What Role Does Psychology Play in Business

business people studying business data

If you dive deep into how entrepreneurs manage their businesses, you will realize how they plan everything accordingly. There is no single strategy that doesn’t have sound reasoning behind it. It’s probably because the stakes are high. Especially with big businesses, there is so much you can potentially lose if your plans and strategies are not backed by data or science.

One of the most used weapons in the business arsenal is psychology. You might think that the packaging is pink for no reason or just because it’s cute. But, more often than not, there is a more significant reason why they chose that exact color. Furthermore, color psychology is just one of the principles in psychology that businesses actively use, but there are many more.

What Is Psychology?

Once you refresh your knowledge on what psychology is, you will understand why it goes hand in hand with business. It’s the science that studies how the human mind works. It investigates why people act the way they do. Psychology tries to make sense of people’s behavior. And to know its customer’s behavior is exactly what a business needs.

How Do Businesses Use psychology?


Items don’t go on sale for no reason. According to a study, discounts drive people to engage in impulse buying. Make something sound like a good deal, and people will buy it quickly even if they don’t need it or intend to buy it in the first place. Add the element of scarcity, and boom, people will buy more than one item. It’s the classic reasoning behind hoarding.

Even economics has a good reason for it. It’s just how the supply-demand scheme works. People want more of something when it’s rare. This is why people take pride in owning limited edition items when it’s just another bag. It just climbs up in value because only four of you own the same bag in the entire world.

It’s also where FOMO or the fear of missing out stems from. There are only two rooms left on the booking site, so you rush to book them.

woman at the grocery


Most medical-related products claim that their product is being used by 9 out of 10 experts. For example, a toothpaste commercial might include real dentists from a real dental health organization to say that this particular toothpaste is good for you.

Trust is one of the most significant selling points. People buy from experts, from people with authority. This is why claims like “the number 1” product are everywhere.

You can also see this in seminars and talks. People who are considered an authority in a subject or field get paid a lot just to talk about it. That’s the kind of premium this principle has. It is so important that it matters even for new technologies like the search engine results pages (SERPs).

Businesses employ services like web vitals optimization to help them rise in the rank of websites. They must satisfy specific criteria, and one of them is authority. Suppose a website has content that links out to authority websites such as major news organizations. That adds to the website’s credibility and, eventually, a high ranking on SERPs. See, even in the digital world, being linked to people with authority pays. IT gets you to the top spot.

Social Proof

Nowadays, celebrities don’t have the same convincing effect regarding advertising. Because of social media, people can quickly get in touch with a stranger to ask them how they will rate the sofa they recently bought. And it makes sense. Who would you believe more, a paid celebrity who tells you to buy something or someone you saw on Facebook who uses the blender you were looking to buy?

This is why affiliate marketing is a thing now. Non-celebrity people can review items they personally bought and earn when they convince someone to buy the same item. People value other people’s experiences and opinions. And the success rate is higher if there is some relation between them. And really, you will want to relate more to a random stranger who does TikTok videos than a celebrity you have never seen.

Social proof is also the principle behind reviews and ratings on e-commerce and business websites. You peruse people’s reviews before deciding that something is worth your money.

The list of psychology-related principles used in the business world is long. If you want to succeed, you’d better understand the human mind and what motivates someone to decide and do specific actions.

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