Customer behavior: the ultimate expert-backed guide

Studying customer behavior gives companies insight into consumers’ minds and why they buy. Doing so helps align sales and marketing efforts to connect with people and encourage purchasing.

However, gathering and analyzing these insights is crucial to avoid information overload and make meaningful changes that benefit revenue.

In this article, we define customer behavior and what influences it. We also walk through a four-step, repeatable formula for customer behavior analysis.

What is consumer behavior? A clear customer behavior definition

Customer behavior refers to the collective factors that influence individual and group purchasing.

Companies study these factors to learn how to encourage more customers to buy. They then use those insights to inform targeted marketing strategies and product offerings while making sales and marketing decisions.

By segmenting customer behaviors, brands can understand different customer groups’ motivations, preferences and needs. There are many ways to segment behaviors, but some of the most popular factors brands focus on are:

• Psychological behaviors (e.g., personalities more likely to fear missing out or those who are more skeptical and will likely need more convincing)

• Social behaviors (e.g., the willingness to act on the opinions of influencers or family and friends)

• Personal behaviors (e.g., the customer’s tendency to impulse buy)

• Situational behaviors (e.g., the customer’s mood at the time)

Say a company provides change management services to large enterprises. Even though their customers are businesses, the sales and marketing teams still must understand the behaviors and decision-making processes of those who evaluate outside consultants and services.

Through customer behavior research, the change management company discovers the top motivations for CIOs and IT managers are minimizing productivity disruption and improving security. These executives also take three to six months to decide, but they want the service to begin quickly once they do so.

With these insights, the marketing and sales teams can highlight their service’s award-winning change programs and case studies detailing the team’s professionalism.

They can also emphasize the smooth onboarding process and avoid pestering potential customers with too many follow-ups during the decision period.

By understanding buyers’ underlying behaviors and motivations, brands can better position products and services to meet the specific needs and expectations of the target audience.

Ultimately, these insights increase the chances of success over competitors who aren’t as in touch with their customers.

Why is it important to track customer behavior?

It’s essential to stay updated on external factors that impact your target market’s buying habits so you can adjust pricing, development and marketing efforts accordingly.

For example, the COVID-19 pandemic shifted global consumer behavior considerably. While some customers spent less to save money during lockdown, others did more online shopping and impulse buying to combat boredom.

However, customers’ reasons for buying or not buying change constantly, even when lockdowns aren’t a factor.

You may already think you’re aligned with your target audience, but you must revisit this research regularly and avoid disparities. While 81% of brands told Twilio they understand their customers deeply, less than half of global customers agreed.

Here are five ways tracking customer behavior patterns can benefit your overall strategy:

• Pricing. By analyzing how customers feel about certain price points and discounts, you can understand how they value your product and set prices that drive purchases.

• Product development. Identifying which features resonate with customers can guide you to develop products that fulfill their needs and desires.

• Sales strategy. Understanding the internal and external triggers that lead to purchases (e.g., social proof) helps you craft approaches that leverage them and boost sales.

• Marketing messages. Observing how potential customers respond to tone and content helps you create more effective marketing strategies that tap into psychological motivators and emotional responses.

• Audience segmentation. Customer behavior segmentation helps you create more accurate buyer personas and ideal customer profiles (ICPs), leading to more personalized and effective targeting.

Referring to a Google study (where the search engine tested different shades of blue to increase link click-throughs and annual revenue by $200 million), neuroscientist Dr. Terry Wu said:

However, design choices and psychology alone don’t impact consumer buying behavior. In the next section, we’ll explore four more common influences.

4 common types of consumer behavior that impact how people buy

Customer behavior changes constantly, and many unique factors affect buying decisions. Therefore, understanding the motivations of each of your customer groups is crucial.

Academic researchers have also identified several broad models of purchasing behavior, so it’s worth knowing if they apply to your product.

Here are four standard models and when they apply to kickstart your research.

1. Habitual buying behavior

Customers who purchase products repeatedly (e.g., sportswear or subscriptions) can develop strong brand loyalty. Familiar, repeat purchases like these can become habits that turn into automatic, hard-to-break behaviors.

Many brands aim to make their products a habit. That often means breaking a habit with a competitor brand or activity.

For example, Exhale offers new customers a free first bag of coffee before they sign up for a paid subscription.

The brand’s subscription offering can help break customers’ habits of buying coffee beans at the grocery store when they run out. Exhale is also trying to keep potential customers from alternative brands like Starbucks or Dunkin’ Donuts.

Exhale seems like it’s making a generous, confident offer with its full bag of beans. However, it’s actually tapping into its buyers’ habit-forming tendencies. Compared with a single-use sample, the whole bag allows users to drink the coffee for a week or two.

Coffee drinkers tend to be creatures of habit. If Exhale can insert its beans into that habit over a trip to Starbucks, it’s likely to gain a loyal customer who will continue their subscription.

2. Variety-seeking buying behavior

For low-involvement products (e.g., regularly purchased items like skincare or toiletries), people like experimenting with different types to see which they prefer. Even if they are satisfied with their usual choice, this behavior shows a desire for novelty and change.

Customers may seek variety because they’re bored with their current choices, curious to try something new or simply want to eliminate alternatives.

Beauty brands like Sephora tap into this buying behavior by offering a wide variety of the same product (e.g., several lip gloss brands), personalized recommendations based on previous purchases and new products to keep people interested.

While creating new products constantly isn’t as easy for B2B brands, adding customization options and bundling existing services in new combinations can tap into this buying behavior.

3. Complex buying behavior

The buying journey for expensive purchases that happen rarely (e.g., a new smartphone) can be lengthy and complicated – especially in B2B sales. Over 75% of B2B buyers Gartner surveyed described purchases as “very complex or difficult”.

For all types of complex sales, consumers spend time researching, reading reviews and digesting content to understand what they’ll get from each option.

In these cases, companies need to convey the value of their products over the competition. You can achieve this with case studies and other creative content like video tutorials.

In-depth content like case studies helps potential customers learn about complex situations and how your company can solve their problems.

4. Dissonance-reducing buying behavior

Customers often need help differentiating between similar products when weighing multiple choices. (The “dissonance” is the worry they’ll make the wrong decision and regret it later.)

Ironically, giving someone too many choices (known as the paradox of choice) can overwhelm them.

To counter this, you can offer an enticing returns policy (e.g., free returns) and highlight positive differences from your competitors with content like comparison pages.

Brands should do everything possible to lessen decision tension and make the choice easier in a highly competitive market.

What other factors influence consumer behavior?

While the four buying behaviors above are broad and typical in many situations, other factors may influence individuals in your target segments.

To create successful marketing campaigns that prompt purchases, you must understand the factors impacting buying decisions about your specific brand or product.

Here are four factors to consider when researching how your target market purchases products like yours.

Psychological factors

Psychological factors are the mental and emotional processes that influence purchasing behavior, including perception, motivation, learning, beliefs and attitudes.

Some examples of psychological factors include:

• Cognitive biases (e.g., trusting those in authority, favoring existing beliefs and valuing immediate rewards over long-term alternatives)

• Personality (e.g., openness to new experiences, conscientiousness, agreeableness and the tendency to experience positive emotions or emotional stability)

• Marketing campaigns (e.g., conveying urgency with a limited-time offer)

• Website design and quality (e.g., making it easy for customers to purchase in a few clicks)

• Motivators (e.g., free trials and discounts)

The intricacies of psychological motivators aren’t always clear-cut, according to Professor of Psychiatry and Behavioral Sciences Dr. Robert Malenka:

In terms of consumer behavior, customers usually buy insurance for high-value products because they want peace of mind. However, that doesn’t mean they like spending money on it.

Insurers can use this information to emphasize emotional benefits like peace of mind when selling the product. They may also offer bundles with value-added services to enhance perceived value and make the purchase seem more worthwhile.

Personal factors

Personal factors refer to individual characteristics (e.g., customer demographics like age, occupation, lifestyle and economic situation) that influence someone’s purchasing decisions.

Common personal factors can include:

• Preferences (e.g., splurging at the start of the month)

• Lifestyle (e.g., prioritizing health and fitness so spending more in that niche)

• Income (e.g., doing more discretionary spending in your current role than your previous one)

• Impulse buying tendency (e.g., buying something without researching and considering your options)

Marketers and salespeople often leverage emotional triggers that compel customers to act, driving impulse buying.

For example, the social media management tool SocialBee uses an email marketing offer to encourage FOMO (fear of missing out).

The subject line “next 3 days only!” sparks curiosity and urgency for email list subscribers to save $199 by becoming a customer in the next three days.

Social factors

Social factors refer to the influences that society, family, friends and social networks have on someone’s purchasing decisions and behavior.

Even people we don’t know can make an impact. According to YouGov, one in four adults has purchased based on an influencer’s recommendation.

Other typical social factors that influence purchases can include:

• Cultural norms (e.g., tipping in American restaurants)

• Opinions of family and friends (e.g., you may not sign up for a subscription you know a friend dislikes)

• User-generated content (e.g., online reviews and ratings)

• Social media (e.g., people you follow on Instagram that you may not know)

Award-winning consumer psychologist Kit Yarrow suggests that social media influences buying decisions so they feel more natural:

Situational factors

Situational factors refer to temporary conditions like physical environment or time constraints that influence a consumer’s purchasing decisions.

The way choices are presented, for example, impacts our decisions – this is called choice architecture. Brands, therefore, act as “choice architects”, creating an environment that influences consumer decision-making.

Other typical situational factors can include:

• Time of day (e.g., you may spend more time browsing on a Sunday morning compared to a Thursday evening)

• Location (e.g., you may buy more things on vacation than at home)

• In-store music, sights and smells (e.g., a sweet-smelling store may prompt you to view the clothing more positively and purchase)

• Customer’s mood (e.g., you may engage in “retail therapy” if you’re feeling sad)

An older study tested the impact of background music on people’s wine-shopping habits in a UK grocery store. When researchers played French music, people bought more French wine. The same was true for German music and wine.

When researchers asked if the music impacted people’s decision-making process, over 90% said no. Reactions like these show how situational factors influence spending subtly and subconsciously.

How to conduct a customer behavior analysis to meet your target market’s needs

To encourage customer loyalty, you must analyze your customer base’s behavior and make informed updates.

Here are four steps to conduct a worthwhile consumer behavior analysis and make changes that count.

Choose the question you want to answer

When building a customer behavior analysis strategy, you need to have a goal in mind to track progress and give yourself the best chance of success.

Instead of analyzing and changing too many things at once, narrow your analysis to a single question that gives you clarity and direction.

Here are a few examples:

• “Has our product become too expensive for our small business users?”

• “Are there any points where customers abandon their carts or leave the site?”

• “What external factors (e.g., trends or seasons) influence customer interest?”

• “Is there anything we can do to reduce returns and increase satisfaction?”

• “What tailored strategies can we develop for each customer segment to improve their experience?”

Focusing your analysis around one question ensures you’ll concentrate on gathering specific insights that address it directly, making the process more efficient and actionable.

Founder of Ravn Research Clare McDermott says one of the most common mistakes she sees companies make in this stage is casting too wide a net. In her words, “taking inventory with research”:

Framing the analysis this way encourages a deeper understanding of that aspect, leading to more accurate and targeted strategies.

Conduct market research

You must research your market and audience to understand what impacts customer needs, pain points, preferences and challenges.

Collecting a mixture of relevant qualitative data (e.g., personal insights) and quantitative data (e.g., hard facts and metrics) helps you make more informed decisions.

Here’s an example of what part of your market research could look like (via an online customer survey company called SurveySparrow):

Let’s say you’re investigating a drop in subscriptions from small business users. Your analysis caused you to research whether your accounting software is too expensive for them.

You can use the following research methods to collect both types of data:

• Surveys (e.g., website pop-ups or post-support chats)

• Focus groups (e.g., in-person or through video conferencing)

• Interviews (e.g., in-person or through email)

• Experimentation (e.g., A/B testing)

• Customer observation (e.g., social listening)

The crucial part here is getting the wording of your questions right to keep your results focused.

You could ask, “What do you think about our pricing?” However, you’ll get more specific insights by asking, “Have you ever considered switching tools due to our pricing? If so, which specific aspects concern you?”

Companies often dedicate years to market research before launching. Continue to do so as you evolve to stay aligned with your target audience.

Analyze your data

Once you’ve collected customer data from all sources, you must analyze it to spot patterns, trends and anomalies.

Ask yourself if some common answers and themes emerge from your feedback that impact customer satisfaction. Examples include:

• Users feel they’re paying too much for features they don’t use

• Budgets for small businesses tightened due to the rising cost of living

• Competitors offer better value for money

• Pricing should be more transparent

Continuing with our previous example, let’s say surveys and interviews reveal that smaller firms love your accounting software’s basic features. However, they think your pricing structure suits larger companies.

Users point out cheaper alternatives but prefer your user experience and educational program. All this is crucial information.

You can gather and analyze relevant data like this manually or with dedicated tools, including Pipedrive. Pipedrive’s cloud-based customer data management system allows you to access insights on various browsers and devices.

For example, you can use pre-created Web Forms templates or start from scratch for targeted data collection.

You can embed forms on your website or send them through email or social media. You can also access over 400 integrations in our Marketplace (e.g., SurveySparrow and SurveyMonkey) to automate surveys and keep all company research in one place.

Draw conclusions and adjust your customer journey accordingly

Once you’ve analyzed data, use the resulting insights to recommend new strategies that improve your customer experience.

Write down answers to your initial question and the tactics you must implement to achieve them. It’s helpful to break this process down into conclusions and an action plan.

Some of your conclusions might be:

• Our product has become too expensive for many small business owners

• The current economic climate has put a strain on small business budgets

• Many small business users aren’t making the most of our range of features

• Our user experience and rewards program prevent people from switching to our competitors

With these answers, you can create an action plan to adjust your pricing and customer journey. Take these conclusions and turn them into a statement like this:

After that, dive into the different customer journey stages and how you’ll address them based on your concluding statement. Tactics may include:

• Highlighting the new plan in your digital marketing efforts

• Creating new content to compare the new plan to your competitors’ offers

• Ensuring a clear, straightforward pricing page that explains the benefits, with FAQs to address common concerns

• Providing step-by-step onboarding that focuses on fewer, more relevant features

• Sharing success stories of small businesses that benefited from the new plan

Once the changes are live, ensure you track essential metrics that convey their success. For example, you may choose to measure conversion rate, customer retention rate, churn rate or customer lifetime value (CLV).

Final thoughts

Customer behavior isn’t an exact science and will always vary from person to person. However, studying trends and patterns in your target audience can help you make changes that benefit your target segments.

Over time, you can hone your process to get the most accurate answers. It’s crucial to keep doing it, analyzing your customers’ responses to changing internal and external stimuli.

Use a customer management tool like Pipedrive and its hundreds of integrations to streamline data collection while keeping all your insights and reports in one place.