Market behavior is a broad economic term that refers to the behavior of consumers, businesses, or the stock market. It is often analyzed and used to generate various marketing strategies aimed at boosting sales or brand recognition when dealing with businesses and consumers by analyzing their purchasing behavior. Niche marketing often takes into account the target demographics, the most likely consumer needs addressed by a product, and the most effective advertising stimuli to begin a successful campaign strategy. Understanding stock market behavior is also important for investors looking to predict trends, time the market, or choose the best outlets for their investments.
Consumer behavior is one of the most common focuses of market theory, and it incorporates elements of economics and finance as well as psychology and sociology. Both transactional and relationship marketing play into this theory, and each tries to maximize sales according to different strategies. Relationship marketing capitalizes on market behavior by building brand recognition and long-term relationships with customers, ensuring high percentages of return visits. In contrast, transactional marketing focuses on the individual transactions and takes advantage of consumer behavior with that goal in mind.
There are several models for consumer behavior, the most common of which is the black box model. This model proposes that there are both internal and external factors that influence a consumer’s buying decision. Internal factors include individual traits, such as personal history, lifestyle, attitude, and the decision-making process itself, which includes brand comparisons, searching for data about a product, and behavior after making a purchase. External factors include a consumer’s surrounding environment, such as the current economic conditions or cultural trends, as well as the implemented marketing strategies. These strategies usually include choosing an appropriate price point for a product, optimizing its purpose and design, and creating effective advertising stimuli, sales, or other promotions.
Market behavior can also refer to the behavior of the stock market. Some of the same observations from consumer behavior analysis can be applied to buying and selling behavior within the stock market. For example, many investors are likely to sell their stocks as the market dips and buy when it’s on the rise, and many others will act according to group behavior. Much of this day-to-day fluctuation in the stock market is simply "noise," and the long-term market behavior is quite different. Understanding these trends can help investors better understand the stock market, when to buy and sell, and which investing strategies are best.