5 psych lessons that can help your business

5 psych lessons that can help your business

Understanding basic psychology can have a big impact on your business. While traditional economics argues a person values a product for its intrinsic value and utility, research in behavioural economics suggest there are many factors that influences a customer’s decisions -- many of them seemingly irrational.

By knowing what these factors are, you can improve your marketing strategy, increase sales and build customer loyalty.

So, what do you need to keep in mind? Here are five cognitive biases and how they can help your business.


How a question is framed makes a big difference to how a person responds. For instance, Amos Tversky and Daniel Kahneman found that people prefer a disease-fighting policy that saves 400 out of 600 people to a policy that lets 200 people die, though, logically, the policies are identical. By framing your question correctly, you can influence a consumer’s decision.

Default effect

Studies show that the default option is more likely to be chosen over the alternatives. In an article in Science, Eric J. Johnson and Daniel Goldstein found that countries where organ donation is the default have a far higher donation rate than countries where people need to elect to be a donor. This effect can be applied to business. Setting defaults in email marketing, for instance, can increase the likelihood that your customer will opt in for a sales promotion or offer.


Anchoring is a cognitive bias where people use initial information, which serves as an "anchor", to make a decision. For instance, if you are offering your customer a deal, the first price will be what they use to make a subsequent judgement on value for money – even if it does not correspond to the product’s intrinsic value. This tacticcan be used in sales negotiations. By setting a high initial price, a customer is likely to accept a lower offer that may still be higher than market price.

Serial position effect

German psychologist Hermann Ebbinghaus discovered that we are more likely to remember items we see or hear in a list if they appear first or last. Also known as the primacy effect  and recency effect, this bias can help improve marketing and sales campaigns.

By ensuring your key messages are included at the beginning and end of an advertisement, be it a sales letter or radio ad, you increase the likelihood that those messages will be remembered.


Seemingly irrelevant or unconsciously processed information influences how a person makes a decision or assigns value. This can be used to prime a person’s action. For instance, an American study showed that U.S. voters who cast their vote in a school were more likely to support school funding.

Priming can be used in business in many ways. From the smell of popcorn at a movie cinema to the weight of a clipboard, association and semantic priming can impact your customer’s behaviour.