In which ways do you think psychology is important in the business world?

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Psychology is fundamentally important in the business world for many reasons, but most of all, psychology is important simply because businesses are made of people, and psychology is the key to understanding people. Within an organization, psychology helps with Human Resources issues such as deciding who would be the best fit for a position or team, the best ways to resolve interpersonal conflict, and how best to motivate or improve work ethic. A solid understanding of psychology can seriously improve a company’s inner workings.
Outside the company, businesses utilize psychology in order to create more effective marketing and encourage sales. By using psychology, they can understand consumer trends and gain an understanding of tendencies that will improve their sales numbers to generate revenue. This is the entire concept behind modern supermarkets—psychology and human tendencies are leveraged to create more selling opportunities.

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Business success depends, for the most part, on skills in interacting with or understanding people. Although some technological innovators have succeeded simply on the basis of technological prowess, even businesses like Facebook, which offers up social networking as a product, or Apple, which attracts a cult-like following enabling it to charge premium prices, depend on deep knowledge of consumer psychology and behavior.

For any consumer business, studying customer psychology is important for product design, marketing, customer retention, and customer satisfaction. Supermarkets use psychological studies to increase sales through a variety of tactics such as organizing aisles in a way that directs customers to more profitable products, using smells of things like baking bread or apple pie to tempt people towards impulse purchases of desserts, and playing music that can makes people likely to buy more or choose more expensive selections.

A second area in which businesses use psychology is in human resources, in discovering how to hire the best people, retain them, and motivate them. The discipline of industrial psychology focuses on how to improve productivity through understanding human behavior.

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Psychology is very important to the business world.  There are many practical applications of psychology in the business world.  I will describe a few for you here.  These three are especially important in tough times.

Motivation Motivation is the reason people do things.  If we better understand why they do things, we can make them do what we want them to do.  For businesses, it is very important to understand how to motivate people and understand them, so you can encourage behaviors you want and discourage behaviors you don’t want.

Consumer psychology Companies exist to sell products.  Their main goal is therefore to figure out what makes people want to buy their product, or why people are not buying it.  This has direct applications in marketing, but also in product development.

Organizational Behavior Psychology helps us understand how individuals act, and we can apply those rules to organizations because they are made up of individuals.  Although organizational behavior is strongly based on principles of psychology, it is more of a hybrid field utilizing business and psychology knowledge.

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