Unhinged marketing secrets that always work (ft. Ogilvy Vice Chairman)

Rory Sutherland: Now this is the classic thing which is that engineers whether they know it or not deep down just want to impress other engineers. Okay. And so a psychological solution in their engineering community will be seen as cheating. So, I make the same point about electric cars, which is you have this thing called range anxiety, and we're spending billions and billions of dollars a year trying to produce batteries with a higher energy density. It's a really good thing. I'm not I'm not saying, 'Hey, engineers, you're wasting your time.' But isn't it cheaper just to reduce anxiety rather than to increase range? Because if the way to reduce range anxiety is always to increase range, we'll end up with electric cars being heavier than they need to be, more expensive than they need to be, and you know, with 50 kwatt hours sitting outside your house 95% of the time effectively doing nothing. So reducing anxiety and I realized by the way how irrational this is and I explain the story which is it it fascinates me because one of the things I think that helps if you want to do this is to have some degree of metacognition. which is you don't just think, you think about your own thinking. It's apparently true of fighter pilots. The really good fighter pilots have good cognitive skills, but they also have good metacognitive skills. They don't just go, I'm going to do that instinctively, but they also ask, 'Is there a reason why I shouldn't be doing that in this instance?' Okay? Or this time it's different, as it were. And so my wife's car is a Mini Cooper electric and it's got about I I guess it's about uh 28 30 kWh battery and a range of about 100 miles. And I've got the Lotus Electray which is 112 kWh battery, a range of about 300 miles. And I got back from quite a lot of driving. I've been down to Wales and back and the car's down to 16%. Okay. And I'm going and all the lights have gone amber because it's at 16%. And I'm get I'm I'm going white knuckle on this. I'm going god I'm down to I'm 16%. Oh my goodness. I was down to 16%. Then I look at the actual range and it's about 58 miles. Now my wife's car that's 56%. Okay. In my wife's car we drive around at 56% i.e. with a range of 56 miles all the time without the slightest smidgen of anxiety. But when that's expressed as 16% not 56 miles, okay, I'm suddenly having conions and really panicking. Now, what that suggests is that range anxiety is much more a factor of psychology than it is of physics. And the problem with trying to increase battery range is that laws of physics are actually kind of set in stone to a large part. Okay? There's not much you can do about the laws of physics. Whereas the laws of psychology are magnificently malleable. And so that's the thing that really interests me because we spend a lot of time effectively trying to uh work within the laws of physics which are immutable when it would be a lot easier just to say actually you know why don't we why don't we take this undesirable thing and make it cool right?

Rory Sutherland: There's a wonderful story I always tell which is Richard Thaylor the Nobel prizewinning economist and behavioral economist the author of Nudge. He once spoke to a board of about 10 people very large company. And he goes to the eight heads of the largest divisions of this company and he asks them all simultaneously a question. Would you take a decision if it had a 50% chance of increasing your profits next year by 50% and a 20% chance of reducing your profits by 30%. And six out of the eight of them said no. And Thaylor goes back and says well you know you're all good enough mathematicians I assume to realize these are highly favorable odds. to a gambling man, you know, this is a very very good bet and yet you declined to take part. Why is that? And they reply six out of the eight of them uh because uh 20% of the time or 30% of time I'd lose my job. And then the interesting thing happens which is the chief executive is sitting at the end of the table and looks a gasast at the eight people and goes but I want all of you to take those odds because net net in aggregate we'd almost certainly end up massively better off. Yes, two divisions, one division might have a slightly disappointing year but four of them would perform spectacularly. And you realize that the way that businesses are structured, as you push responsibility and accountability further and further down the organization, they become more and more risk averse and they become more and more uncertainty adverse. So they would prefer a definite 5 to 10% to a probabilistic a 50% chance of 50%. And what happens then is that you fundamentally you become highly conservative. You're more worried about downside avoidance than you are upside opportunity. And as a result, obviously both innovation and marketing, I would argue, are fat tailed activities where 10% of what you do is probably more valuable than everything else. You know, you can't tell in advance which 10% it's going to be. They are processes of exploration and discovery. And what you do is you get rid of the discovery layer in the pursuit of efficiency. And in the short term it looks like a great idea but in the longer term it's it it proves fatal I think because you've lost the capacity to adapt to reinvent to reposition in pursuit of the occasional um the occasional breakthrough.

Rory Sutherland: I'll give you an example. This is it's something like 1991, 1992, and I'm working on direct response advertising for the phone company. And we simply um were offering people the chance to pay a couple of pounds a month extra to receive what what we call star services I think in the United States network services which is you could have call diversion you could have call waiting on your phone and you could have something else wake up call or something like that and and if you've paid a certain amount monthly these facilities were added to your home phone line and we wrote people letters and it said either send back the pre-lasered coupon below in the in the postage paid envelope or call this number and quote this code. We gave them a choice of post or phone. And we had a slightly bonkers client who didn't want to offer the postal response. I don't know why. I have no idea why to this day. Okay. And so we said, well, let's test it. um let let's not just get rid of a coupon response because that's dangerous because you know if you know if you don't test this rigorously you could end up effectively damaging your business quite significantly on a whim. And so we tested three kinds of letters, 50,000 people each, randomized, completely randomized selection as with the newspapers. And one lot got postal only, one lot got phone only, and one lot as before got the choice of phone or post. Post only 5% response rate. Phone only 2% response rate. When you offer people a choice, it was just it was 7%. not quite but almost nearly I think the sum total of the of the two independent response rates that that may not surprise strike you as all that weird but to an economist this would be completely baffling because it would suggest that the more important factor affecting whether you bought the product was not what the product was or how much it cost but how you were able to actually order it. And from that moment on I remember thinking okay this is extraordinary because every now and then there are almost certainly brilliant businesses which are failing because they've failed to unblock some sort of psychological bottleneck. At this case, the psychological bottleneck might have been that, you know, all you know, people just hated using the phone to order something. And you could have rationally spent millions and millions and millions of pounds trying to improve the product or to spend ages demonstrating what a great product it was. And yet, if you fail at one psychological hurdle, you can doom yourself.

Rory Sutherland: It struck me that there were places where you wanted a high quality cover coffee, but you didn't want a queue behind people who are all customizing their own bloody drinks. And the technology with contactless payment now allows you to basically tap pick up a coffee which has been made in advance and walk off. And my argument is that the flat white, which is a New Zealand/ Australian invention with which is I think the right ratio of coffee to milk and with microfoam as well. I think I think it's basically the you know it's the happy medium of sensible coffee drinking. And this is quite interesting because my assumption was that the place to put this is they only have two versions for the vegans. There's an oat flat white and there's a regular milk flat white. You walk up, you tap your card, you pay £4, you pick up a pre-made coffee and you walk off. And my logic was at the time train stations and um airports were the natural home for this thing. Uh they're expensive real estate. So the fact that you could sell more coffees in a given time, it's Henry Ford applied to coffee basically. Okay. The argument is that Starbucks and the customization and the time is absolutely wonderful if you're in downtown Santa Fe and you're meeting a friend for 2 hours, but it's not suited to airports and railway stations. So anyway, this thing launches. It's only it's only at the trial stage at the moment. But something really interesting happened which is shortly after we launched and got some publicity. Someone came to us and said actually the natural market for this isn't even train stations and railway stations. It's conferences. Quite often the coffee at a business conference is rubbish because it's it's badly made filter coffee because you have to serve a lot of people simultaneously or you have a customizable coffee thing, right? Where there's a massive queue cuz everybody comes out of the plenary session, they all want a coffee so they've got something to hold in their hand and not look like an idiot, which is one of the reasons we buy coffee, by the way. Nothing to do with drinking it. It's effectively accessorizing ourselves. Okay. And the point about flat white or off is it's highquality coffee, not crappy filter coffee that you can produce at scale by simply reducing the customization level. Now, here's where it gets interesting. Henry Ford was a brilliant marketer. Why did he say you could have every any color as long as it's black? Because at the time, paint dried at differing speeds depending on the color. And therefore, if you had a variety of paint colors on the Ford production line, it completely messed up the flow of the production line because some cars would take longer to dry than others. And it turned out that black was the fastest drying color. So, they basically imposed black on the whole Ford fleet. So, it's absolutely fine not to give people something to ask people to make a tradeoff so long as you make them aware of the trade-off in advance. Okay, that's why it's called flat white or off. It doesn't you if you turned up at a branch of Starbucks and they said we we only serve flat whites, right? You go, 'What the hell are you talking about?' No, no, I want a Frappuccino with, you know, almond milk and blah blah blah. No, no. Okay. No, you can't have that. It's, you know, now the reason it's called flat white or off is it makes explicit the tradeoff before someone turns up. So you said if anybody the joke is if anybody turns up and asks for a cappuccino, you point at the logo and you say the answer's in the name. Right now there's an example of this which always fascinates me. Are you a fan of the Moxy hotel chain? The rooms are tiny. There's no room service. There's no laundry. Okay. But the ground floor is kind of a bit like a well a solvent we work, right? Okay. And there's a 24-hour barista. There's a you there's a um uh usually there's someone making really quite good cocktails. You check in at the bar. You don't check in at the check-in desk. There isn't a concage. None of that bollocks. Okay? Don't go stay there on your honeymoon. Don't go stay there for a week. But if you've got one or two nights to stay in a place, it's exactly what you want. Okay? It's small room, very good TV, very good Wi-Fi. The other great advantage is after you've checked out in the morning and had breakfast, to be honest, you can hang out there for another 5 hours if you want to, you know, whereas if you tried doing that in a conventional hotel, you'd you'd feel a bit unwanted. It's a it's it's basically a brilliant brilliant explicit trade-off.