International Finance

Study of consumer behaviour is crucial: Omar Fares

IFM_ Omar Fares

Omar H. Fares is a Lecturer at the Ted Rogers School of Retail Management. Omar Fares earned his Bachelor of Commerce and Master of Science in Management from Toronto Metropolitan University. His main research interest is in the consumer behaviour area, particularly focusing on consumers’ interaction with novel digital innovations and the impact of digital innovations on retailers.

Omar Fares published his research in different impactful journals, such as Computers in Human Behavior, the Journal of Financial Services Marketing, and the Journal of Global Scholars of Marketing Science. His professional background combines expertise in sales, market research and planning, corporate strategizing, and leadership & training in the banking and retail sectors. Omar Fares worked for many leading institutions such as Walmart, CIBC, and Fairstone Bank (Previously Duo Bank).

In his interview with the International Finance Magazine, Omar Fares shares his insights about consumer behaviour, marketing strategies, Retail Sales Management, the importance of digital marketing, and much more.

Q) Why is studying consumer behaviour important for a business?

A) The study of consumer behaviour is critical for the success/survivability of businesses. Having an understanding of the consumers of a business allows for the development of products/services that match the consumers’ needs, wants, and/or preferences.

For instance, in the past, businesses would develop products/services and then try to find the right customer (based on different variables) that would likely engage with their offering. However, with the evolution of the study of consumer behaviour, businesses now engage their customers first (surveys/ focus groups/experiments) and work backwards on product/service development and design. Such an approach helps businesses avoid losses that can otherwise be critical for the businesses’ success/survivability.

More importantly, the study of consumer behaviour helps reduce the guesswork for businesses and allows for data-driven strategic decisions which may benefit businesses in the following ways: save money, save time, enhance brand image, and deliver the right product/service to the right customer.

It is also important to note that the study of consumer behaviour is as important to consumers as it is to businesses. The study of consumer behaviour may benefit customers in the following ways: more products/services that satisfy their needs/wants/preferences and manage their own behaviour, by understanding the motives and drivers of an individual’s decisions one can work to manage their behavioural actions for optimal results. This may equate to extra savings of time and money.

Q) As each consumer is different, how can a company master the art of predicting the customers’ demands?

A) With the growing complexity of consumer behaviour (i.e., consumers are getting smarter, have access to more data, and are able to share information on a wider scale), predicting consumer demand is more and more complex. One of the key ways businesses can predict and understand consumer demands is through market segmentation. Market segmentation refers to the process of dividing consumers into groups with similar characteristics and traits. While appreciating that each individual is different, the process of market segmentation helps in narrowing the gap between guesswork and likelihood estimations that is driven by data. Based on this, the question becomes how consumers differ and how can a business segment its consumers.

Consumers can be segmented/divided/grouped based on four characteristics:

Demographic characteristics: Refer to the process of dividing the market based on characteristics such as age, gender, income, level of education, occupation, etc.

Geographical characteristics: Refers to the process of dividing the market based on location

Behavioural characteristics: Refers to the process of dividing the market based on actual behaviour such as usage rate, loyalty, purchase occasion, etc.

Psychographic characteristics: Refers to the process of dividing the market based on consumers’ personalities, values, and attitudes.

The process of segmenting may allow businesses to better predict consumer demand and deliver offerings at the right time and place. One of the key challenges businesses face however is the lack of statistical skills to effectively segment their consumers. While data availability became less of a concern for businesses, the main issue may be around how to effectively use the data to segment consumers and therefore target and position products/services more effectively.

It is important to note that such segmentation approaches are best utilized in combination (e.g., the use of demographic data only to base strategic decisions may lead to a significant loss of opportunity and thus fall into the trap of painting consumers’ behaviour with the same brush). For instance, recent research of mine that we are working on publishing is related to the drivers of banking technology usage, and while many banking professionals assume age (i.e., demographic variable) is a key driver of digital adoption and thus base decisions based on this factor; we found that other psychographic variables can paint a fuller picture in the process of digital banking adoption.

Q) How does the dynamics of consumer behaviour impact organizations?

A) The dynamic of consumer behaviour impacts organizations in multiple ways including the development of products/services/ enhancement of marketing strategies, understanding competition, and driving bottom-line profits.

Development of products/services: By understanding consumer needs/wants/preferences, businesses can develop and design products/services that match consumer needs. In recent years, businesses have relied on consumer surveys, focus groups, and pre-market experiments to gain an understanding of the market before spending resources on product development. This is also evident in consumer experience, where the field of UX (user experience) has taken a common practice of conducting consumer research before and as businesses work on the development of websites and applications.

Enhancement of marketing strategies: Having an understanding of the complex consumer dynamics may aid businesses in developing strategic plans that tailor to their target market and develop tactical approaches based on the understanding of what motivates customers to take certain actions.

Understanding competition: Understanding how consumers perceive and interact with competitors may help organizations develop clear points of differentiation and address consumers’ pain points proactively (versus reactively).

Driving bottom-line profits: Ultimately organizations look to drive profit and increase acquisition while reducing customer churn. Understanding consumer behaviour may help increase sales and reduce costs by examining the behavioural drivers of consumers, developing products/services efficiently, and having the right product/service to the right customer at the right place.

Q) What factors influence behavioural changes in a customer?

A) As human beings are very complex, there are a wealth of variables that influence behavioural changes. While the following is by no means a comprehensive list, it is however a starting point of much of what we know.

Demographic variables: This includes age, gender, income, occupation, level of education, etc.

Psychological variables: Internal psychological factors such as perceptions, memory, learning, and motivations are all factors that may influence behavioural actions.

Social variables: The environment of an individual plays a critical role in determining how one might behave in different scenarios. For example, influence on reference groups such as family, friends, and colleagues has been shown to be a likely driver of behavioural action. On the other hand, the need to dissociate from certain groups may also play a key role in behavioural action.

Situational variables: consumers may behave differently in certain situations, for instance, one’s behaviour can be different if they are busier or if the weather is bad.

Marketing variables: Different variables such as promotions, advertisements, or discounts may influence consumer behavioural actions. The study of such influence is of key interest to consumer behaviour researchers as such variables can be controlled to a higher extent compared to other variables.

Q) How can a company influence consumer behaviour through marketing strategies?

A) Companies may influence consumer behaviour in several ways including (not limited to): effective branding, strategic advertising, behavioural nudges, product/service promotions, efficient targeting and positioning, and personalization of offerings.

Effective branding: Companies with strong brands and brand image may influence consumers to interact with their product/service by enhancing trust and managing expectations. For instance, purchasing a laptop from an established brand comes with the expectations that have been developed by previous user experience, trust in the post-purchase process, and a level of comfort in knowing what the brand stands for. On the other hand, making such a purchase from an unknown brand leaves customers with a lack of trust in the product and what it can and is expected to deliver. Therefore, building a brand image is key to helping customers make decisions and influence their behaviour.

Strategic Advertising: When done right, advertising can be a powerful tool to help customers move from one stage to another in the customer purchase journey. Some of the key considerations should be around what message is the company trying to deliver to the customer? What is the goal of the advertisement (i.e., informative, persuasive, reminder)? Who is the ideal customer? how to best reach the ideal customer? Many companies fall into the trap of pushing out advertisements before strategically aligning on some of the main areas of consideration which may result in a harmful impact on the brand and cost companies a wealth of resources.

Behavioural Nudges: These nudges can be referred to as subtle prompts designed to influence behaviour in a positive way. For instance, a product stored at eye level in a retail store may influence customers to purchase the product vs products that are harder to see at eye level. There are many examples of the usefulness of behavioural nudges to influence behaviour, however, some of the key ones include choice architecture (i.e., the process of designing the way choices are presented to customers), social proofs (i.e., the process of using social influence/norms to impact one’s decisions), default (i.e., the process of setting an aspired action as the default option), and feedback (i.e., the process of showcasing customer behaviour to customers to influence future actions).

Product/service promotions: The process of including discounts, free trials, and offers may entice customers to take certain behavioural actions. Such an area has been of key interest to researchers and practitioners. Promotion of a product/service that may entice an initial behavioural action works well with the familiarity principle. The familiarity principle is the tendency of individuals to prefer things the more they become familiar with them. Thus, having a promotion or free trial may enhance one’s level of familiarity which may lead to enhanced positive behavioural action.

Efficient targeting and positioning: Companies that are able to segment their customers effectively may be better positioned to effectively reach their ideal customers at the right time and place. Reaching customers at the right time and place can play a significant role in behavioural action, therefore, leading to increased sales and bottom-line profits.

Personalization: The process of designing products/services that fit the customers’ needs/wants, through data and analytics, may result in customers feeling a sense of relevance and connection to the brand. Thus, personalization of offerings may influence behavioural action leading to positive business outcomes and increased customer satisfaction.

Q) Why is digital marketing important for a business to be successful?

A) In the modern landscape, digital presence is no longer optimal for most businesses, but rather a necessity. Customers enquire, connect, interact, and purchase from certain brands online. Digital marketing helps businesses to reach a highly targeted wider audience compared to traditional channels. Companies can specifically reach customers based on their behavioural, psychographic, demographic, and geographic traits with more effectiveness and reduced costs compared to traditional modes of marketing. Additionally, businesses can work within their own budget to create effective campaigns that may be significantly cheaper than other channels. Most importantly, businesses can measure consumer behaviour with a high level of precision and may quickly adapt and change their approaches based on real-time feedback.

Q) How different is ‘Inbound Marketing’ when compared to ‘Digital Marketing’? Which one should companies prefer?

A) The ultimate answer depends on the company’s goals and resources. However, both approaches provide value in a unique way. Inbound marketing provides customers with value through valuable content such as informative videos, blog posts, and expert research. The idea is customers will be attracted to engage with the business through helpful information presented which in turn may result in increased brand trust. On the other hand, digital marketing refers to an all-encompassing approach where a business may work to develop strong inbound strategies and also proactively reach customers wherever they are. This may include targeted advertisements and content. Companies need to examine their goals, motives, and resources before selecting an approach.

Q) Does digital marketing yield results for all businesses? What is your take?

A) A clear no. While digital marketing is a necessity in the modern landscape, if done inappropriately, it may cost businesses significant losses. Some of the common reasons why digital marketing efforts may fail include: poor segmentation, targeting and positioning, no/lack of clarity on objectives, bad product/service, no clear value proposition, ineffective message, minimal testing and optimization, and budget constraints. Therefore, it is important to critically examine all the factors involved in building an effective digital strategy before going to market.

Q) What role will artificial intelligence play in the coming days in transforming the marketing sector?

A) Artificial Intelligence will play a critical role in reshaping the marketing field. A few key takeaways I present here are:

  • A business with no proper marketing plan before integrating AI technologies will still be a business with a poor plan after integration
  • AI technologies will effectively need active human monitoring and management to avoid reputational and different sorts of risks
  • AI technologies will help automate (and are already helping) repetitive tasks, thus leaving marketers to focus on high-impact tasks
  • Content creation may be enhanced by using AI technologies, however, with a careful note on avoiding complete reliance on existing tools – this will be one of the top areas of possibility and challenges for marketers (It will be important to maintain the human element to existing processes to maintain relevancy and connection with consumers)
  • Customer service may be enhanced through the use of chatbots that are trained on vast amounts of data and are able to support customers 24/7 in different languages
  • Process enhancements: Internal marketing tasks may become more efficient with the integration of AI technologies such as pipeline management software
  • Customer research may be enhanced using AI technologies through effective thematic analysis that can be done in minutes (otherwise may take weeks or more). Marketers will be able to collect, analyze, and adjust in real-time creating key opportunities in the field

Q) You have worked for leading institutions such as Walmart, CIBC, and Fairstone Financial. According to you, what does it take to become successful in Retail Sales Management?

A) Some of the key skills that I believe are necessary include data analytics, technical competency in one’s particular subject matter, relationship management, research competencies, ability to write and present work effectively, and work-ethic/commitment.

While there is no clear formula for success, there are certain steps one can take to further enhance and develop. In the field of Retail Management, data analytics (the ability to work with a large set of data and give meaning to it) is a key to standing out as a strategic leader and decision-maker.

Following, I suggest developing a high-level of technical competency in one’s subject matter; this can be done through active studying and working towards relevant certifications in one’s field.

I also urge working on the soft skills side, just like subject matter expertise can be acquired; soft skills need continuous development and work. This will lead to effective working relationships with colleagues and customers alike.

Moreover, one of the usually overlooked skills is the ability to research in a scientific manner. I suggest that future business leaders take research methods courses and familiarize themselves with the scientific research process as it will pay dividends in the form of strategic decisions in the long run.

I also recommend that individuals practice business writing and presenting at all given opportunities (valuable information that can’t be communicated effectively may cost one and business significant losses).

Finally and most importantly, one can teach all of the above, however, work-ethic/commitment is very hard to teach. I argue that the main criterion for success is work-ethic/commitment where all the other areas can be reached with the right focus and strategic planning.

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