Smart businesses are swotting up on the brain’s inner workings to assess employees and customers alike, in order to find the most suitable employees and craft the best customer offering. They can also learn more about the psychological tools that divulge details as diverse as employees’ ethical preferences and reveal the biases that feed the human mind and shape behaviour, writes cognitive scientist turned journalist, Stav Dimitropoulos.

The previous century witnessed the explosion of the science of psychology and the early tendrils of ground breaking fields like behavioural economics and neuroscience. The age-old world of business was swept along

It was Adam Smith who first coined the theory of the ‘invisible hand’ — the idea that when we make a self-interested decision, say to buy a fancy dress and a designer handbag, it gives a helping hand to the wider economy. From the ‘invisible hand’ evolved the concept of the ‘invisible mind’ — the (still) uncharted territory of emotion and reason, of feelings and logic, of hidden desires and buried intentions – to explain why we might buy that particular dress or handbag.

Today, science can dive deep into the workings of the human mind. It can put the brain under scans to see which parts of it light up when we see an advertisement. It can design tests that will predict which employee is least susceptible to corruption. It can even take advantage of the mind’s desire for simplicity, to help businesses and organisations design campaigns that will most readily be adopted by people. And for the scientists and experts who are leading these advances, we are only just seeing the beginning.

Behavioural Economics

No, we are not perfectly rational customers – and successful businesses know that. To understand the way customers think, first take a brief sidestep into the world of award-winning economic theory. Last year, Richard Thaler won the Nobel prize for economics for “providing a more realistic analysis of how people think and behave when making economic decisions”. A man in lifelong pursuit of behavioural economics, Thaler proved that people are predictably irrational in ways that transcend economic theory. He was not the first to speak about human irrationality.

Fifteen years earlier, two psychologists named Daniel Kahneman and Amos Tversky also won a Nobel prize, pointing out how prone humans are to bad judgment and rigid thinking. Should we want to improve our reality, we had better start improving our own way of grasping it, Kahneman and Tversky’s prospect theory said, in a nutshell. This theory not only went on to shape behavioural economics, but also to provide fascinating insights into what influences people’s decisions as purchasers. “Many of these doctrines can help businesses of today understand what clients want,” says Camillo Padoa-Schioppa, Associate Professor of Neuroscience at Washington University in St Louis. “For example, one of prospect theory’s central biases is loss aversion, which says that loss is more important than winning.”

Psychologist Daniel Kahneman receives the Presidential Medal of Freedomfor his groundbreaking research on behavioural economics

Imagine your business is Netflix. You give your clients a free trial period of three months, after which it is up to them to decide whether they should switch to paid subscription or not. This means that after three months of enjoying Netflix, they are now faced with the pain of losing it.

Add temporal discounting to the mix and watch sales spike. This is the phenomenon that if you anticipate the value of a reward at a much later stage than initially promised, the wow factor dies down.

Padoa-Schioppa explains, “Let’s say you want to buy an electric car from Toyota. What do you do first? You seek information, so Toyota must make sure you know it sells electric cars through advertising. But then comes the knowledge of temporal discounting. We tend to defer payments, which means that if Toyota wants to make the sell, it must be aware that the human mind finds it much more preferable to pay little by little, in instalments.”

What role does emotion play in customer engagement? Brand-attachment theory says that consumers are likely to prefer emotionally or culturally significant products. Marketers must therefore know how to evoke soulful emotions like joy, sorrow and fear in order to secure an emotionally charged bond between the customer and their brand.

David Hall is Executive Director at Behaviour Change. Based in Workspace’s Archer Street Studios in Soho, the not-for- profit social enterprise addresses major social and environmental challenges by developing ideas that help people embark upon positive action.

“Emotions are powerful and more likely to have an impact on decisions than rational calculation. A good example would be World Wildlife Fund, whose association with iconic animal species and a cute panda logo is a far more effective money-raising tool than rational arguments about climate change or species depletion,” Hall says.

David HallExecutive Director at Behavioural Change

Yet humans can be fickle. Even if businesses establish a long-term emotional relationship or attachment to a brand, customer loyalty is not guaranteed for life. Successful brands are those that tap into another “source of gold”, says Hall, namely mental shortcuts. Our brains use these quick and intuitive algorithms to give a rough answer to a reasoning question in a fairly easy way (if you want examples of such shortcuts, look no further than educated guesses or guesstimates).

Hall advises that brands should focus on those priceless moments of decision that lead to impulse purchases, rather than solely building long-term loyalty. The reason? Shortcuts ease the load on your brain when it has to decipher cognitive problems, and what better than offering less homework to a brain that’s constantly bombarded by non- stop waves of information?

“An effective brand might be one that makes it easy for you to do the thing you want to do, such as Uber; cuts through complexity like Apple; or is simply the thing you’ve done so many times before it becomes a habit, like the toothpaste you buy,” Hall says. “They all help people shortcut a decision by cutting out the need for effortful thought.”

We’ll be exploring more in the next instalment of this piece. But in the meantime, you might also like to read Welcome to the machine which explores the astonishing progress of AI in the workplace, or find out more about psychology and your favourite brands – how are you being influence to buy or use certain products?

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