The Psychology of Buying

Customer Psychology is More Important than Statistics When Growing Your Business

Large corporations and companies spend billions of dollars in research each year on studying consumers and their spending habits to develop marketing strategies and advertising campaigns. While it is important to invest both time and money in marketing and advertising, both will be wasted if you head off in the wrong direction.

The world around you is full of free marketing and advertising clues. Demographics and statistics serve a major role in studying markets and consumer spending habits, but what motivates consumers is not simply about statistics but also about psychology.

In fact, according to statistics professor Shane Jensen of Wharton University, “The Use – And Misuse – of Statistics: How and Why Numbers Are so Easily Manipulated,” April 2, 2008, “Even if care is taken to establish a good sample, there are possibilities of misleading results," he notes. "One common problem is data mining. If someone analyzes a large dataset for long enough, they are bound to find a statistically significant effect or difference between some set of variables."

To understand how the psychology of consumers can work in your best interest, you must also understand the psychology of the nature of your own business:

  1. How do You See Your Customers? Your customers all have needs and feelings that should be addressed not as merely groups, but as individuals that comprise consumer groups. Customers are not gold mines; they are a gift and should be treated as such.
  2. What Psychological Purpose Does Your Business Serve? Analyze the psychological needs of consumers that your business’ products or services address. Is your business fulfilling or a desire or need, a combination of both; or is what you offer generally considered a luxury or an impulse purchase?
  3. Do You Capitalize on the Social Nature of People? Customers will advertise your business for better or for worse and most people tend to be more vocal about negative experiences than they are about positive experiences. If you do not into account the social nature of people you give too much power to unsatisfied customers. Does your business seek to remedy negative customer experiences and optimize the positive experiences of customers?
  4. How Heavily do You Rely on Statistics for Your Marketing Plans? Statistics are tools, not marketing plans; they only tell you a part of the human story and poorly conducted marketing research studies lead to false results.

Principles of Psychology Useful in Advertising and Marketing

In modern psychology there are widely accepted schools of thought and “principles” applied to describe, explain, and predict human behavior. Many businesses apply some of these principles to help understand what motivates buyers, as well as to foster employee-friendly environments.

These principles are interwoven into our society, occurring naturally and can be seen in how individuals and groups respond to each other, authority, and peer pressure. Psychological principles of human nature are studied and used as a basis for brainwashing in the military and in cults. But these principles can also be applied for positive use in marketing and advertising.

Some of the more commonly applied principles of psychology in business situations included in this course are:

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Methods there are many, principles but few, methods often change, principles never do