Customer behavior analysis: What you need to know

What is a customer behavior analysis?

Customers’ habits, such as how much they post on social media, when they look at your products and what drives them to buy, is all encompassed by the term “customer behavior”.

It describes how customers shop, from how often they make a purchase to how they respond to your marketing campaigns.

Understanding this behavior will help you make predictions about what comes next and adapt your strategies for – from product to sales and marketing – to better reflect your customer’s behavior patterns. When you provide a customer experience that meets your customers’ needs, you’re more likely to drive sales and maximize your ROI.

Customer behavior analysis, as this process of understanding is called, can go to a granular level of detail on your customers. Customers don’t always do what they say they will, so customer behavior analysis can identify what’s really happening when they encounter your brand.

By examining customer-generated data and your own operational data using qualitative and quantitative approaches, you can identify how customers behave at each interaction and understand what drives that behavior. You can use a customer behavior analytics tool to help you surface trends and actionable insights from large quantities of customer data.

When you take this consumer behavior analysis and action on it to improve your customer experience you can drive customer retention and increase your revenue.

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Why is customer behavior analytics important for businesses?

Understanding how your customers behave and why they do it might sound like a nice-to-have, but why is it fundamental to driving ROI and customer satisfaction

Here are the top reasons why customer behavior analysis is important for businesses:

Identifying patterns helps you make accurate predictions for the future

Getting to grips with customer behavior trends helps you to see the pattern in the way customers shop with you or use your services. Do customers buy seasonally or at certain periods? Are there marketing campaigns – and value propositions – that are more effective in driving customers to purchase? Which stage of the customer journey, or parts of the experience, drives churn  and what fix would make them stay?

Salesforce has found that 63% of B2C consumers and 76% of B2B customers expect brands to know and understand their unique needs and expectations. By analyzing patterns of behavior, you can deliver interactions that meet and exceed these expectations and drive profit by giving your audience exactly what they’re hoping to find.

Drilling down on existing customer behavior helps you win over new customers

Completing customer behavior analysis doesn’t just give you insights into your existing customers – it can help you win over new ones.

According to Invesp, selling to an existing customer has a probability rate of 60-70%, but selling to a new customer is only 5-20%. The more you understand each segment of your current audience, the better you’ll be able to see how each type of customer behaves and what new customers of that type will be likely to do.

Better still, if you identify the behavior of customers who you think will spend the most, you can predict which new customers will follow in that trend and deliver them the optimum customer journey.

Personalizing customer experiences drive sales

You are constantly receiving relevant customer data. Customers are keen to tell you what they want, and when their experiences have not met or have exceeded their expectations. Tailoring your customer experience based on feedback and other customer data can go a long way to shaping customer behavior, rather than just waiting for it to happen naturally.

Our research on global consumer trends has found that two-thirds of customers believe companies should be better at listening to feedback, and 62% of them think brands should care more about them and their preferences. 60% of customers we surveyed indicated that if they felt cared for, they would buy more from a brand.

Personalizing experiences can drive ROI. With the right analysis and taking into account behavior and feedback, you can offer experiences that customers will love. Bespoke customer journeys that mirror how customers would naturally behave will remove friction and optimize the process, in turn increasing the likelihood of an increase in conversions and revenue.

Understanding behavior helps you to retain customers for longer

Why do your customers stay loyal to your brand? Are there certain experiences (such as broken links or technical issues) that are driving them away or minimizing usage? What actions will convince them to stay?

Analyzing customer behavior will help you to identify pain points and inform the best solutions. Then, you can optimize the journey based on your customer preferences. This will help you reduce customer churn because you’ll be minimizing frustration and reasons to leave.

With 65% of your business likely to come from existing customers, you can’t afford to ignore customer behavior insights.

See how understanding customer behavior can improve the experience in real time

How do you perform a customer behavior analysis?

You understand why it’s useful to identify customer behavior, but how do you go about finding and analyzing it?

Here’s our step by step guide to help you out.

1. Set out your segments

You’ll likely already have your buyer personas for your customer audiences, but it’s worth reviewing your customer segments in advance of starting your behavior analysis.

You should understand customers’:

• Demographics: Age, gender, income, location, family status, annual Income, education level
• Personal background: Hobbies, interests
• Professional information: Industry, job title, company size.
• Values and goals: Beliefs, aspirations both personal and professional
• Challenges: Personal pain points, worries, needs, problems to solve
• Use of your product/service: how your brand is relied upon in their life
• Identifying information: social media use, potential for being an influencer in their online or offline communities, communication preferences
• Objections or barriers to purchase: factors that might affect their choice to buy

Ideally, you’re identifying the features of your ideal, highest revenue-generating customer – after all, you’re hoping to replicate this customer when finding new ones. Factors to consider include:

• Customer satisfaction: Who are your most satisfied customers? What do they identify as key to satisfying their needs?
• Customer lifetime value: Which customers/customer segment has the best overall value for customer retention?

2. Gather qualitative and quantitative data on customer behavior

Once you’ve identified who your customers are – particularly your revenue-generating customers – in segments, you’re able to start evaluating their data for customer behavior patterns.

This information will fall into two types: quantitative data and qualitative data.

Quantitative data will include information such as:

• Purchase history (and product/service popularity)
• Website visits and views
• Social media engagement
• Conversion reports for marketing/sales activity
• How many customer service tickets they’ve raised and whether their issues were resolved quickly

Quantitative data will describe what is happening when customers take action.

Qualitative data will cover information such as:

• Direct customer feedback (collected through surveys)
• Conversation analytics data (such as emotion, intent and effort)

Qualitative data can give you the “why” behind customer actions (or lack of, in some cases)in their own words.

3. Evaluate your data for behavior insights

Looking at the data you’ve gathered, you can start evaluating your information for behavioral insights. Ideally, you will use a customer behavior analytics tool to help you – you might have large quantities of data to parse.

Customer behavior: types and approaches

Consumer behavior can fall into several types, and there are a few theories why a customer might behave the way they do. Your data might be reflected in some of the types of customer buying behavior and theories outlined below.

What are the 4 types of customer buying behavior?

• Extended Decision-Making: What research does a customer do and how much time do they invest before deciding to buy a product? This could include asking family and friends for references, reading reviews, looking at comparison sites and browsing a brand site for further information.
• Limited Decision-Making: Customers might be limited in what they buy due to availability. Are they buying a product because it’s the only option on the market?
• Habitual Buying Behavior: What do customers regularly seek out and buy? How does this differ from segment to segment?
• Variety-Seeking Buying Behavior: Sometimes, there’s several very similar options on the market. Customers might be driven to buy and try several of the same product over time to see what the differences are. Are your customers comparing you to others in your market offering the same thing?

What are the five consumer behavior approaches?

• The economic man approach: The theory that customers always choose the lowest price product when offered a range of similar products at varying prices. Customers are believed to be driven by making the “rational” decision when reconciling their need and the limited money they have to meet that need.
• The cognitive approach: The theory that consumers act with a particular mental process in mind. This includes recognizing they have a need, searching for information, evaluating their choices, making a purchase and then evaluating whether that purchase was a good one.
• The psychodynamic approach: Based largely on Sigmund Freud’s theories, this theory suggests that consumers are motivated to reduce conflict between what they want and what they should do. Consumers are believed to search for the maximum amount of gratification they can find while also doing what they “should” be doing according to society.
• The behaviorist approaches: This theory suggests that consumers’ behavior is shaped by stimuli and past experience. Negative and positive experiences serve as lessons to either avoid or do the same action again.
• The humanistic approach: This theory posits that consumers are all individuals, with their own subjective reasons for taking action. They’re always self-interested and their purchases will demonstrate their individuality in some way.

Identify patterns

Across your segments, what patterns can you see? For example, you might want to answer the following questions:

• How does a customer access your brand? Is it through online searches for products, social media posts, marketing emails?
• When are they most likely to purchase a product in terms of day, week, month, season?
• What stops them from completing a purchase? Is it a broken payment system or a price point?
• Alternatively, what drives usage? Is it ensuring payment details are added within the first hour of downloading a new taxi app?
• What functionality and design features of your website or purchase platform were a problem for your customers?
• What marketing or sales campaigns worked on them?
• What encouraged them to make multiple purchases?
• What did customers feel that made them make a purchase?
• Why were customers driven to make a purchase in the first place?
• How hard was it to make a purchase for these customers?

Again, using a customer behavior analytics tool will help you to identify patterns, as it can automatically surface trends and predict future behavior. Then, you have the tools to go and act on that insight.

Discover the truth of customer experience

What customers tell you and what you actually see happening can often differ. For example, your ideal customer might tell you in a feedback survey that they prefer to use Twitter to engage with your brand – but you might see that actually, your regular update email sent by your marketing team encourages more of them to buy your products.

When identifying patterns with customer behavior analytics, discover the truth that lies between what customers say is happening and what is actually occurring. This information is the most useful for creating an optimum journey.

4. Adjust your customer journey and experience for better customer lifetime value

Once you’ve analyzed your data for customer behavior analysis insights, you can more accurately see what the optimized experience is for your customers and how to deliver on it. You can start to take steps to minimize behavior that you don’t want to see – cart abandonment, high bounce rates, failure to add payment details – and maximize the behavior you do want to see.

However, this might mean tweaking your customer experience and buyer journey to better encourage this behavior. For example, if customers often buy two products together, bundling them together and advertising this new bundle might sell more because you anticipate customers’ needs and reduce the effort of having to search for both products. Or perhaps sending a reminder email to ensure your new customer who has just downloaded your taxi app adds their card details so they can start using the app.

Optimizing your customer experience to better reflect customer behavior

Customer behavior analysis can help you to improve the entire customer journey, from initial research on a product and first interactions to the post-purchase sharing of feedback. Understanding behavior and implementing appropriate changes helps you to deliver an improved experience, with the end goal being increased customer satisfaction and loyalty.

Qualtrics CustomerXM can help you to not only complete customer behavior analysis, but to shape customers’ actions in future. Give customers the journey that exceeds their expectations and meets every need, based on the customer behavior analysis insights you generate.

Shape your customer behavior and drive your ROI.