psychology in business

Learn How Psychology Can Be Used in Business

Most businesses have plenty of various human-to-human experiences. Therefore, companies that understand and pay attention to human behaviour have more chances to be successful. This includes interactions between the company, customers, and employees.

The best way to approach this matter is by using applied psychology in your business. The scientific nature of applied psychology can help companies tackle various issues related to human behaviour more effectively. But how do you go about it?

In this article, we will dive deeper into this topic by looking at the definition of business psychology, its importance for companies, and five ways you can use business psychology too.

What is Business Psychology?

Business psychology is a field of study that implements aspects of human psychology into practical business applications. The primary purpose of this practice is to improve various elements of a company’s operations.

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Personnel called business psychologists would analyse the company and its employees to get a better understanding of the working environment. They would then use this information to educate and motivate employees, improve working conditions, and ensure the smooth running of a business.

Business psychologists typically use this framework to practice their strategies:

  • Advise. Business psychologists need to position themselves as independent professionals. This allows them to offer unbiased and credible advice for various issues in the company.
  • Diagnosis. Business psychologists implement social scientific research methods to examine employees’ behaviour and help the company understand issues and challenges better.
  • Design. Business psychologists develop solutions to challenges and issues based on the examination results.
  • Delivery. Business psychologists should implement their solutions to issues through facilitation. They need to position themselves as an independent third party rather than representing the client.
  • Evaluation. Business psychologists analyse the results of their intervention and use the information to improve future processes.

Why is Business Psychology Important?

Paying attention to employees’ psychological conditions and how they feel about their workplace is crucial for every business. It ensures that managerial tasks run smoothly by supporting, motivating, and training every personnel.

Having happy employees who are committed to the company’s goals can result in higher productivity and increased revenue. Motivated employees tend to make more effort, meaning that they go above and beyond in their duties to do a great job.

When a company provides a good employee experience (EX), it is easier to achieve a better customer experience (CX). The people who deliver your products or services need to be happy and satisfied in order to make your customers happy.

Good EX can also reduce your employee turnover rates and help you save unnecessary expenses. This can also help companies gain customer loyalty, which is a crucial factor in growing a business.

5 Ways to Use Psychology in Business

Business psychology can be applied to different aspects of a business. Here are the five most common domains where psychology is useful when improving a workplace.

1. Personnel Orientation

Psychology is a big part of the hiring process. It helps HR personnel select and assess candidates’ compatibility with their desired position and the company itself. Aside from evaluating applicants’ abilities, HR personnel also need to understand their personalities.

The most common method to analyse candidates’ personalities is through interviews. Most companies have a structured interview process where each candidate will get the same questions then be scored on a standardised internal rating scale.

Modern personality tests such as Myers-Briggs Type Indicator (MBTI), Caliper Profile, or the SHL Occupational Personality Questionnaire can also be helpful during the hiring process.

Psychological tests make it possible to redirect candidates to a better position that suits their personality instead of rejecting them right away.

2. Training and Development

Investing in employees’ professional development can lead to many benefits for the company. It can improve workers’ quality, boost their work satisfaction, and solve employee retention issues. 94% of employees said they would stay longer at a company that invests in employees’ careers.

Companies can use psychology to determine their employees’ career projections. Providing on-site training and certification, quarterly evaluations with direct managers, and facilitating employees to continue formal education are some methods a business can use to develop its workforce.

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Set employees up for success by aligning their personal goals with the company’s objectives. However, make sure you hear their aspirations and what they want to achieve before forcing them to take a path that might suit their personality and professional inclinations.

3. Performance Appraisal

Business psychologists can give companies solutions to measure employee performance and give feedback accordingly. Performance appraisals are typically used to determine bonuses, promotions, or training programs needed for certain employees.

Psychology is used to analyse good or bad performance based on various factors such as operations, management, and working conditions. This allows the company to provide a fair and balanced assessment for all employees.

A good performance appraisal process is highly beneficial for the company and its workforce. Your company can increase both quality and quantity of production while your employees can understand what is expected of them and openly discuss how to improve their performance.

4. Policies Development

Psychology can help your company develop policies that better suit its employees’ behaviour and social conditions. Business psychologists can work together with the company’s management to develop better policies that ensure the company runs efficiently to achieve its objectives.

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It is easier to determine and pinpoint responsibilities involved in each position by looking at psychological considerations during policy development. This allows businesses to run different work teams within their company effectively.

5. Marketing Effort

Aside from improving your company as a workplace, psychology is also useful to influence your customer behaviour. There are four main psychological factors that affect customers’ purchasing and engagement decisions:

  • Motivation. Every customer has an innate desire to satisfy a particular need, which varies between individuals. Your product or service needs to be designed to solve problems and fulfill this unique demand for your target customers.
  • Learning. Consumers typically seek various information regarding a product before deciding to make a purchase. When a company makes sure this information is readily available, it can be easier to convince customers to purchase its products.
  • Perception. Two persons with the same needs might end up choosing different products or services to satisfy their motivation. This is because each individual perceives a brand differently based on their internal perception. Businesses need to consider this factor when marketing their products or services.
  • Attitudes and beliefs. Your target customers hold a certain attitude regarding a variety of matters, including your branding. Negative attitudes towards a brand or product typically discourage a person from making a purchase. That’s why companies need to align their marketing strategies and their products with their target market’s attitudes to get better engagement.


Every business owner needs to have an understanding of human behaviour and invest more into various business psychology efforts. This allows companies to ensure good quality of life for their employees while improving work quality and productivity.

In this article, we looked at five important fields where you can implement psychology into your business, including:

  • Personnel orientation
  • Training and development
  • Performance appraisals
  • Policies development
  • Marketing efforts

Hopefully, this article has helped you understand the importance of psychology in running a successful business. Start paying more attention to how employees and customers behave, and your company is more likely to grow and thrive in this fiercely competitive market.

Juliet Jones


Juliet is an Editor at, all in one content marketing agency. She loves creating articles about technology, innovative product reviews, and technical writing to help scale up digital growth. She is a writer by day and a frustrated singer by night.