Table of content:

INTRODUCTION

Customer behavior refers to how an individual buys, what is their frequency of shopping, and what factors influence their buying decision. Customer behavior is influenced by the following three factors:

1. Personality Traits
   

   Customer behavior is decided by their personality. An extrovert or jovial or outgoing personality may like to try more products in your store compared to the introvert or quiet personalities. To better understand the customer behaviour, you need to understand where your target audience lies in this category.

2. Social trends
   

   Social trends are external factors which are influenced by cultural fads or peer recommendations. Some trends are just a fad and will pass on quickly, while others are more permanent and may bring a lasting change in consumer behavior. For example: after covid, wearing a mask has brought a permanent change in the customer behavior.

3. Psychological Responses
   

   It means how a customer responds based on a situation. A customer will respond based on their perception and understanding of the situation, which may vary from day to day. Understanding the psychological responses of customers is important as you can diffuse difficult business situations, such as shipping delays, to prevent customer churn.

Customer Behavior Analysis

Customer behavior analysis is the observation of the interaction of the customer with your company. It gives an insight into what are the various motives or decision methodology a customer goes through during the journey of purchasing your product.

“Knowing Your Customer” is very important for any ecommerce business and you can use customer behavior analysis to understand how to serve customers more efficiently.

There are 3 types of Behavioral Analysis in ecommerce:

1. Purchasing behavior analysis
   

   Purchase behavior is the most accurate indicator of consumer behavior. It includes understanding the buying patterns of customers, for example, seasonal purchases, or how shoppers respond to discounting or special offers.

2. Browsing behavior analysis
   

   Online browsing behavior of a consumer can be used to track how the shopper discovered your store, which products they browsed, etc...

3. Email behavior analysis
   

   Email behavior is used to analyze how consumers respond to your different email marketing strategies; such as what types of emails prompted shoppers to buy your products or how many emails were opened.

Benefits of Customer Behavior Analysis

1. Improved Content Personalization
   

   41% of customers switched companies last year due to poor personalization. Content Personalization is very important to shoppers as it can improve brand recommendations.

2. Increased Customer Value
   

   Using customer behavior analysis, your business can attract brand-loyal customers before your competitors do.

3. Increased Customer Retention
   

   Using customer behavior analysis can help your team reduce customer churn, for example, by identifying loyal customers and giving them some special recognition.

Studying your customers patterns can lead to a better understanding of who your customers are and what they value. It’s using a methodological approach to building lasting relationships. It’ll help you figure out who best to spend your money marketing to and how best to keep them as loyal customers.

Customer behavior analysis is critical to the long-term success of your business because it helps you understand what influences consumers’ buying decisions. In this post, we will learn how to conduct a customer behavior analysis.

1. Segment your customers
   

   The first step to conduct a customer behavior analysis is to segment your customers. Segmenting your customers allows you to create marketing campaigns for each individual segment.

2. Identify key buying reason for each segment
   

   Each customer segment will have their own reason for buying your products. It’s important to understand whether customers bought your products because they love your brand or because it was convenient, or for some other reason such as price. Maybe it was purchased because of an urgent need. If you understand your customers buying motivations then you can improve the customer shopping experience.

3. Gather some numbers
   

   Just having qualitative data is not enough. You need quantitative data to truly validate your conclusions.  You can easily get blog subscription data, social media insights, and product usage reports from your company database. Consumer reviews and competitor analytics can be obtained from secondary sources. And industry wide trends are also available widely to give you a brief idea of consumer behavior.

4. Compare all your data

   After you have gathered data, try to understand what the quantitative data is saying compared to qualitative data. Identify which customer segments bought what products, when and where they were purchased or repurchased. By doing this, you will have a detailed understanding of your customer behavior. Now you’re set up to easily pick out recurring trends or any roadblocks in the customer journey and offer better solutions.

5. Apply your findings to marketing campaigns

   Use your findings to provide better content to your customers and remove various roadblocks in the customer journey. Use only the best delivery channel and marketing platform for each customer segment and use insights from your data to update the marketing campaigns for each customer segment.

6. Analyze your results
   

   Lastly, it’s important to understand whether your changes to your marketing campaigns worked or not. To measure the effectiveness of campaigns use metrics such as conversion rate, acquisition cost, and customer lifetime value to determine the effect of your updated campaigns. Reanalyze your results again and again on a timely basis to make sure that they reflect the updated trends.

The first step of conducting Customer Behavior analysis is to segment your customers as you'll want to identify the characteristics of customers who are the most valuable to your business. Typically there are six types of behavioral segmentation:-

1. Benefits sought
   

   When a customer is looking to buy a product or service their behavior can reveal what benefits, features, or values are most important when making a purchasing decision. For example, a customer buying a jacket may be buying one based on the price, material, color, etc... Any of these benefits sought can be motivating factors to a customer and influence their purchasing decision.

2. Occasion or timing-based
   

   Occasions can be universal or personal. Universal occasions such as holiday sales and discounts apply to all the customers equally and signify a time when customers make more purchases. Personal occasions can be recurring such as buying groceries every week or rare such as buying a wedding gift.

3. Usage rate
   

   The frequency with which customers use a product is another way to apply segmentation. Usage rate signifies customer loyalty or churn and overall customer lifetime value.

4. Brand loyalty status
   

   Loyal customers are extremely valuable to a business because they are less costly to retain and have the highest lifetime value. By analyzing customer behavior data customers can be segmented by their level of loyalty. And loyal customers can be given special privileges such as special discounts or loyalty rewards.

5. User status
   

   Different customers have different user status such as:

   • Non-users
   • Prospects
   • First-time buyers
   • Regular users
   • Defectors
6. Customer journey stage
   

   Segmenting customers based on where they are along their customer journey map can help you understand potential roadblocks they’re facing and why they are not progressing forward to purchase.

Besides the typical way of customer segmentation, there is another way to segment customers called the RFM model.

RFM stands for Recency, Frequency and Monetary Value. 

• Recency = how recently a customer placed the last order on your website

• Frequency = how many times a customer purchased something from your website in a specific period of time
• Monetary Value = how much each customer spent on your website since their first order

You cam use RFM model to segment your customers in the following ways:

1. Manually: By manually reporting customer data in a spreadsheet and then segmenting the customer based on RFM rules.
2. Automatically: By using tools like Tableau that can create RFM dashboards.

This may be one of the most important and critical business activities you ever do so do not skip the process of segmenting your customers! 

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