Espresso: Rory Sutherland, The Power of Satisficing and The Real Genius of Ocado

0:06This concept of satisficing, which was coined by a guy called Herbert Simon, i was kind of polymathics won the new world prize for economics um interestingly but his um a surprisingly interesting person to win the award actually um but um he um uh he interestingly made the point that in making decisions under uncertainty his old sort of shtick was decision making under uncertainty the avoidance of a negative probably looms larger than the attainment of a positive you know yes yeah um and uh it is um it's a useful tool to understand human behavior because everybody in human but men in describing their own behavior always talks about i chose this because it was the best and actually it probably isn't the best okay you buy a samsung television not because for the same money you might not be able to get a slight you know you probably could get a slightly better television but there's a 10 5 whatever it is risk without that other television that it might be a piece of shit yes you know and actually avoiding buying a bad television is much more important uh both i think that's why sub subway successful because i mean i will uh uh so so for example with coffee there's pret there's gales there's black street black sheep coffee yeah there's there's not many um sub there's obviously sandwich chains like there's not many sub sandwich chains other than subway so everyone going there is probably satisficing something yes because it's not like that but whereas a sandwich shop could be i mean it's literally like a that's one thing that hasn't like you know it's literally a roll of the dice you're in a new town you fancy a sandwich there isn't a if you go to subway you know exactly what you're getting you know exactly what you're getting you have kind of some kind of agency over what you put in it whether you put yeah i think some fancy restaurants make the mistake of i think you should have one or two unchanging staples on a menu yep and maybe they make the mistake of being so keen to kind of you know over stimulate their customers but quite a lot of the time actually knowing that a restaurant has well if the worst comes to the worst i can always have the x because i know no weirdly interestingly my didn't you say you just write something about a burger or something why the burger is the best seller or something well yeah there's a wonderful uh phrase coined by a london ad agency called um ddb adam and eve and their phrase is what they call the burger effect that when you look at a menu once you've seen the burger it's difficult to get past it that's that that's their view that you have those things that are very sticky it's interesting that nearly all places do a burger now don't they because people who can't decide are always you know it's it's rare to have a burger that's actually bad not impossible um but there's also the thing i think that a lot of restaurants do i stopped going to wagamama because there were various things there that were absolute staples i didn't always eat them but i knew i always enjoyed them there was something called surrender's curry which was fantastic and there was a hot coconut based noodle soup which was quite spicy I can't remember what the hell it was called now.

3:21But they took them both off the menu since when I haven't been back to Wagamama in about three years. Because now I don't know whether, you know, I go there and I go, well, it might not be anything I like there. Yeah, it's crazy when they take away those things that you like, you love. So just back to these. Actually, that's an interesting measure because restaurants don't have that metric. they know what's selling okay but they don't unless they have a loyalty card which i suppose kfc and mcdonald's do they don't know what's selling repeatedly that's why supermarkets want a loyalty card because if you talk to for example um the people at ocado where they don't need a loyalty card because they know exactly what everybody's buying they they actually apply two valuations to the items at ocado there's how much it sells and there's how much it repeatedly sells to the same people yeah so repeat purchase will keep something stocked at ocado even if the overall volume sales might not seem to justify it and the reason for that is that apart from anything else if there's something you really like that you can only get at ocado you'll end up doing a whole hundred pound shop at ocado just to get the actually irwin's soda bread i don't know if you're a fan of yeah well that's that's okay there are a few things to cardo there are a few korean things there's a korean hot horse which ocado sells and 50 of the reason i order from ocado is because i know i can get those things there and i can't get them anywhere else quick one guys espresso's got a brand new sponsor unleashed unleashes inventory management software that talks directly to your finance and econ software we use unleashed daily islands i bloody love it we've got our admin time in half saving approximately 30k a year why use it save money save headaches save stress get granular clarity on your margins know where your stock is don't miss availability look your favorite brands literally use unleashed as their backbone candy kids tiny rebel trick always religiously look there's a link in the show notes please feel free to book a call with josh and his wonderful sales team at unleashed they're amazing even nothing comes of it and even better news you'll get your first month free if you reference hungry thank you yeah that's that's why so that the bulk of our listeners are brands doing that i actually think i think that i think that's a really interesting thing if you get something which is a staple yeah that's what i was going to ask you about so don't take that you know so sat sat supermarkets are the mecca of physical supermarkets are the mecca of satisficing you have go down a lidl or a waitrose or a sainsbury's most people even if you're whether you're unprofessional with a small basket or you're a mum with a big trolley and a toddler in the front you're going through habitually buying the things not nine times out of ten so you're getting the peanut butter you always buy you're getting the uh the sweet there are different segments there is a segment with a cardo about i'll give away there but there you know there there is a highly adventurous segment yes within the buying and actually of course that will vary according to context as well yes but a lot of the time depending on your level of price constraint your level of risk taking you're absolutely right most people most of the time are you know 50 % of the population effectively lead a kind of hand-to-mouth existence and this is something I'd like to do something about where essentially life is a cash flow problem it's not a wealth problem it's a cash flow problem and in that case you have a very strong incentive to buy things that you've bought before even more so if you have kids yes okay so a rich household can try and get their kids to try new foods and if they don't like the food you can chuck it away if you're a poor household exactly the same with a cat you don't take a risk with your brand of cat food because if you vary the brand of cat food and the cat just won't eat it you've just wasted a few quid yeah so you buy the same cat food same with kids so how how so in terms of the adoption curve right so you have brands who are starting you know like the chocolate i sent you and i can get you some more of that as well by the way um that was sensational so so that is that's expensive it's for waitress shopper right yeah it's it's venturous it's expensive it's premium so that that brand is may struggle is we'll get to a point where you probably get the hipsters who are buying it you'll get the the mums who've got money you also you also have a group of people they're famously um one of the first things i learned well it must be in my first week in advertising sales of fairy liquid go up at christmas um because people have guests in the house and they want to be seen buying a premium brand so people people um people effectively the affording hospitality uh will tend to up uptick they'll tend to premiumize and they might go to a deli rather than just going to an ordinary shop yeah well this is shopping now has changed so yeah so um it's kind of again back to this middle ground we've been talking about i actually bought i had she's had some people around and i went to gail's to to pick up the an order just because people just coming around for tea and we wanted scones and everything so and they do pretty good and so on um but gales interest me because there's something wrong i i the food product is pretty good i think you'll agree there's something wrong with their queuing system isn't there do you do you experience the same thing that the the the whole thing is a bit of a mess that you're you know you're not quite sure whether you actually take the bread off the shelf or whether you ask for the bread and then there are people in front of you who are asking for coffee and if they have a large coffee order it then holds you up yeah so there's something fucked about that yeah but you know you know what last time we talked about gratuitous perversity a lot of people in gales the clientele i like i like the brand i like the business the clientele are some fucking annoying people you know they're the kind of audi drivers of the um so i go my local ones cobham so you get a lot of the chelsea footballers and you get it looks like a sort of a botox horse thank you so so much for listening it honestly means the world to me i hope you enjoyed your morning coffee and go and have an amazing day let's be having ya if you want the full episode it will be in the show notes and it will be in the show notes the full episode thank you so much please stay friends as well means a lot to me