What Is Consumer Behavior and Why Is It Important?

Consumer behavior is defined as a field of study that focuses on the purchasing decisions of individuals, groups and organizations.¹ Considered a subfield of marketing, consumer behavior is an important source of actionable insights for businesses across virtually every industry.

Whether you’re an ice-cream manufacturer or a government contractor, understanding the needs of the people you’re selling to is vital to building a strong brand, driving sales and securing repeat customers.

Understanding consumer behavior hinges on four key variables. A successful marketing campaign will take some or all of these factors into account.

Understanding your customers’ motives for purchasing is key when you’re deciding which marketing tactics to use. For example, a high-end athletic running shoe may best benefit from a campaign touting injury reduction statistics from an in-house study, whereas a sneaker aimed at a fashion-conscious, youth-oriented market segment may be better served by a celebrity endorsement.

No one lives in a vacuum, and according to the Friedkin-Johnsen model of social behavior, consumers place a premium on peer and familial information when making a purchase.² Understanding your target audience’s social milieu will enable you to craft a more appealing message.

To meet your customer where they’re at, you need to understand the influence directed at them by their culture, family and peer groups.

Customer segmentation is an important step to take when you’re launching a marketing campaign.³ Before you can sell a product, you need to know important details, like your target audience’s average income, age and lifestyle. For example, lower-income groups may be more receptive to messaging that emphasizes affordable prices, installment plans and discounts, while a higher-income demographic may be more receptive to quality-centered advertisements.

The behavior of different consumer groups varies in several interesting ways. Some people seek the best deals regardless of the product’s quality, while others spend hours in deliberation over the smallest purchases.

Understanding consumer behavior helps businesses address their customers’ needs and preferences, which leads to more effective marketing messages and product designs that better mesh with the needs of the marketplace.

For example, the COVID-19 pandemic saw a huge upsurge in online grocery shopping. Businesses that capitalized on this trend by delivering a positive buying experience were able to alter consumers’ behavior over the long term and secure lasting customers even after the pandemic ended and in-store shopping resumed.⁴

The study of consumer behavior drives innovation by providing actionable feedback that businesses can use to create product iterations that closely align with customers’ expectations. That’s why virtually every product that’s available for mass consumption goes through rigorous user testing. At the same time, studying the behavior of consumers enables businesses to tailor their marketing strategies and messaging to the preferences of their end users.

Finally, understanding consumer behavior helps you enhance your customer satisfaction, which can lead to greater retention and loyalty. When your consumers’ preferences are matched by your brand identity and product design, they’re more likely to come back as repeat customers.

There are numerous applications of consumer behavior in the world of business, particularly within the marketing domain. All of your marketing campaigns begin by defining which portion of the market you intend to target, called market segmentation. Businesses can also use demographic information to predict trends and consumer demand. Plus, this data can prove to be invaluable when you’re developing your pricing and promotion strategies.

The world’s largest corporations take consumer behavior into account when launching successful marketing campaigns and promotions. For example, the wholehearted embrace of social media platforms like X (formerly Twitter), Facebook and Instagram has enabled Starbucks to reach customers where they are. Through the use of data analytics, Starbucks is able to provide personalized promotions and offers that drive more sales.⁵

Consumer behavior is inherently dynamic. That means last year’s insights won’t necessarily translate to this year’s trends. To stay abreast of ongoing changes within your core market, it’s vital that you keep your pulse on the market through continued surveys and studies.

Case in point: During the early years of widespread internet adoption, banner ads proved to be a remarkably lucrative marketing strategy for firms looking to capitalize on the growing strength of personal blogs. However, it took only a few years for click-through rates to plummet on banner ads while traffic for personal blogs increasingly shifted to social media and more polished content.⁶

The rise of digital analytics tools has given firms a wealth of knowledge on their prospective customer base. The downside to this proliferation of information has been higher competition for increasingly narrow slices of the demographic pie.

In the past, firms may have defined their market segments through just a few key demographics, such as age, gender, and household income, but today, digital analytics have opened the door for organizations to target much more tightly defined demographic segments without sacrificing their profitability. Online marketing lets you sell to a wider audience while also discriminating by minor behavioral details.

Marketers gain valuable insights into consumer behavior through a raft of tools and methods, such as surveys, focus groups and sophisticated data analytics tools. Traditionally, consumer behavior insights came from in-person feedback through focus groups or surveys tailored to your customers’ core demographic groups.

However, the rise of digital analytics has given internet marketers powerful new tools to augment these traditional marketing methods. For example, pay-per-click advertising services let you remarket to consumers who’ve previously clicked on your advertisements, and A/B testing lets you gather insights on consumer behavior in real time.

Understanding consumer behavior is at the heart of effective marketing. It allows businesses to anticipate needs, tailor messaging, and create meaningful connections that drive loyalty and long-term success. In an increasingly competitive and data-driven marketplace, companies that invest in consumer insights are better equipped to innovate, adapt, and grow.

If you're passionate about decoding what drives consumer decisions and want to lead marketing strategies that make an impact, William & Mary’s Online Master of Science in Marketing program can help you get there. With a curriculum rooted in research, analytics, and real-world application, you'll gain the skills to turn consumer behavior into business advantage. Apply today or connect with an admissions outreach advisor to learn how you can become a leader in modern marketing.