Most consumer behavior is irrational, and asking people what they want has poor predictive value — you need to understand hidden psychological bottlenecks.
Sutherland argues that economic logic and conventional market research have poor predictive value for consumer behavior because most of what we feel isn't even thought, let alone spoken. He proves this with a direct mail test for phone company services where offering both phone and postal response produced a 7% response rate — more than the sum of phone-only (2%) and post-only (5%) — showing that the ordering mechanism itself was a psychological bottleneck more important than the product or price. ✦ AI generated
Rory Sutherland · My First Million · 2026-07-27 · original ↗
starts at this moment · 19:29
“You said you study how we think or you like to talk about how we think versus what you do. Let's break that down. Okay. So, if I just asked you a very simple question that's probably very broad and you could take it any direction you want. How do we think?”
What you have to acknowledge is two things I think. One, you got to let go of two handholds at once, which is what makes it difficult. One is economic logic. You know, if we reduce the price, more people will buy it. Economic logic is has very bad predictive value. I think in the you know in consumer behavior and the other thing you've got to you got to partly abandon is conventional approaches to market research where you you think that we've asked the customer what it is they want and they will tell us because most of what we feel isn't even thought let alone spoken and also there are very very large areas of consumer behavior which are they may be metarrational at some level but nobody will ever tell you, I would buy that product if it were more expensive. But there are plenty of documented cases of exactly that happening. 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.
verbatim transcript · starts at 19:29
19:27keeps them out of sight. But when you when you look at these things and go maybe it's not about this, maybe it's all about that. What you have to acknowledge is two things I think. One, you got to let go of two handholds at once, which is what makes it difficult. One is economic logic. You know, if we reduce the price, more people will buy it. Economic logic is has very bad
19:49predictive value. I think in the you know in consumer behavior and the other thing you've got to you got to partly abandon is conventional approaches to market research where you you think that we've asked the customer what it is they want and they will tell us because most of what we feel isn't even thought let alone spoken and and also there are very very large areas of consumer behavior
20:14which are they may be metarrational at some level but nobody will ever tell you, I would buy that product if it were more expensive. But there are plenty of documented cases of exactly that happening. >> I think you you're buddies with the uh Daniel K. Uh >> I Yeah. >> And he in his book Thinking Fast and Slow. I don't know if you've read that, Sean, but one of his like one of the
20:40famous examples was the economists, I think it was, or something like that. >> The decoy the decoy thing. >> Yeah. They like do uh this thing where they say you can get the economist for $20 a month and you get all of these things. And if you get the other version of the Economist, you get all of these things plus digital access. Paper paper only, paper plus digital and digital
21:00only. And paper only and paper plus digital were the same price. So you looked at that and your mental frame was if I get the if I get the paper version, I'm getting the digital one for free. Vanishingly few people ordered paper only. Now if you remove the paper only one so you you know effectively you had digital or digital plus paper vanishingly few people chose the one in
21:23the middle but the presence of the middle option increased by about two or 300% the number of people who subscribed to paper plus digital instead of digital it I I think it shifted the ratio from one direction to the other and by the way that's pretty valuable to the economist because my hunch is that their uh paper circulation is much more valable in terms of advertising revenue
21:45than their digital circulation is. >> One of the best Oggov ads, my favorite ad is uh David Oggov writes this letter and it's I think it's called how we write ads at Oglev and he like has this like long maybe thousand or 2,000word essay on like the 18 points on how they create ads that are effective. And some people might be like, well, why would you give your secret away? And he was
22:08like, well, I'm going to teach them how we think. There there's also a really interesting aspect in um business which is if you give your secrets away you assume that people will copy you and the odd thing is they don't and quite often the reason is they're just culturally incapable of doing it. So for example if you point out that physical direct mail is very successful for a business