How Consumer Behavior Influences an Organization
Javier Ramirez
Liberty University
BUSI 520: Strategic Marketing Management
Muriel Wilson
January 6, 2022
How Consumer Behavior Influences an Organization
To effectively sell a product or service, organizations have to know how consumers
behave with regard to what they buy. The study of consumer behavior involves examining
what products certain types of consumers buy and when and how consumers decide among
products. As a small business owner, understanding how your customers buy your products
and services will help you grow your business by responding
Marketing
1. Organizations often study consumer behavior to determine when, how and where
they should market their products and services. For example, if you know people tend to
choose office supplies by familiar brands, you are going to try to make your office supply
brand a household name, creating commercials, social media pages and promotions for your
product. However, if you are selling textbooks that only graduate students buy, you
probably won't spend as much time with commercials and will focus more time hanging
posters in graduate schools and becoming Facebook friends with graduate programs.
Product Development
1. Consumer behavior helps organizations decide what products and services to
manufacture or offer. When they know what customers buy and how they go about buying
those products, organizations can more easily spot a need that has not yet been satisfied. If
you run a technology company and notice that many of your customers buy educational
software from college bookstores in early fall and spring, you may recognize that your
customers could use a place to buy and automatically download educational software
online. According to the Harvard Business Review, most organizations must learn as much as
they can about consumers and what types of products they purchase to come up with a
winning idea.
Customer Service
1. When you know how customers behave in relation to the products you're selling,
you have a better understanding of how to provide good service to them, increasing the
chance that you'll have repeat customers. For example, if you know that customers tend to
come to your restaurant because they can get healthy food without waiting for a long time,
you should continue training your wait staff to be as efficient as possible.
Gathering Consumer Behavior Data
1. Gather some consumer behavior data by simply analyzing the sales information you
already have. For example, you can see whether most of your products are purchased with
cash or credit card. If you have a clock on your register, you know when people tend to shop
in your store. However, you shouldn't limit yourself to this information. The most valuable
information comes from in-depth answers from your consumers about their spending. Focus
groups, surveys and one-on-one interviews are good ways to get information about
consumer behavior. Encourage consumers to participate in these methods by offering
rewards, such as a contest entry or discount, for survey completion or focus group
participation.
Both individuals and organizations need to purchase items to accomplish their daily
tasks. There is a large difference, however, in how and why an organization purchases goods
and services versus how an individual shops. Understanding these differences is important if
you want to tap into both an organizational and a consumer market.
Why Goods are Purchased
Organizations purchase goods to use in their ongoing operations and to resell to
consumers, while consumers purchase goods for their personal use. Organizations also
purchase more raw materials – such as wood, steel and other items used in manufacturing –
than individuals who don't have the tools or knowledge to put those raw materials to use as
a product. Organizations generally purchase goods in larger volumes than individuals, and
are driven by customer demand and need for manufacturing materials.
Consumers, on the other hand, are driven both by need and by want. It is possible to
entice a consumer to purchase something he does not need through effective marketing or
peer pressure, but it is much harder to entice an organization to buy an unnecessary
product, especially when dealing with a purchasing department that is accountable for what
it spends.
Buying Products in Bulk
Organizations often purchase in bulk, whereas consumers typically do not. For example,
a consumer might buy three gallons of white paint to paint his house while an organization
might need 3,000 gallons to paint shelving units for resale. The organizational market is thus
more condensed – it is possible to have a business succeed catering only to a small number
of organizational clients – while businesses that typically focus on consumers sell smaller
quantities to more people.
That said, Costco and similar wholesale warehouse companies do successfully market
low-price, high-quantity goods to individual consumers. These consumers tend to buy for
small office spaces or family homes, however, rather than only for themselves.
Choices and Use
Consumers typically purchase goods for different reasons than organizations, and have
more freedom in choosing the items they want. A consumer may purchase a chair so people
can sit comfortably in his home. He will be able to choose any chair within his budget that
he likes. An organization, on the other hand, may purchase a chair because an
administrative assistant needs it to do his job.
The organization may be restricted in a chair purchase, not only by the budget set by a
purchasing manager, but also by guidelines set by the Occupational Health and Safety
Administration, and by company-wide guidelines on office furniture.
Marketing Strategy for Each
Reaching organizational clients requires explaining how your products and services will
help their organization serve their clients and customers. It is a help them help others
approach. However, to reach a consumer market, you have to show how your products
enhance a consumer's life in some way. whether it makes life easier or more enjoyable, or
both.
Customer incentive programs offer benefits to loyal buyers. Some businesses offer
frequent-shopper discounts or points-based reward systems that allow customers to
accumulate benefits with every purchase. Other companies offer incentives to obtain
customer cooperation, for example, by paying customers for referrals. Such as;
Customer Satisfaction
1. Customers want to feel valued, not exploited. Offering incentives rewards them for
using your product or service, increasing customer satisfaction. The key is to target the right
customers with your incentive program, notes the book “Customer Loyalty Programmes and
Clubs,” by Stephan A. Butscher. Analyze your customer base to identify the most profitable
segment of customers, and then design an incentive program offering a benefit that's
meaningful to that group.
Incentives offer many advantages.
Data Collection
1. Businesses increasingly use customer incentive programs to persuade their
customers to share personal data. Supermarket chains often offer loyalty cards that help
them track purchases by linking them to individual shoppers. If stores simply asked for this
information, even loyal shoppers might balk at the prospect of having their purchases
tracked and recorded. But by compensating shoppers with discounts for using loyalty cards,
the stores create an incentive that boosts customer satisfaction while supplying new
insights into consumer behavior.
Customer Retention
1. Acquiring new customers is expensive. You must design and implement marketing
campaigns, introduce them to your product or service and offer them support as they learn
the ropes. New customer acquisition costs vary among industries, but replacing a customer
can cost five times as much as keeping an old one, according to the book “Emerging Trends
and Challenges in Information Technology Management,” by Mehdi Khosrow-Pour. A
smarter approach is to keep the customers you have, something a customer incentive
program can help you achieve. For example, knowing that making a second purchase from
your company will earn a discount makes your product more attractive than those of your
competitors.
Charity
1. Some businesses offer incentives that allow customers to support charitable causes.
For example, a retail store might announce that it will donate a small percentage of a
month’s sales to a particular charity. Customers are more likely to purchase products from a
business that supports causes important to them, leading to a sales increase. With enough
purchases, everyone wins: The charity will receive a sizable donation, the customers will feel
they've helped their community and the store will make enough money to cover its
donation and earn a tidy profit.
