Irrational Consumers Behavior– New Normal: Business Strategies are Mostly Out of Sync with Consumers Buying Habits…

Consumers behavior is complicated: According to Dan Ariely; consumers are not rational actors, but irrational reactorsreacting to environmental stimuli with a set of cognitive heuristics (mental rules of thumb) that are fast and frugal, prompting them to do things that are often smart, but sometimes stupid…

A consumer’s mind is not a clean slate; it’s refracted through the lens of– belief, culture, experience… and many are far less rational in their decision-making than most consumer buying models predict… According to Daniel McFadden; classical economists used to posit that consumers are rational and make decisions to maximize pleasure; end of story… but that might not be the complete story; consumers might be rational, but they are prone to all sorts of biases and habits that divert them from any strictly rational behavior…

The classical ‘economics of choice’ is far too simple to explain consumers behavior, since it does not capture what goes on in people’s brain when they make choices; it’s much too static to capture the sensitivity and dynamics of the process, in the modern world… In fact, some say that consumers are on a hedonic treadmill, which can be characterized as– not in ‘pursuit of happiness’, but in ‘happiness of pursuit’…

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In the article Keeping Up with Your Customers Behavior by Adrian J. Slywotzky writes: Have you ever been blindsided by changes in your customers? Have you ever felt that half or more of your marketing dollars are wasted? Were the surprises and the waste really unavoidable? Perhaps the most insidious strategic risk companies face is decimation of their customer base by shifts in– behavior, preferences, demographics… These shifts may happen gradually or literally overnight. Either way, they can destroy a business model…

Customers are people–unpredictable, irrational, emotional, curious, and highly prone to change. Customers can’t keep still. They resegment themselves from ‘product buyers’ to ‘value buyers’ to ‘price buyers’ and then back again. Their priorities change from ‘quality’ to ‘price’ to ‘solutions to ‘style’ to ‘brand’…

They get richer; they get poorer; they get excited by and attracted to different styles, different offerings, different ways to buy… They get better informed; they get even more demanding; they decide to shop at different places; they start buying through catalogs, from TV networks, online… They pledge allegiance to product brands; then store brands; then no brands… They want carbohydrates, then they don’t… They want big cars; then small; thrifty ones; then decide they value fuel-efficiency…

Hence, every time customers priorities shift, your business model is at risk, and your value proposition gets a little fuzzier, a little more out of focus. You lose a little business from a few customers; they decide to buy a couple of items from another supplier… Then you start losing customers altogether (and, that’s a little more worrisome but at least you have your old reliable customers). Then you start losing your most profitable customers, the 20% that generate more than 80% of your revenues… Panic; what you thought was a trickle turns into a nightmare; all because you lost track of the changing customers behavior, perceptions, expectations…

In the article Irrational Consumers Behavior by Ravi Dhar writes: Economists have long assumed that consumers rationally weigh the costs-benefits of every possible choice, before deciding what to buy…  Typically, under this assumption, businesses uses a tidy frameworks to help identify ways to influence consumer decisions… As it turns out, this assumption is wrong. While shopping, consumers don’t think as much as you think they think… Recent research in behavioral economics and psychology demonstrate that consumers seldom behave rationally, meaning the tidy frameworks are not, in fact, useful for predicting consumers behavior…

A revised understanding of consumer mental processes indicates that business need to rethink how consumers make purchase decisions… In order for business to create an  effective– in-store and/or online strategy, it must make a clear connection between mindset and behavior… You tend to think of consumers as rational beings with stable preferences.

But recent research shows that it just isn’t so; small changes in things like; environment or messaging can change consumers’ goals and mindsets (and, ultimately their purchasing behavior) in ways that are both predictable and profound… Hence, business must learn to embrace these new, multi-dimensional models of consumer behavior and devise new, more effective ways of influencing the consumer’s decision-making process…

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In the article Duality Of Consumers Behavior by Bob Hoffman writes: There seems to be two competing models of consumer behavior: First model suggests that consumer behavior is basically logical: This theory asserts that people behave rationally– and there is much persuasive evidence to valid this model; for example, retailers know that they can stimulate sales by lowering prices, offering discounts, utilizing other types of promotional activities… and, consumers will react with rational behavior… Second model asserts that consumer behavior is essentially irrational: This theory holds that people are not really influenced by marketing motivations, but are ruled more by emotions– evidence that validates this model is equally persuasive… Then, you are faced with two contradictory models of consumers behavior that both seem to be valid…

Hence, you can conclude that consumer behavior may have a dual character, and when paired with a business strategy (which have no inherent inevitability; just probability and likelihood) the result can be a business nightmare

According to Einstein; when there are two contradictory pictures of reality, and when separately neither of them fully explains the phenomena– but then when these realities are combined, they do… This type of duality and uncertainty is true in business, and is typical of consumer behavior… In other words, there is an inherent contradictory duality that challenges your most cherished beliefs about consumers behavior…

This duality of consumers behavior is one of the most difficult and confusing element of business– it’s one of the factor that business people continuously misunderstand and misalign in their struggle to describe and predict consumers behavior…

In the article Rationalizing the Irrational Customer by John Lucker writes: Classic economic theory tells us that consumers behavior is born of certain traits that can be described as– unbounded rationalism, will power, self-interest… Historically, these traits have been identified as the reasons humans make certain choices under specific circumstances… In business, these cognitive perceptions have long been relied on to– develop business strategies, guide product development, give marketing executives their directives…

The problem is that consumers don’t always follow these rules or conform to  classic experience and wisdom. Business often find that traditional evaluative methods of supply/demand models, consumer surveys, observational focus groups… can go only so far to help understand individual behaviors…

When faced with value choices, consumers make decisions that appear counter-intuitive, e.g.; perhaps consumers are more fickle, acting more often on whim than fact… Some say that market and behavioral forces, today, are changing consumers behavior faster and more radically than ever before…

Further confusing the issue is that most consumers think they are rational, in the classical sense… They research a purchase in detail before making it, but in reality they get tangled in a web of correlations, along with a network of influencers, followers, transient leaders– who often sways their behavior without their being aware of it… With the pervasiveness of product review information, a seemingly rational purchase choice can be driven by others’ nonfactual, subjective or irrational influence… Too often, misinformation can be viewed as accurate information…

Consequently, businesses that subscribe to the notion of always engaging rational consumers risk misunderstanding the factors that motivate many customers’ buying decisions. This lack of understanding may lead to– missed business opportunities, customer churn, loss of market share, declining revenue… Ultimately, deep analysis of customer– biographic, demographic, and psychographic data can give companies a more accurate view of what makes customers tick and lead to better business outcomes.

Although the factors that motivate consumers behavior may not always make obvious sense, business through more imitate consumer engagement and analytics can begin to make more sense of the seemingly nonsensical…

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Business needs to work smart to keep-up with constant shifts in consumers– behavior, perceptions, expectations… Being in-sync with consumers’ changing needs and wants is critical– it can make or break a business… hence, constantly re-aligning the business such that it’s in complete sync and harmony with unpredictable and often irrational consumer must be priority #1 for business sustainability… According to Jirafe; failing to understand consumers behavior is recipe for disaster– as many companies have found out the hard way…

According to Charles Swann; calling consumers irrational misses the whole point. It’s the business’ responsibility to understand consumers behavior and decision process, even if it doesn’t make a lot of sense… Calling consumers irrational also suggests that something is wrong with them when they don’t make the decisions you expect or want… In fact, these seemingly ‘irrational’ decisions may be quite– rational, predictable…

According to Martin Lindstrom; much of what you do each day is irrational, and in most cases emotions drive decisions, and you only look for logic to help confirm the decisions... Business is very much about tapping into the emotional nature of consumers, and for business to be sustainable; it must have a realistic perception of consumers emotions, behaviors…