Why do people buy what they buy and shop where they shop? These are the fundamental questions of shopper psychology. And, it’s complicated. But when small businesses understand what drives consumer behaviors and motivations, they can attract shoppers.
Purchasing decisions are often driven by emotions, at least at first. Then shoppers consider price, quality, value, and why they need a product or service. So how can small business owners tap into these sentiments? Here are seven trends to know.
People spend more time online (and alone)
The pandemic changed many consumer behaviors, and one that’s stuck around is a “reliance on digital connectivity and at-home activities,” according to a recent McKinsey & Company report. People seek convenience and instant gratification, and they report having three extra hours of free time a week compared to 2019 — most of which is spent on solo activities.
Consumers focus more on hobbies, fitness, social media, relaxing at home, and shopping and less on going to movies and concerts or hanging out with family and friends. E-commerce and food delivery continue to rise as well. The report notes that consumers' expectations for speed and service continue to increase, especially when ordering online.
Consumers appreciate AI-driven pricing
Price remains an important consideration for shoppers. And more companies are using artificial intelligence to price products and services. AI enables vendors to adjust their pricing dynamically and use customer data (including their location and purchase history) to forecast purchasing decisions and offer personalized pricing.
A 2024 study published in BMC Psychology analyzed data from hundreds of customers and found that AI-initiated pricing resulted in higher customer loyalty. Why? Consumers believe that AI algorithms generate more fairness in pricing. However, shoppers want businesses to highlight that the AI tools they use are independent and fair rather than something companies use for their own gain.
Family and friends wield the biggest influence
People spend several hours a day on social media, but it’s their least trusted source for making purchasing decisions, according to McKinsey. However, social platforms are where consumers interact with family and friends, which the report notes are shoppers’ “most trusted sources.”
Small businesses should note that consumers generally trust social media influencers the least for brand and product recommendations. Therefore, they should adjust their social media marketing strategies accordingly. The report suggests that businesses should strive for “authentic yet personalized messaging across platforms” and incorporate product reviews and ratings into their messaging.
According to McKinsey, 47% of consumers say locally owned companies are important to their purchasing decisions, mostly because they want to support local and domestic businesses.
Younger shoppers are ready to spend
Gen Z, born between 1996 and 2010, is projected to become one of the largest and wealthiest generations, according to McKinsey. Their spending is growing twice as fast as previous generations, and by 2035, Gen Z will add $8.9 trillion to the global economy.
But their spending habits differ from those of past generations. Gen Z is price- and value-conscious — they seek sales and product dupes and place emotional and social value on purchases, according to PwC. They also use AI tools to find deals and product recommendations, and enjoy discovering products in store.
To reach these consumers, PwC suggests that small businesses tie pricing to stories about a product’s quality or purpose, focus on affordability, tap into emotions, and use AI and customer data to generate personalized promotions and recommendations.
Consumers are interested in AI experiences
Retailers, including small businesses, continue to incorporate AI tools. These resources often include using chatbots and virtual assistants to support customer service and offer personalized recommendations, according to the National Retail Federation.
Consumers, especially younger ones, are interested in using AI when they shop. A 2024 study found that when Gen Z encounters user-friendly, beneficial AI tools while shopping, they’re more likely to buy something.
However, not all shoppers trust AI’s product recommendations, according to a Salsify report. It’s up to brands to offer detailed product descriptions and specifications, be transparent about their AI use, and give shoppers the option to accept or decline an AI recommendation.
Shoppers want to support local businesses
According to McKinsey, 47% of consumers say locally owned companies are important to their purchasing decisions, mostly because they want to support local and domestic businesses. Shoppers are particularly interested in shopping locally for apparel and household items.
Small business owners should emphasize their local roots. They should highlight how shopping with them supports the local economy, provides jobs for their neighbors, and builds community relationships.
Consumers seek community
Along with supporting small, local businesses, shoppers are increasingly seeking real-world experiences and community to build connections. Nearly 70% of consumers report feeling “nostalgic for pre-digital times,” according to Gartner.
The report suggests that business owners should host pop-ups and live events and partner with other local businesses to give shoppers authentic, real-life experiences. These collaborations can help build connections, deepen relationships, and promote loyalty.
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