The essential guide to customer behavior analysis

When you’re buying a new product, chances are you take some routine actions. You might read about the product online, scroll through social media for reviews by real people, compare different product offerings, and consider pricing. These actions are all examples of customer behavior, and they can tell businesses a lot about you as a customer.

Deeply understanding customer behavior can help your organization offer better, more seamless, and more satisfying customer experiences to increase conversions and improve your bottom line.

Customer behavior looks at how customers make decisions and the actions they take concerning products and services. It involves deeply understanding customers’ motivations, actions, and preferences as they interact with your organization.

Customer behavior analysis can help you discover more about your customers and gain insights into why they take the actions they do. The analysis involves collecting data, analyzing it, identifying themes, and gaining actionable insights to make improvements for the customer’s benefit.

Conducting customer behavior analysis can help your organization gain key insights into your customers’ motivations, pain points, and preferences. Ultimately, it can help your business offer better, more satisfying products.

Boost customer value

You must deeply understand your customers if you are to provide them with genuine value.

Customers want more from your business than ever before. Research by McKinsey & Company, for example, shows that 71% of consumers expect personalized interactions from companies. Meanwhile, 76% are frustrated by a lack of personalization.

In an increasingly competitive marketplace where customer expectations are high, you’ll need to rely on data and key insights to provide true value.

Customer behavior analysis helps you discover what your customers want and need from your organization. You can use this information to tailor your offering so that it offers the greatest value.

Increase customer retention

If you provide meaningful and satisfying product experiences, customers will be more likely to stick with you in the long run.

Customer retention counts for a lot. Research by Frederick Reichheld from Bain & Company shows that increasing the customer retention rate by just 5% can boost profits by 25–95%.

Customer expectations, however, are always expanding. You’ll need to continually gather customer data and analyze it to improve your customers’ experiences.

To use a customer behavior analysis example, imagine that an analysis shows customers often leave your service after an initial free trial. This information tells you that you need to make informed decisions that help provide a more valuable experience, meaning customers are less likely to leave.

Make your company more competitive

If your competitors are offering superior or more unique experiences, your customers might be tempted to move away from your business and try them instead.

Your organization is more likely to attract and retain customers if you can continually offer both high-quality and unique or superior experiences. You can do this by analyzing customers’ behavior and understanding and fulfilling their needs.

Optimize content

When you create content, whether it’s for your blog or social media channels, you want to provide your customers with information that’s helpful, entertaining, and actionable.

Customer behavior analysis can help you see what content is performing well and what isn’t. This means your team can optimize content and focus on what’s offering the most value for your customers and your organization.

Many conscious and unconscious factors impact your decision-making around making a purchase.

We can separate these factors into four categories:

Psychological factors

The psychological factors influencing your customers involve their

• Perception of your organization and products

• Beliefs and attitudes toward your business

• Motivations in making a purchase or other action

• Emotional state when making a decision

It’s helpful to keep psychological factors in mind when conducting a behavior analysis to get into your customers’ minds.

Personal factors

Personal factors involve a person’s specific attributes, including the following:

• Age

• Occupation

• Lifestyle

• Financial status

These personal factors can impact how customers interact with your products and the actions they take. Be sure to consider them when analyzing different customers and their specific needs.

Social factors

The socio-cultural situation in which a person lives also impacts their decisions and actions.

A customer’s family dynamic, for example, might impact their buying behavior. It indicates who they may be buying for (children or partners). A desire to improve or maintain social status can also influence purchasing decisions.

Social groups also have an impact on the choices people make. A friend’s recommendation, for example, can hold a lot of weight in shaping a customer’s decisions, as can online social network sentiment toward companies and products.

Cultural factors

Cultural context also counts in customer behavior analysis. Cultural norms and deep-seated beliefs tend to influence us when we make choices—whether we know it or not.

Not all purchases are the same. Your buying behavior will change dramatically depending on the type of purchase you’re making.

Deciding what ketchup to buy, for example, takes considerably less thought and research than buying a high-priced tech item.

Being aware of these nuances in customer behavior can help you step into your customer’s shoes and sense their state of mind when they interact with your organization.

Here are the four types of customer behavior you should be aware of:

1. Complex buying behavior

Purchases that cost more money tend to correlate with complex buying behavior.

Buying a house, deciding on a college, or purchasing a car will usually be accompanied by in-depth research, comparisons, and a pros and cons analysis.

Some customers may also demonstrate complex buying behavior with small, low-value purchases—so keep that in mind.

2. Dissonance-reducing or decision-justifying buying behavior

Medium-cost purchases, such as appliances, furniture, and long-term subscriptions, tend to be associated with dissonance-reducing buying behavior.

Take, for example, when a consumer purchases a new fridge-freezer. They might seek out positive reviews or reassurances from friends to confirm they made the right choice. Even if they have doubts initially, they look for information or opinions to reduce any discomfort or second thoughts.

Customers are still heavily involved in the purchase process and tend to weigh up different options before making a choice. The process, however, isn’t usually as long-winded as in complex buying behavior.

3. Habitual buying behavior

Everyday purchases a person may be used to buying, such as groceries at the supermarket or a coffee on the way to work, are associated with habitual buying behavior.

These purchases are repetitive. They don’t require much research or thinking. Customers will typically rely on established brands, assuming they’re satisfied with their purchases.

4. Variety-seeking buying behavior

To change things up, customers might also look for variety or novelty in their purchases. This can mean trying different products or switching to competitor options just to try something new.

Customers may make impulse decisions, become influenced by marketing deals or sales, or make unique choices in different contexts.

Performing a customer behavior analysis can involve gathering key customer data, segmenting audiences, and applying contextual information to understand the story the data tells.

Here are the essential steps in conducting customer behavior analysis:

Collect data

You’ll need data for analysis if you really want to get into your customers’ minds. This can include things like:

• Website analytics

• Heatmap summaries of online behavior

• Customer purchase histories

• Social media interactions

• Customer feedback

• Notes from focus groups

Segment your audience

Breaking your audience into specific groups based on things like their demographics, purchase history, interests, and more can help you better meet their needs.

Whether it’s through personalization, identifying groups’ unique needs, or identifying specific patterns to predict future behaviors, segmentation helps you offer more personalized and better experiences.

Identify the key benefit for each group

To understand customer data, group the information you have collected into categories and themes. This can help reveal where trends and patterns are emerging and where actions for improvement can be made.

Use the insights you gathered from audience segmentation to understand each group’s specific pain points and challenges. Then, consider what product or service benefits you can apply to resolve them.

Analyze quantitative data

At this stage, numerical data—such as figures that can be collected through surveys, website analytics, transaction records, or customer feedback forms—should be gathered and allocated to different customer segments.

This helps you identify patterns and trends within each group, gain insights into customer behavior, and identify areas for improvement.

Compare quantitative and qualitative data

Next, it’s helpful to compare your quantitative data with qualitative data. Qualitative data is associated with “qualities” (such as descriptions and more subjective insights). It’s usually collected in interviews, open-ended survey questions, and focus groups.

Your aim here is to see whether the numerical data aligns with the qualitative insights and to identify any discrepancies between the two.

This comparison offers a more comprehensive analysis as you can apply context and depth to the numbers. It helps you better understand the underlying reasons behind the trends.

Gain actionable insights

Once you have identified themes and analyzed the data, you can uncover actionable insights.

These insights lead to specific actions that can be integrated into the product improvement cycle, making products more seamless, user-friendly, and satisfying for customers.

Measure the results

Measure the effectiveness of any actions you take to improve your offering. Set clear metrics and benchmarks before implementing changes and then track performance over time to determine whether the adjustments are achieving the desired outcomes.

By regularly evaluating your improvements, you can prove the incremental changes you make are adding genuine value to the customer experience with your product or service.

The customer behavior analysis process can be complex. Fortunately, a range of advanced tools and technologies can make the process significantly faster and more accurate. Here are some of them:

Google Analytics

Google Analytics is a commonly used tool for gathering quantitative data. It allows researchers to track and analyze user interactions on websites and apps. It can also offer key insights into behavior when customers interact with your company’s online content.

Google Analytics covers a range of areas, including the following:

• Demographics

• Conversions

• Web page visits

• Page drop-offs or bounces

• Sources of website traffic

• Specific user data

The platform also provides real-time data and custom reports to help researchers understand what’s working and where improvements are needed.

Hotjar

Hotjar offers heatmap technology, which enables you to discover how your customers are interacting with your website and app. It can track your customer’s website activity to highlight areas of interest and friction.

The tool also offers opportunities for feedback to gain insights from real users—information you can use to optimize the web and app experience for increased engagement and loyalty.

SurveyMonkey

Surveys are a useful way to gain both quantitative and qualitative data from your customers, including their thoughts, opinions, and sentiments toward your business.

SurveyMonkey is simple to use and can be deployed quickly through online surveys and forms. Your team can use the tool to gain key data about customers and then make relevant decisions to improve their experiences.

Dovetail

Dovetail is our all-in-one platform that helps teams streamline customer research and access actionable insights faster.

Dovetail houses data gathered through videos, recordings, documents, and feedback in one simple-to-use place. Then, through AI-powered analysis, Dovetail can turn data into shareable customer insights in minutes.

Mixpanel

Using Mixpanel can enable your team to gain access to real-time analytics. The tool offers the ability to both measure and optimize customer engagement for mobile and web.

You can use the tool to track and gain insights into customer behavior, including scrolling, button clicks, and page visits. With Mixpanel, it’s simple to access live updates, measure key metrics, and slice and dice data to spot key trends.

All in all, the platform can boost data-led decision-making and help you improve your offering for customers.

Performing a customer behavior analysis can have a powerful impact on your business. Here are some of the ways you can apply your analysis:

Predictive analytics

Predictive analytics can help build a picture of future behavior, revealing what customers might do next. This can help you identify things like churn rate, order fulfillment, and key trends.

Importantly, this process can assist with business forecasting and planning.

Keep in mind that while predictive analytics are useful, errors are always a possibility. When forecasting, consider manual forecasting and contingencies.

Personalization

Customers are increasingly expecting personalized experiences, so one of the core goals of a customer behavior analysis ought to be providing better, more relevant, and more highly personalized experiences.

Personalization is only possible when you deeply understand customers and collect data. The insights gathered throughout the customer behavior analysis can prove essential for creating personalized experiences.

Driving sales

Customer behavior analysis can boost conversions and your business’s bottom line. Customers whose needs, wants, and expectations are met are more likely to convert and stick around for the long haul.

Shaping marketing strategies

Understanding customer behavior can also help you shape successful marketing campaigns.

Customer behavior analysis marketing involves deeply understanding what motivates your customers. Through this process, you’re more likely to reference what customers need and value and ultimately promote your products in ways that align with what they want.

While customer behavior analysis can be very useful for your organization, you may run into some challenges.

Data collection challenges

The data collection process isn’t necessarily easy. You may hit roadblocks for a range of reasons, including the following:

• Data quality issues can lead to misleading insights.

• Resource restraints can prevent you from gathering sufficient data.

• Disparities can lead to confusion.

To avoid challenges, rely on advanced tools to do most of the heavy lifting for you. The right tools can help reduce the risk of human error and be more cost-effective than manual processes.

Privacy concerns

Any data you collect should be gathered in line with all applicable laws and regulations.

Paying attention to your customers’ privacy is also essential. All data should be collected ethically and safely. Importantly, it should be kept confidential. This can involve encrypting data and using highly secure systems and anonymization to reduce the risk of data leaks.

To satisfy your customers’ needs, you must first truly understand how they interact with your products and the rationale behind their decision-making. This knowledge will tell you a lot about your customers.

Performing a customer behavior analysis can help your team offer products that meet and exceed the needs of your customers, providing a more satisfying experience and boosting conversions for your organization.