Understanding Consumer Behavior: Signaling

The way people make purchasing decisions isn’t always logical. Consumer behavior is determined by a great number of factors. One of the challenges of good marketing figuring out the best methods that appeal to how most people think when they’re shopping.

A recent article in the New York Times takes a look at some of the eccentricities in how people choose their favorite brands. The basic argument of the piece suggests that for most consumers, decisions are made via a mix of reasonable research and emotional impulse.

The writer, Davidson, offers the example of his decision to purchase a more expensive baby formula, largely because the company’s been around longer than many of its competitors. This signals to him that they care about their reputation enough to consistently offer a quality product. This is an assumption based on little evidence, yet one many other consumers are likely to understand.

For certain purchases, especially for items that influence the health of your family and more costly purchases, people want to feel confident that they’re choosing an item of the best quality. Whether or not they know that the product’s the best matters less than how they feel.

For many small businesses, it isn’t too complicated to ensure that your company is well represented in the research phase of consumer shopping. Any business that cares about its reputation knows already to only offer quality products and consistently excellent customer service. It’s the more emotional side of consumer behavior that can present a challenge.

Many of the examples the article cites of successful signaling by brands consist of larger companies demonstrating their success by spending lots of money on advertising. If they’re already successful, the thinking goes, clearly they’re already doing something right and consumers should have confidence in their product.

So how can a small business use this knowledge of consumer behavior on a smaller scale?

  • Include customer testimonials on your website, to give people confidence that you’ve provided quality products and services in the past. If one of your customers is known and respected in the community, all the better.
  • Are you a member in a trade organization? Have you earned any awards or received favorable reviews? Show that on your website. It lets visitors know that your business cares about its reputation and as such will strive to offer quality goods and services.
  • Make sure your website looks professional. If it looks sloppy or poorly designed, people are less likely to trust that it’s a legitimate business. It’s worth it to spend a little money on a good graphic designer.
  • Don’t go too low in your pricing. Some people will always take what looks like the better deal (and little by little learn that this often means having to replace the original purchase soon thereafter), but others will choose to look for the higher quality product rather than the cheapest one.
  • Offer a money-back guarantee or warranty. It’s much easier to feel confident in making a purchase if it doesn’t feel like an obligation.

When in doubt, think of your own shopping tendencies and talk to friends and family about their consumer habits. What turns them off to a potential purchase? What helps them decide to go ahead with it? Consumer behavior is varied, but there are enough trends and tendencies to help businesses make effective marketing decisions.

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