Psychology investigates human behavior, emotional development and the decision-making process. Consumer psychology is a discipline that analyzes human behavior to understand consumer decision making and organizational development. While traditional marketing focuses on the four P’s (price, place, promotion and product), consumer psychology adds other critical elements, such as why, when and how.
Consumer trends continue to evolve at a rapid rate. With a wealth of choices and new ways to interact with brands, customers today behave very differently than those of a generation or even a decade ago. Integrating psychological concepts into consumer analysis offers a powerful tool for identifying consumer needs and predicting behavior.
Understanding consumer behavior allows brands to personalize products, increase brand loyalty and predict trends early. Current and aspiring professionals can learn more about the value of psychology in understanding purchasing decisions through a Master of Science in Applied Psychology Program.
What Is Consumer Psychology?
Consumer psychology combines psychological insights with human behavior to understand the business of selling products and services. The psychology of consumer behavior reveals why customers choose particular products, how they make decisions and what factors drive their choices.
Applying psychology to consumer behavior requires an understanding of social status, identity and decision-making. As the American Psychological Association points out, applied consumer research can also promote beneficial choices such as sustainable buying and fiscal responsibility.
From a marketing perspective, applying research-based insights to consumer behavior can shape advertising strategies, public relations campaigns and message design. Companies can use the insights of consumer psychologists to create effective campaigns, compete in crowded marketplaces and foster brand loyalty.
3 Future Trends of Consumer Psychology
In recent years, the field of marketing has evolved rapidly in response to the impressive growth of ecommerce revenue and the expanding role of digital marketing. Data analytics and artificial intelligence have also begun to transform marketing and user experience approaches.
As brands adopt more data-driven strategies, consumer psychology is increasingly probing the why and how behind the wealth of data that is now available about online behavior, customer preferences and purchase decisions. New approaches in psychology promise to unlock valuable consumer insights. Here are three of the most important trends shaping the understanding of consumer behavior today.
Big Data and Artificial Intelligence
Big data provides a wealth of information about consumers and buying decisions. Customer surveys, search histories and social media engagement all offer rich insights into prospective and current customers.
According to Dr. Jorge Barraza, Program Director for USC’s Master of Applied Psychology Program (MAPP) and Assistant Professor of Psychology, “While not so new anymore, it is clear that companies/brands are learning how to use big data effectively. No longer is it seen as a panacea for understanding consumers.”
There was a time when big data was viewed as a gold mine of information for understanding consumers. Today, brands are turning to consumer psychology as the key to putting that data into context.
At the same time, the emergence of artificial intelligence has shaken up multiple industries. The psychology of consumer behavior provides a roadmap for transforming marketing with AI. With its focus on predictive behavior, psychology can anticipate customer needs and identify trends faster.
Leveraging AI tools requires an understanding of customer motivations and the decision-making process. For example, brands like Sephora have successfully implemented AI services to connect with potential customers overwhelmed by the number of options available. Now, customers can interact with a virtual color match assistant to narrow their options.
In today’s crowded and noisy marketplace, customer expectations have changed dramatically. Dr. Barraza notes that “consumers are feeling empowered to make products their own. Many brands are responding by providing more options to make products unique for a consumer”
Consider how streaming services have implemented personalized recommendations based on analyzing customer behavior to predict what viewers want to see next. Currently, viewers choose over 80% of the shows they watch on Netflix based on personalized recommendations.
Socioeconomic, cultural and psychological factors all shape consumer behavior in complex ways, so traditional marketing has struggled with crafting personalized messages for a diverse customer base.
Successful mass personalization requires an in-depth understanding of consumer behavior and the analytic power to direct customers to personalized products and recommendations. Personalization can also influence user experience and increase brand loyalty.
Today, 85% of executives believe that real-time delivery represents the future of successful branding. Yet brands cannot position themselves to customize their services in real time without data analytics and an understanding of customer behavior.
Understanding the Why
While big data is all about numbers and takes a quantitative approach, psychology puts data into context with qualitative tools. As Dr. Barraza explains, “While big data may provide deeper knowledge of what consumers are doing, it has increased brand appetite for understanding the ‘why’ behind the numbers. ”
Investigating consumer motivations requires an in-depth mastery of long-term trends and short-term influences. Psychological techniques explore the impulses that drive consumers to choose one product over another and the role learning plays in purchasing new products.
To anticipate trends in consumer behavior, brands need both quantitative and qualitative approaches. Data analytics provides part of the picture, but understanding the why requires an assessment of the complex factors shaping consumer perceptions and their emotional motivations. Conducting surveys about consumer perceptions and buying decisions is just one of the qualitative tools available. These surveys, which are increasingly fielded online and at the point of sale, enable brands to understand their strengths and weaknesses from the point of view of the consumer.
As consumer psychologists know, perceptions of scarcity and economic uncertainty can drive consumer behavior in a manner that looks illogical based on the data alone. In recent years, the COVID-19 pandemic, inflation and recession fears have all influenced consumer motivations.
In the future, brands that can understand the why behind consumer decision-making will have a major edge.
Pursuing a Career in Consumer Psychology
The rapid changes in consumer behavior in recent years have revealed the limitations of traditional marketing approaches. Understanding the psychology of buying habits gives brands a powerful tool for connecting with future customers and improving brand loyalty.
Consumer psychologists need exceptional qualitative and quantitative skills along with an understanding of marketing and the latest trends in analyzing consumer behavior. USC’s online Master of Science in Applied Psychology Program can equip graduates with the essential understanding of human behavior that can drive success in the cutting-edge fields of consumer psychology and organizational psychology.
Applied vs. Clinical Psychology: The Power of Real-World Solutions
What is Applied Psychology? A Guide for 2021 and Beyond
The Consumer Decision Journey Explained
American Psychological Association, “The Goods on Consumer Behavior”
Digital Marketing Institute, “Best Examples of AI in Marketing”
Entrepreneur, “How to Use Digital Consumer Psychology to Stand Out From the Competition”
Forbes, “Why Every Business Must Embrace Personalization And Micro-Moments”
Indeed, “7 Psychological Factors in Marketing That Influence Consumer Behavior”
Journal of Retailing and Consumer Services, “The Panic Buying Behavior of Consumers During the COVID-19 Pandemic: Examining the Influences of Uncertainty, Perceptions of Severity, and Anxiety”
Psychology and Marketing, “AI in Marketing, Consumer Research and Psychology: A Systematic Literature Review and Research Agenda”
TechTarget, “8 Big Data Use Cases for Businesses and Industry Examples”