Consumer Psychology in 2020

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A woman shops online

 

Between marketing and traditional psychology sits consumer psychology, a growing discipline devoted to understanding how people think and act when making purchasing decisions. For many years, consumer trends were very cut and dried — and relatively unchanging. However, increased use of the internet and web applications over the past decade has continued to move the goal post so quickly that traditional marketing has struggled to keep up. An advanced approach to consumer analysis that blends psychological concepts, big data analysis and marketing activity has risen from this frenetic game of catch up.

The Growth of Ecommerce

Much of the aforementioned change was brought on by the explosive growth of ecommerce, particularly as consumer buying platforms have become more robust in both offerings and trustworthiness. According to the U.S. Department of Commerce, retail ecommerce sales in the first quarter of 2020 were 14.8% greater than during the same time the year before, with total sales garnering an estimated $1.363 billion. During that same time period, ecommerce sales accounted for 11.8% of all retail sales. Though online sales have not overtaken traditional, they form a significant portion of revenues while also reducing overhead for businesses facing unprecedented challenges this year.

The changing face of retail — along with relentless uncertainty — has made consumer psychology ever-more critical in 2020.

When Did Marketing and Psychology Blend?

The two disciplines were never really far apart. Both include studies in how people behave, particularly when presented with some type of stimuli, whether cognitive or physical or both. As mentioned above, the growth of the internet has been a catalyst for blending the relationship between the two. Traditional marketing focused on the four P’s (price, place, promotion and product). Consumer psychology adds other critical elements, such as why, when and how.

According to ConsumerPsychologist.com, focusing on “consumer behavior involves the study of how people — either individually or in groups — acquire, use, experience, discard and make decisions about goods, services or even lifestyle practices such as socially responsible and healthy eating.”

This has become far more complex in 2020 because customers are not subject to limitations driven by geographic location or groupthink. Consumers are dispersed across the globe, away from others who may have previously influenced their decision-making.

In 2020, marketers are tasked with crafting messages that resonate with people who are incredibly diverse in their behavior and thinking. Understanding the difference in how a consumer thinks in California versus Brazil versus Germany versus Hong Kong now matters that much more for modern businesses.

Opinions Matter Now More Than Ever

A scientific-based approach helps marketers navigate difficult times like those faced by the public throughout 2020.

Beyond normal market trends, the marketer’s job is complicated in 2020 by many outside factors, including the coronavirus epidemic and recent social unrest. The last thing any company wants today is to be the poster child of how to market incorrectly — a tightrope to walk this year especially. Marketers depend on consumer psychology to determine what messaging is appropriate and what messaging will drive negative responses, which can be even more helpful during uncertain times.

Consumer psychology not only tries to anticipate what consumers may be interested in, but the discipline also puts a heavy emphasis on what to avoid as well. As noted by ConsumerPsychologist.com, consumer psychology can help organizations better understand:

  • How consumers think, reason, feel and choose between different brands and products
  • How consumers are impacted by their environments
  • Consumer behavior while shopping
  • How limitations in consumer knowledge impact purchase decisions

Ultimately, marketers use this knowledge to formulate their messaging and pivot their campaign approaches to drive efficacy.

Data Analysis and a Proactive Approach

Consumer psychology offers perspective, which allows marketing teams to build proactivity into their strategies.

Data about consumer perceptions is becoming increasingly valuable. With the growth of big data, information abounds about how consumers make decisions, how they shop, and what matters to them. Internet traffic provides highly detailed windows into what people search for, click, view and act on.

Conducting surveys about consumer perceptions is a significant application of consumer psychology. These surveys, which are increasingly fielded online and at the point of sale, enable a company to understand its strengths and weaknesses from the point of view of the consumer. Data scientists who are trained in consumer psychology are able to provide insight about the consumer mindset to corporate leadership in many departments.

A cognitive approach to this data also allows marketers to see long-term trends at work. Where data analysis may simply expose a fact, consumer psychology might expose what is driving that fact and how it can be leveraged for marketing.

For example, recent trends indicate that the fear of a recession caused by COVID-19 is driving people to spend less and penny-pinch. Though the facts might simply reveal that people are buying more discounted goods right now, a cognitive focus helps marketers mold their messaging to address the state of mind driving the trend.

Emotional Intelligence Drives Consumers

Emotions are closely tied to consumer behavior. Marketers have known this for years and work regularly to trigger what might cause emotional responses that lead to purchasing. Consumer psychology can help take this a step further, identifying what drives these emotions in the first place, the psyche of the given consumer and how it can be leveraged to drive loyalty.

According to data cited by Forbes, companies have to bring in up to seven new customers to generate the same amount of revenue they get from one repeat shopper. Returning customers are a company’s most valuable asset. But the “how” behind generating brand loyalty can be elusive unless consumer psychology comes into play.

Often, people will remember the feelings associated with a brand, even if they don’t remember a brand name. The key is leveraging consumer psychology to build those feelings into marketing efforts.

Here’s how psychology can help build brand loyalty:

  • Developing a brand personality to drive customer feelings
  • Using data to find words that will generate specific feelings about products
  • Crafting a sense of belonging and achievements associated with the brand
  • Making shopping an “experience” for customers

Consumer-Based Marketing

The marketing industry is moving toward a stronger focus on what consumers expect and what will appeal to them. Marketing departments across all industries throughout the country are making more of an effort to understand their customers through psychological principles instead of simply creating flashy content and campaigns.

Educational Opportunities

Consumer psychology and marketing involve scientific study and careful analysis to better understand why people react to certain situations in specific ways and how to best capitalize on those reactions. Learning more about the psychology of decision-making and buying habits can strengthen marketing efforts while giving consumers what they want.

For this reason, contemporary marketing positions increasingly benefit from training in consumer psychology. Learn more about the online Master of Science in Applied Psychology degree, a unique program focused on understanding consumer mindsets and other applications of psychology in business.

 

Sources

https://www.consumerpsychologist.com/

https://www.statista.com/topics/2443/us-ecommerce/

https://www.census.gov/retail/index.html

https://www.martechadvisor.com/articles/data-management/consumer-behavior-matters-more-than-sales-trends/

https://hbr.org/2019/01/neuromarketing-what-you-need-to-know

https://www.cnbc.com/2020/05/13/shoppers-shift-from-stockpiling-to-penny-pinching-at-the-grocery-store.html

https://www.forbes.com/sites/forbestechcouncil/2019/09/05/big-data-consumer-behavior-and-the-consumer-packaged-goods-blindspot/#8563f296ce50

https://www.forbes.com/sites/forbesagencycouncil/2020/05/27/how-to-create-a-tiered-loyalty-program/#6fdb10e4549a