What is the one core difference between a successful business and an unsuccessful business?
Why did Apple’s iPod succeed and Microsoft’s Zune failed?
If one searches for the failure of any business there may be many reasons but all sums together to one sentence
Company Failed To Influence Their Customers
The answer to this question lies in the human mind and its decision-making process.
We all make decisions consciously known or unknown.
On average we all have about 35,000 decisions to make each day
From morning stepping down from the bed and again getting back to bed we make tons of decisions. Decisions are sometimes easier to make and sometimes more difficult? Sometimes smaller and sometimes even life-changing.
Let us understand how we make decisions with the help of Daniel Kahneman’s “Two Systems Model” from his groundbreaking book “Thinking, Fast and Slow”
This book shows us how two systems in our brains are constantly fighting over control of our behaviour and actions. He also teaches us the many ways in which this leads to errors in memory, judgment and decisions, and what we can do about it.
System 1 and System 2
Most importantly, research by Kahneman shows that our brain has two operating systems. Which he calls System 1 and System 2.
These are the differences between the two systems of our brain:
- EMOTIONAL SYSTEM
- DEFINING CHARACTERISTICS: unconscious, automatic, effortless
- WITHOUT self-awareness or control “What you see is all there is.”
- ROLE: Assesses the situation, delivers updates
- Makes 95% of all our thinking
- RATIONAL SYSTEM
- DEFINING CHARACTERISTICS: deliberate and conscious, effortful, controlled mental process, rational thinking
- WITH self-awareness or control, logical and skeptical
- ROLE: seeks new/missing information, makes decisions
- Makes 5% if all our thinking
System 2 is a slave to our system 1
Our system 1 sends suggestions to our system 2. Who then turns them into beliefs.
This can be easily understood with the help of the below video,
This is one of my favourite analogies.
Now you understood why we all make most of the decisions based on emotions and not rationally.
Before exploring the 4 factors that influence decision making. I suggest you watch the below video to get a deeper understanding of system 1, system 2 and how they are connected together.
Don’t forget to give a thumbs up to this video, later!
Cool, now let’s look at the secret sauce,
4 Factors that Influence Decision Making,
Even the most analytical thinkers are predictably irrational; the really smart ones acknowledge and address their irrationalities. – Dan Ariely
Psychologists understand four chief mental processes that influence decisions:
Past experiences can impact future decision making. Studies have shown that when something positive results from a decision, people are more likely to decide in a similar way, given a similar situation. In contrast, people tend to avoid repeating past mistakes.
This is why the first impression and how we create the environment for customers always payoffs
Abductive reasoning is based on creating and testing hypotheses using the best information available. This kind of reasoning produces the kind of daily decision-making that works best with the information present, which often is incomplete.
This is why data-driven business decisions based are always better to use instead of guessing the future in any business verticals.
Decisions are emotional. Neuroscientist Antonio Damasio made a discovery when he studied people with damage in the part of the brain where emotions were generated. He found that they seemed normal, with the exception of not being able to feel emotions. But they all had something peculiar in common: they couldn’t make a decision. They could explain the logic, but struggled when asked to make simple decisions, like what to eat. This is because decisions are based on emotion.
So first feed the emotions of the customers with trust and then prove them logically our product/service can benefit them.
To know deeper about this strategy, my 1st article on this series will be really helpful.
4. Cognitive Biases
Cognitive Biases are a systematic error in thinking that affect the decision and judgments people make.
Sometimes these biases are related to memory. Some of these include belief biases (the over-dependence on prior knowledge in arriving at decisions), omission biases (people tend to omit information that’s perceived as risky), and confirmation bias (people observe what they expect in observations).
To learn more on cognitive biases, one can take a look at Robert Cialdini “7 Principles of Persuasion” through his book “Influence: The Psychology of Persuasion” and “Pre-Suasion: A Revolutionary Way to Influence and Persuade”
My previous articles also offer a great insight into these concepts with practical Insights,
Thanks for reading, if you liked my article give a thumbs up and you can also write to me in comments about your opinion on my article.
As always suggestions are always welcome please drop me a comment below.
With 💜, Naveen