mistakes of other businesses in your field. Case studies can offer insight into market trends and reveal aspects of consumer psychology you may not have considered. 

A popular example of this is the case of New Coke. In the mid 80s Coca Cola changed its recipe and introduced a product called New Coke. It did this to compete with Pepsi which had been advertising that customers prefer the sweeter taste of Pepsi to Coke in a blind taste test. However, many of Coke's loyal customers were angry with the change and New Coke failed. What Coca Cola failed to take into account was the culture it had built around its brand. The years it spent building a reputation. In fact, Coke had built such loyalty around its brand that in open taste tests more customers chose Coke over Pepsi regardless of the taste.

Customer Interviews

This is precisely why engaging with customers is so important and social media is an excellent tool for understanding what your customers want. Most of the time the answers don’t even need to come from algorithms or data collection, but from engaging with customers directly. Someone who is in the market for your product will often have plenty of questions that should not go unanswered. 

Even with endless information at their disposal, right in their pockets, people like instant answers. This is why it’s important to be a reliable source of information for your customers. Answer their questions, provide assistance and optimize your SEO so that your product is the first one they come across when they search.

Beyond this, engage your customers and listen. Get ahead of the curve by asking what they’re looking for but not getting elsewhere. Needs that aren’t being fulfilled but could be if you take the time to ask, questions your staff may be receiving, but don't have the answer to.

Top Consumer Motivations

Above all else, consumers are motivated by self interest. When making a purchase they want to know that they will benefit from parting with their hard earned money. They ask themselves what this product will add to their life for the money they spent. This seems rather straightforward, but it’s always good to keep in mind.

Consumers are looking to feel gratification from their purchase. They want a positive experience that will last, something that feels like a good deal, a reason to relax. They also want to know that the company is catering to them and cares about them. The most effective ads reach out to customers personally and make use of the word “You”. The same way those old Uncle Sam posters were designed to make it feel as though Americans had a personal duty to enlist in the military.

As discussed above, social pressures and influence are also major factors in a consumer’s motivations. They ask themselves if this is something their friends and peers will approve of or even recommend. They feel the need to follow trends to fit in, but also see popular items as something reliable.

Amazon, for example, displays its ratings and reviews prominently, event telling buyers which products are best sellers with a badge right next to the photo of the product.

Repetition should also not be underestimated. Part of the reason Coke was able to elicit such strong feelings where Pepsi was not is because Coke has become a cultural institution after decades of iconic advertising.

Consumers may see your product the first time and pass it over, but they’ll remember that this is something they considered buying, something, perhaps, that they’ve wanted for a long time but added to their Wishlist for later.

How To Create Customer Personas

It's important to know your audience and identify the groups you would like to reach out to. The categories could be as simple as men or women or dive into specifics like occupation, age group, gender and education level. 

Consider how these individuals discover your company or product. Do they hear about it from friends? From social media? An online ad?

What are these customer groups asking about your product when and where are they are introduced to it?

What sort of questions would need to be answered in order to get this consumer to purchase your product? How long should their decision making process take?

What are some reasons they wouldn’t want to buy your product or hesitate?

How To Create A Conversion Funnel

A conversion funnel is one of the most basic concepts of consumer psychology. It charts the decision making process of a consumer from the point of discovering your product, through their initial skepticism, all the way to finally becoming a customer and establishing brand loyalty.

Initially, you're going to have to build brand awareness by establishing an online presence. Building up mailing lists, perhaps even offering free samples of your product in order to build familiarity with your brand.

In the next phase you will focus on narrowing your prospective customers down to a base of likely buyers.

In a grocery store for example, according to Thomas R. Berkel, out of a 39,000 items available any given customer will only focus on about 200 items and consistently purchase those items each time they visit the store. 

The point is, you don’t have to appeal to everyone, you just have to find your niche.

This would be a great time to engage consumers and pinpoint exactly what they would like to see you provide. 

In the final phase of the funnel, you will have a reliable consumer base and can focus on maintaining and increasing sales. In this phase, maintaining a relationship with your consumers will be key. Engaging on social media and establishing the reliability of your product will make sure that people share their experience as a customer and recommend you to their friends.