As a business owner, there are many benefits to learning more about psychology.
The field of psychology offers many insights into the way human beings think, strategise, perform, decide and behave.
From a business perspective, these insights can tell us a great deal about the best ways to motivate and incentivise. When it comes to finding out what customers and investors really want, an understanding of psychology is invaluable.
The discipline is so useful that many companies now recruit individuals who have studied psychology in corporate environments.
Having a good knowledge of this field can make you highly employable and a better business owner or manager.
You don’t need to study for years to get to grips with powerful psychological concepts and principles. Start by researching ideas like reciprocity, loss aversion, social proof, paradox of choice and information gap theory.
How Psychology Can Influence Business
The study of psychology is a path to understanding how to induce, encourage and influence.
There are many applications within the business world such as inspiring workers, recruiting skilled individuals, negotiating agreements, improving team morale and providing engaging customer experiences.
Ultimately, running a successful business is all about people.
No matter how impressive your product or service, you can’t be profitable without building harmonious relationships.
Understanding people is the secret to creating things that people want to pay for and psychology is the cornerstone of this knowledge.
1 – Reciprocity
Reciprocity is the human instinct to mimic generosity shown to us by others. We respond to kindness with kindness.
This principle has important implications for marketers and is responsible for the popularity of free gifts and keepsakes (as a promotional tool).
2 – Commitment and Consistency
Human beings (customers, in particular) want to appear reliable and true to their word. It’s common for people to commit to a proposed action even if they start to doubt its value.
Commitments, even if they’re not legally binding, significantly increase the likelihood of a customer performing considered actions.
3 – Social Proof
Human beings are social creatures with a strong desire to fit in. They are significantly more likely to desire a product if they know lots of other people covet it.
4 – Liking
No personal connection is needed for the principle of ‘social proof’ (described above) to work. However, people are even more likely to purchase a product or perform a certain action if somebody they know and trust recommends it.
5 – Authority
The authority principle says human beings have a natural desire to obey people in higher positions of power. They are psychologically inclined to adhere to the wishes of a superior or individual in authoritative uniform.
6 – Scarcity
The desire to acquire an item increases as the availability of said item decreases. It’s why limited edition products and time sensitive sales are so effective. Customers will purchase products simply to avoid missing out.
What Is the Importance of Psychology in Business?
Psychology is the study of people’s thoughts and how these thoughts affect the things they desire, pursue and enjoy.
An understanding of the field can be invaluable for businesses because it offers a way to shape products and services to fit customers’ inner desires.
Six Human Needs
Experts on marketing psychology say there are six desires a business needs to fulfil to be successful.
- Certainty and Comfort: the promise of a high pleasure to effort ratio.
- Uncertainty and Variety: the offer of diversity and exciting, dynamic stimuli that change frequently and keep interest levels high.
- Significance: the ability to make a person feel special and valued.
- Love and Connection: the assurance that, by making a particular choice, a person is demonstrating their affinity with others who are like them.
- Growth: the ability to increase scope, competence and comprehension.
- Contribution: the reminder that showing generosity and kindness to others also fosters happiness in oneself.
Personalisation is one of the biggest marketing trends of the decade. In recent years, companies have gone to great lengths to deliver bespoke purchasing experiences.
This is because studies show customers want to be addressed directly, as individuals. Plus, there’s a greater desire for reciprocity when human beings feel noticed and valued.
Mirroring is a basic psychological concept that describes our human urge to respond to generosity in kind.
It’s true that we treat others ‘as we wish to be treated,’ and providing customers with freebies or bonuses is a great way to encourage reciprocity and get them to make a purchase.
It’s human nature to be curious about new experiences and to feel more interested in novel stimuli than the familiar.
It’s why marketers spend a lot of time and money creating multiple forms of marketing for singular products.
Psychologically, humans are drawn towards experiences based on discovery.
Psychologists say our enthusiasm for products and experiences increases when we know access to them is limited.
This is the scarcity principle, and it’s the reason why retail sales have such prominent deadlines.
Customers are more likely to purchase limited edition products because missing out feels like a bigger risk than buying the product and not enjoying it.
The storytelling principle is probably the oldest to exist in marketing. It exploits the human proclivity for narratives – particularly those with a conflict and resolution – to demonstrate ways a product might improve, inspire or liven up a person’s life.
Advertising narratives convince consumers that products fit naturally into their existing lives or that they will alter their lives for the better.
Why Study Psychology in Business?
Understanding the basic principles of psychology helps entrepreneurs improve their relationships with employees, collaborators and customers.
It leads to more sophisticated product designs, healthier work environments and positive, constructive workplace habits.
Many assume psychology is a niche subject, but it has valuable applications in all industries, markets and creative endeavours.
If you’re interested in strengthening your business relations and/or brand potential, a good place to start is with the latest psychological research.
Every year, experts in the field discover new ways to boost productivity, increase employee satisfaction and appeal to more customers.
Learning psychology as a business owner is an important skill. Read the full article on skills required for a business owner.