How consumer behavior impacts advertising decisions [according to experts]

"We need to stop interrupting what people are interested in and be what people are interested in.”

— Craig Davis, Co-founder of Sendle

It’s an advertising adage to know thy customer. It’s easy to understand why — the more you understand your customer’s motivations for buying and what they want next, the better you can position your products to satisfy their demands. 

Of course, it’s not easy to understand millions of people’s buying habits and how they change.

According to McKinsey, today’s consumers are splurging more than saving thanks in part to a financially gloomy Gen Z outlook.The McKinsey report also found younger audiences in Asia and the Middle East opt for higher-priced goods than those in the West.

We do know that today’s consumers are more segmented than ever before. Brands like Pepsi and Clorox use modern consumer insights tools to craft ads that resonate with customers. 

Imagine testing ad campaign ideas before you commit to creating an entire campaign. That’s what’s possible with today’s online market research tools. 

In this article, I’ll share how to better understand how consumer behavior impacts advertising and share some expert insights and tools to get you started on ads that work. 

Consumer behavior is how and what people choose to consume with their time, attention and money. What entices people to pay thousands of dollars for a Birkin bag when they could buy a similar one for a fraction of the cost? Why do people choose Dunkin' over Starbucks or vice versa?

Such questions have baffled psychologists, sociologists, economists and advertisers since the dawn of consumerism. 

Philip Kotler is a pioneer in marketing and a retired professor at the Kellogg School of Management, where he taught for more than four decades. He says, “Consumer behavior is the study of how people buy, what they buy, when they buy, and why they buy.”

Maslow’s Hierarchy shows once our basic needs of food, shelter and clothing are met, we look for ways to embellish on those basics. No one “needs” a 6000-square-foot house, but people buy them, just like people choose Whole Foods instead of their local grocery chain.

Previously, brands created in boardrooms and relied on time-consuming focus groups to shape their next products. Now, the biggest brands rely on new AI tools to shortcut the process from conception to winning ad campaigns.

If you’ve been in marketing for longer than a month, you recognize the complexity of customer behavior. It’s emotion-driven. Writer, author and speaker Seth Godin says, “People do not buy goods and services. They buy relationships, stories, and magic.”

What does this mean to you, the marketer? It means it’s time to bring out the stories and use them to create the environment your customer craves. Imagine the difference between a Ralph Lauren boutique and a Shein store. One offers fantasies of country estates and polo games on a sunny afternoon. The other offers a cheap top. 

In Buyology, Truth and Lies About What We Buy, author Martin Lindstrom explores the psychology behind consumer behavior. He dedicates chapter six to the reliance on rituals and comfort. What makes someone choose Apple over a PC? Oreos over the store brand of cookie? Successful brands tap into our subconscious. 

From Buyology, 

“Senior business director, Mike Faherty, once said, “Oreo is not just a cookie, it’s a ritual. Dunking Oreo cookies in milk is part of the American fabric.” Therefore, people don’t simply choose Oreos because of the cookie, they choose Oreos for the experience and the comforting ritual that has created an emotional bond between the consumer and the brand.”

Is your brand part of a ritual? Does it evoke emotion? Successful advertising helps the consumer feel something and drives behavior.

Get more on consumer behavior by watching our podcast episode with Richard Shotton, behavioral scientist, author of The Choice Factory & founder of Astroten:

Advertisers study consumer behavior to create product innovations and successful advertising campaigns. Here are four proven ways to connect consumer behavior with effective advertising campaigns. 

1. Brand research

Brands like PepsiCo and McDonald’s constantly innovate to keep their consumers returning. From new snack concepts to new milkshake flavors, these brands use modern AI tools for real-time customer feedback on concepts and marketing campaigns. 

Consistent brand research helps brands stay relevant and ahead of consumer trends. For example, the holidays are a time of nostalgia for many, which is why it was a no-brainer for British supermarket Sainsbury and Roald Dahl’s Big Friendly Giant to collaborate on a “BIG Christmas” campaign. And, it’s on-brand and relevant. 

2. Audience selection 

Online survey panels and other audience segment tools help savvy advertisers tap into their customer’s interests and behavior. Define what you want to test and then find the right audience to test those ideas. 

For example, similar to the point above, audience selection will help you test new ideas, new products or even Super Bowl ads with your target audience for more effective advertising campaigns. 

“Great marketing means knowing your audience, talking to your target personas, and building your content strategy around them.”

– Rocío Arrarte, EMEA senior marketing manager at Diligent

3. Pricing research

Pricing is complicated. It’s far more than your tangible costs. According to Katharine Paine, speaker, author and consultant to Fortune 500 companies: “Pricing is the most critical component to maximizing your revenue. Harvard studies have found that a 1% improvement in your pricing can add up to 11% to your profits. With bad pricing, you’re missing out on profits in every transaction that you make, not to mention the deals that you completely miss out on. Pricing is also a big factor in your branding and reputation. Prices that are too high can make you come off as arrogant, while prices that are too low can call the quality of your product into question (would you eat a steak that only costs $3?." How much will your customers pay for your new product? In the past, you’d have to rely on trial and error. However, you can now test pricing before rolling out an entire campaign. 

4. Product research

95% of new products fail a year. But, the good news is you can improve your brand’s efforts with smart product research. If brands like McDonald’s are using customer insights, why shouldn’t you to guide and refine your next winning product idea?

“For a new shake flavor, I analyze the drivers of interest & purchase in all the shakes we’ve tested before. I can see how consumers play those concepts back, & what they want us to do differently. There’s a lot I can do easily with the data set.”

- Matt Cahill, Senior Director, Consumer Insights Activation at McDonald's

It almost goes without saying that emotion is at the root of buying. People buy things to feel good (retail therapy), to show their social status and to feel like they belong. 

However, some purchases require more thought than others. While human behavior is rarely linear, we can still learn from these typical behaviors: 

1. Complex buying 

Cars, houses and any big and irregular purchases fit into this category. There’s more at stake than a fast food meal, so you’ll do plenty of research to make the right decision. 

According to Brightlocal, 49% of consumers trust online reviews from strangers as much as from friends and family. 

Potential customers are likely to browse in-store and online, read reviews and give testimonials. Traditional publications like Consumer Reports built businesses by reviewing consumer products, and numerous websites now do the same. 

The larger the purchase, the longer the sales cycle. 

“Every buying decision, every piece of persuasion has to fit within the cultural values [of your target audience]. People don’t relate to the mass market, they relate to class and community and 'who’s most important in my reference group?' and that’s where you see issues in marketing; if you have this new innovative topic but people can’t understand what it is or what it’s supposed to do for them [you won’t see repeat purchases or truly influence consumers].”

- Margaret J. King, Ph.D., Director of The Center for Cultural Studies & Analysis  

2. Dissonance reducing buying behavior 

If you’ve ever struggled to understand the difference between TVs, computers, lawnmowers or other bigger-ticket items, this can create “dissonance” or tension. Many of us don’t know how to tell the differences. 

This differs from complex purchases. In both instances, people are highly involved, but in "dissonance-reducing” purchases, people don’t see much difference and want to avoid buyer’s remorse. 

For example, if you’ve ever bought an expensive pair of pants and then rationalized it by saying, “They’ll last for years,” that’s “dissonance-reducing” behavior.

3. Habitual buying 

People who always buy the same brands have brand loyalty. For example, some people always buy a favorite Starbucks drink on their way to work. 

Habits like a daily coffee order provide a comfortable ritual. Brands can capitalize on this habitual buying by offering brand loyalty cards, exclusive discounts and behind-the-scenes invitations to special events. 

“If people believe they share values with a company, they will stay loyal to the brand.”

– Howard Schultz, CEO, Starbucks

4. Variety-seeking behavior 

People are curious and naturally want to try new things. Imagine all the point-of-sale items at the grocery counter. These low-cost impulse buys offer a quick dopamine rush or fulfills a reminder.

Fast food brands constantly supply people with new taste sensations like Taco Bell’s Cheez It Crunchwrap and Tostada.

Few people buy a new car on impulse, though they are willing to try new drink flavors without much thought. Understand how your products fit into your consumer’s buying behavior and use their behavior to improve your advertising. 

For complex buying habits 

People want plenty of details for high-priced products. For example, car brands can create a trustworthy buying experience that puts the consumer at ease by sharing detailed product descriptions, specifications and comparisons to similar products.  

Highlight the benefits of your product over similar ones. Use testimonials and reviews to show other happy customers.

Offer personal assistance. You can use human-powered chatbots to answer questions and help potential customers make the right decision. 

Over time, this becomes your brand. 

“Your brand name is only good as your reputation.”

– Sir Richard Branson, CEO, Virgin

For “Dissonance-reducing” behavior 

Electronics, engagements, lawn equipment—many higher-priced items might appear the same to the untrained eye. 

Your role as a marketer is to build trust. This happens in two ways.

1. Testimonials and reviews 

2. Helpful follow-up messages 

If your prospective customers are debating new flooring or a luxury bag, they’re wondering what their friends and family will think. They want reassurance. 

According to DemandSage, 95% of consumers look to online reviews before buying. 49% of consumers trust those reviews, and 60% believe having a lot of reviews is important. 

Social proof builds trust.

Other ways to build trust include offering guarantees and generous return policies. You’ve probably heard the legendary story about a customer who returned a set of tires to the luxury department store Nordstrom. Nordstrom graciously accepted the tires even though it doesn’t sell tires. 

For habitual buyers 

It’s always cheaper to maintain existing customers than attract new ones. When it comes to habitual buying behavior, these tend to be repeat purchases like a brand of toothpaste or soap. Successful marketing to existing customers includes: 

• Maintain consistent messaging and packaging for instant recognition 

• Use loyalty programs or special promotions

• Offer recurring subscriptions if applicable

For variety seekers 

These customers crave variety in their purchases, so give it to them. You can introduce new product innovations regularly. Give them limited-time offers to encourage urgency like these holiday seasonal collaborations. 

You can also make personalized suggestions based on past purchases to keep your customers engaged.

Brands that understand their customers’ behavior have a competitive advantage.  

AI-informed consumer insights tools give brands the power to build in continuous learning loops for ideas, products and ad campaigns. This data-informed knowledge is really what gives marketers the edge to produce more effective advertising.