Business How to use psychology to gain a competitive advantage

How to use psychology to gain a competitive advantage


Opinions of contributing entrepreneurs are their own.

When people think of business and investing, they often think of numbers and financial calculations. All of that, of course, is an integral part of the business world. However, what I have discovered as a businessman and property investor in the UK is successful business and investment is ultimately about people. To succeed, you need to understand people and work well with them — whether they’re customers, partners, or investors.

It is imperative to understand human psychology, both at the macro level (understanding market trends) and the micro level (understanding the person you are doing business with). If you do this right, you can consistently earn exorbitant returns on your business and your investments. If you get this wrong, or can’t control your own emotions, you could end up losing money while others get rich.

In this article, I will discuss the different emotional states of the market and the individual actors that make it up. I will give you strategies that will allow you to take advantage of each and give you insights that will prepare you to manage your own emotions.

1. Anxiety

Fear is a powerful motivator of human action. This is just as true in the business, financial and real estate markets as it is in the rest of society. When there is fear in the markets, rightly or wrongly, a sell-off quickly follows. This inevitably leads to assets being sold at prices well below normal value. For those who don’t give in to fear, there are some huge and potentially life-changing opportunities right now.

Stock market genius Warren Buffett says, “Be afraid when others are greedyAnd greedy when others are afraid.” When everyone is running for the exit, it’s time to look at assets with a cool, calm head. For example, in the real estate industry, look at what a real estate cash flow is or could be cash flow. If that number puts you in able to hold the property for the long term, it doesn’t matter much if prices continue to fall.

Even if markets are not afraid, every market will have motivated sellers. Motivated sellers want to get rid of their properties quickly. This may be because they are moving abroad or have to sell the property due to the end of a relationship. Your job is to understand their motives and make life easier by offering them a quick sale. In return, you can get the property below market value.

In the business world, you may need to adjust your product offering. This may mean offering cheaper online versions of real-world products or events. However, it can also simply involve reframing existing products. For example, does your product help people protect themselves against uncertain market conditions? How can you emphasize this aspect of your offer in your marketing?

Related: 5 Fears All Entrepreneurs Face (and How to Overcome Them)

2. Neutral

When the market is not moving too fast in either direction, people gravitate towards neutral emotions. Normally, people don’t sell assets for well below their normal price or too much above their normal price. There is more time to review deals and for both parties to consider all their options. This can present a challenge for those looking for market-based deals, either as a buyer or seller.

The key in this type of macro environment is to look at the micro. Just because the market is in no rush to buy or sell doesn’t mean individuals aren’t.

For example, in real estate, regardless of the market, there are still people who need to sell their house quickly, and there are still people who are in a hurry to buy. In business, now is the time to understand your customers and their needs. In the investment world, it’s a good time to understand the true value of companies and dig deep into their balance sheets.

Again, this is about understanding people and their psychology. Take the time to talk to the people you do business with and understand their story. If you can work within their timeline, they may be willing to give you a lot. The better you can empathize with others, the better you can create win-win scenarios for all parties involved. Remember that the business world is always about people.

Related: 8 ways traders can manage their emotions and achieve success

3. Greed

When the market is booming, people experience FOMO (Fear Of Missing Out). This pushes prices much higher than is reasonable.

In the real estate industry, now is a great time to be a seller or refinance your properties. When buying, you should control your emotions and pay only what you think an asset is worth. Be prepared to walk away and have plenty of deals to consider at any given time as many will fall through.

FOMO is also particularly relevant in the world of Bitcoin and cryptocurrency investing. That industry is driven by hype and 4-year market cycles. When everyone else is buying, now is the right time to sell to demand. If you buy when everyone else does, you could lose a lot of money in that market.

Finally, regardless of market conditions, if you understand: your own psychology; the psychology of the market; and the psychology of those with whom you do business, you can make money at any time as an or as an investor!

Related: Should you buy investment properties now or wait for a crash?

Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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