Why Retailers Should Understand the Psychology Behind Customer Spending

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Customer Strategy
Customer Experience
The emotional element of shopping helps explain why a quarter of Americans admit buying things they don't need, during impulsive moments when the purchasing process is fuelled by excitement and adrenaline.

People's actions are driven by emotions. And that includes their purchasing behavior. Whether we're buying an everyday item that we need, like a carton of milk, or something we desire, for example, a designer handbag, emotions play an important part in the process.Supermarkets, for example, have done a lot of research into what pushes customers to buy. And their shelves tell a story. You rarely find staple items, like bread and milk, next to each other, even though that would be more convenient for busy shoppers. Instead, customers have to navigate the aisles, passing by other items and potentially jogging their memory that they need something that isn't on their list. Not to mention the candy bars, which are often strategically positioned next to the checkout counters to tempt hungry shoppers into rewarding themselves with a treat.

This emotional element of shopping helps explain why a quarter of Americans admit buying things they don't need, during impulsive moments when the purchasing process is fuelled by excitement and adrenaline. A staggering 40 percent of purchases in the United States are considered impulse buys, according to a recently published infographic by Truaxis. In the last four months of 2010 Americans spent $4.2 trillion on impulse buys, at an average value of $108. Almost 90 percent of these impulse purchases happen during a sale.

According to Jen Millard, Truaxis' chief revenue officer, emotions are at the core of customer spending and, therefore, marketers should give weight to the psychology of shopping. "At the core of all spending there's an emotional connection," she says. Not only can a customer's state of mind impact his likelihood of making an impulsive purchase, but changing situations in his life can also lead to different shopping patterns. For example, Millard says, most people don't pay attention to children's clothes until they're expecting a baby.

By better understanding the psychology behind customer spend, companies can better target customers with relevant products, she says. While today's retailers already have a lot of information about their customers, including their purchasing history and which websites they visit, they need to add another layer to this data and better understand the psychological profile of their customers and prospects. This allows companies to reach out to customers with information that's more relevant and personalized to their needs and state of mind at the most appropriate time.

Millard argues that understanding the psychology of spending can help organizations remain relevant to today's customers, making changes that will continue attracting those customers to spend money with them. While transactional data can help companies understand whether certain promotions, for example a White Sale, are effective, looking at customers' emotions will help organizations pinpoint why and adapt accordingly.

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