3 Psychological Principles You Should Know if You Own a Business

PsychoAnal-ysis
Image by: By Esparta
By Richard K. Noots

Perhaps you scuff at the idea of using Psychology in business. In that case, the door is over there. For the rest of you, it’s time to learn how to turn those OK profits into BIG profits by simply using what people have against them: their own brain. Don’t worry, it’s not as hard or as maniacal as it sounds. It’s actually tried-and-true business strategies.

You’re going to master these strategies today. You see, people have a tendency to forget that humans are just animals. Since evolution takes over millions of years, our brains haven’t exactly caught up with all the cool stuff we’ve invented yet. That’s why people are still afraid of the dark, spiders and Big Foot. So, let’s find out how to make money from stepping up where evolution left off!

#1) Learn ‘Reciprocity’

When people are given a gift, they feel the need to also give one back. Hence why Christmas is such a chore. So, when you give away free items within your business, people feel obligated to come back. This is more than just something like free shipping, however. You have to give people something concrete. Having a physical object is a great reminder of where they got it from, and if your business gave it to them for free, nine times out of ten they’ll be returning shoppers.

This extends to contests, raffles, and all other ideas we’ve given you in the past. But you must remember the main point: The more you give, the more people will seek you out. It’s … Sort of like feeding a stray cat. Except this cat will give you all his money. 

Reciprocity also makes a difference when you just give back. If your customer comments about your product, respond. Especially if it’s negative. Personally, I’m more inclined to buy from a company if they actually respond and make attempts to amend negative reviews. That’s how I know my dollar matters to them.

#2) The Contrast Principle

There was a company who produced a bread maker and they were disappointed by it’s incredibly low sales. So what’d they do? They made a bigger version, then they priced it higher than their first model. Of course, you would expect both models to promptly fail. If people didn’t want the first model, why would they go for an even bigger, more expensive version? However, what actually happened was people saw both versions, and immediately bought the lower-priced one. That’s right, the sales of their first model exploded. How do you make any sense of a business plan like that?

Well, the Contrast Principle suggests that when people are confronted with three different prices for the same object (low, medium and high), they’ll choose the middle-priced one. People don’t always want the most expensive version (obviously), and the cheapest one makes people nervous. So, they’ll often settle for the average price. The reason for this is when we are confronted with just one object, it’s easy for us to ignore. When it’s multiple versions of the same thing however, we get befuddled and those competitive instincts take over.

You want to take advantage of this principle. When you’re pricing your products, make sure you look at your competitor’s prices. You’re not looking to undercut them so bad that you lose business. Instead, you just want enough of a price cut that, when compared to the other product, a person will feel no choice but to buy it.

#3) Expensive is Good Mindset

If you offer a service, don’t be afraid to charge more for it. This can apply for products as well, but it varies depending on what you’re are dealing with. The point is, when people look for something they need done, most people don’t look for the cheapest route. And a lot of people don’t mind forking over extra cash, because that extra cash translates to a guarantee of a job soon-to-be well done. Why? Well, how often have you paid a little extra to insure your comfort? Now, apply this principle to the rest of the world and you’ll see my point.

Although numbers two and three run slightly counter to each other, the trick is to understand when to price high, and when to price low. This will require you to pay attention to customers and how they shop. When you’re offering services, don’t be afraid to go a little higher than the norm. You may be surprised, but this generally can garner you more business as it gives the impression that you’re worth the price. When it comes to actual products, it’s usually best to base it off competitors.

Have any other advice for Psychology in Business? There’s more than one way to skin a cat, like making all prices end in “.99”. What can you think of?