Economic Psychology: Small Psychological Factors Will Make a Big Impact in Business


What is the difference between success and failure of business?

What do you think is the difference between success and failure of business? What do you say if asked to analyze a case of a restaurant doing great in the place where many other restaurants closed down successively in the past? I would imagine some improvements in pricing, targeting, etc., and check the hard data of the area, such as the number and type of household population, traffic volume by time of day, etc. Surprisingly, Rory Sutherland disagrees, in his book: “Alchemy,” with such a judgment made through logical thinking and observations. In the example described in the book, he proclaims it is nice tables and chairs in front of the restaurant that lead the restaurant to success.

Small psychological factors decide the outcome

Such nice tables and chairs (like our products) are too good to leave outside, and put back every time after closing. Consequently, they well work as a sign to indicate the opening of the restaurant. The author continued that people would naturally assume the restaurant must offer good food and service because it pays attention even to furniture outside. That would make the believers of logical thinking like me say “No way! It just sounds like guesswork!” Replying to such criticism, he proclaims it is small psychological factors that make a big difference between success and failure because we are more likely to make moderate decisions instinctively and subconsciously.

Don’t think. Feel!

According to the author, logical solutions through data-analyzing, streamlining, optimizing, etc. are not always invincible. He argues we should focus more on psychological factors for problem solving. As writing above, I’m a kind of believer of logical thinking, but I like his idea. In fact, I know we very often behave irrationally and illogically, and that makes us human, I believe. Let me summarize the points of this article. If you should think our furniture is a little bit higher than you like, you have no other choice but buy it if your instinct says so😊

Shungo Ijima

He is travelling around the world. His passion is to explain Japan to the world, from the unique viewpoint accumulated through his career: overseas posting, MBA holder, former official of the Ministry of Finance.

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