Business Psychology Affects Us on a Daily Basis
Psychology affects the decisions that are made on a daily basis. Since psychology touches so many areas of our lives, it is rare that we consider the immense impact that it exerts on populations daily. One area of psychology that makes a major impact is that of business and organizational psychology. Such fields consider how people make decisions, and what they base their purchase decisions on. Prior to making a purchase, there are factors that determine whether or not they will make a purchase. Knowing what these factors are and how to use them, whether in sales or advertising is an important part of psychology.
The Psychology of Sales
The first major area is the psychology of sales. The “psychology” of what motivates people to purchase items or services influences advertising whether it be on television, radio, movies or the internet. How products are packaged and sold is a basic element of psychology. Companies pay large sums of money to understand how their customers think and what motivates them to purchase products. Having a knowledge of what motivates sales, provides a business with useful information. Knowing about which colors, size, interest and price points are the most important makes a major difference in the success or failure of a business.
Psychology in Real Estate and Investment Banking
Take real estate for example. Knowing how people think helps builders design homes for the consumer market. It is not by chance that Century 21 focuses on the yellow jackets and standardized processes in its realtors. The realtors are trained in knowing how to make a sale. That training is based on knowing the psychology of sales from the design of the logos to how to present a property. This knowledge also helps realtors know how to package and sell homes to potential buyers. Knowing the psychology of art and home decor makes a world of difference in which homes sell and which ones do not.
When the purchasing and selling or property is taken to the level of buying and selling businesses, psychology also plays a major role. Knowing the psychology of how contracts are negotiated and how people make deals enables investment bankers to secure profitable deals. The thinking and purchasing decisions of multi-million dollar deals is different than the thinking involved in purchasing a house for a hundred thousand. Although some may think such large financial decisions are based purely on financial factors, the psychology of ‘risk-taking’ and ‘negotiating’ exert a major influence on the making of decisions.
There is also the impact of organizational psychology on the setting up and operation of a business. Knowing how to set up businesses for efficiency, for both the employees and the business makes a major difference on the bottom line. Psychology helps in knowing how to make the best use of labor. Psychology also helps determines which colors and surroundings make for a more productive work force.
Ergonomics also goes into the design of products. Hours are spent studying and testing the placement on instrument panels on cars so that they are positioned in a way to be usable and safe. The placement of such items is not haphazard. Likewise the design of products and product packages often contain elements of ergonomics and psychology.
The study of groups dynamics has led to organizational psychology providing tools to help groups. Using group problem-solving methods like “consensus building”, the participants are forced to resolve issues with artificial limitation placed on them. By manipulating the artificial limits (e.g. time limits, limits in choices, etc.) the group facilitator manipulates the group into developing a consensus. The parties have not come to major agreements with each other, they have just been forced or manipulated into a solution that was forced on them. Some of these include the Borda-Kendall and Delphi methods. Although differences exist between the systems, the dynamics share the common goal of forcing an agreement on those participating. By using such techniques the discussion and debate that often accompanies differences in policy or decision are truncated in favor of forced-choice solution.
Tools such as the Delphi technique ignore the future consequences of the choices. Such techniques are often used in government and corporations when dealing with controversial or unpopular decisions. The technique can also be used to force a desired outcome on the group (i.e. to manipulate them into accepting the desired outcome). There are ways of defeating Delphi, which involve being aware the such a consensus-building tool is being used against you.
Another method pioneered in psychology is the use of small groups to force a consensus. The breaking up of an organization into small groups allows the facilitator to control the agenda and ‘weed out’ those ideas that are unacceptable. By having the small groups each select a spokesman, many of the issues that may have been brought up waters down the issues. The use of small groups as a way to achieve consensus has been used in churches, business, and government agencies. The effectiveness of this method has contributed to its popularity as a way to develop (i.e. force) consensus.
The Psychology of Advertising
Psychology concerning business is also involved in how companies position themselves in the marketplace. Many businesses spend major sums of money so that when you need or desire their particular product, their name is the first product that comes to mind. One example of this is Kleenex. The Kleenex company has been so associated with their product that they are known as Kleenex rather than as facial tissues. This kind of close association does not happen by accident.
Advertising and promotion has been at work to create that association in the minds of customers. Companies spend hours of research coming up with logos that are recognizable and catchy. These logos or memes are designed to convey the company and its products in a powerful word picture. It is as if those companies want to own a portion of your brain so that if you want a particular product, you will consider their product first. The psychology of their efforts is highly effective when you consider that many children recognize logos of various businesses before they even know how to read.