750 Billion Dollars in Marketing Spend Is Being Wasted Every Year

0:00The relationship between the person and the brand is the weakest it's ever been. You tell me that you can measure attention by tracking people's eyeballs. Great, I will have it. And I'm going to talk about it in my conferences and make it my new shiny tool, even though it doesn't do shit for me.

0:19Pranav:I'm Eric Fulweiler, and this is Scratch, bringing you marketing lessons from the leading brands and brains, rewriting the rulebook from scratch for the world of today. Hey everyone and welcome to today's episodes of Scratch. Today I am joined by Pranav Yadev, the founder of NeuroInsight, a firm which really focuses on understanding the data analytics and metrics behind what it takes for our consumers and customers to make decisions to spend their money with us basically. Pranav, welcome to Scratch by Rival. Thank you for having me. Very, very excited to have you on the show. I've watched quite a few things that you've been on, podcasts, interviews, documentaries, and such, but also been a big fan of the work as well for the past few years.

1:08So very excited to have you on today's episode. I think we're going to have a very interesting discussion and probably something that most people who listen to this podcast may not necessarily have heard about before, or maybe not even considered. So yeah, really excited for this. So thank you. No, no, it's an honor and a pleasure. Thank you so much. you know it is I'm as much a fan of the the field and the pursuit as you or anybody else maybe so you know very eager to share notes and see what we can decode together amazing well look Pranav we always ask the same icebreaker question all of our audience will know it well by this point and hopefully you've had a chance to to see it and think about it as well but what's one challenger brand that you're passionate about right now that you could talk about?

1:57We'll come back to this one. I have been thinking about it, so it marinated me when we come back to this one. No worries. We'll come back to it towards the end and we'll drop it in. Okay, great. Well, Pranav, I guess this one you should be able to talk about pretty much right off the bat. Give us a quick overview for those that don't know about NeuroInsight and what you actually do. I have to start at the fundamental premise because we live in such a time that we're so far away from our reality. And we run so quickly that we pay so little attention to who we actually are and how we actually work.

2:34But I have to go back to the fundamental premise that in the past 5 ,000 years of philosophy or the past 100 years of neuroscience, What we've learned about ourselves and human behavior is that 90 % of all decision making takes place in the subconscious. So that's the key fact that I want to start at. Now, in the world of marketing and advertising or business in general, you know, there's about a trillion dollars spent every year on new product innovation, strategy, marketing, advertising. And all of which relies on self-reported behavior. You come up with an idea of a new brand of a razor or a water bottle and you think you're onto something.

3:17You create a prototype, you create your RTBs and you begin to test it in the market by asking people questions. And yet, while being very successful rationally, you put it out in the market and it's a complete failure. In fact, only 24 % of the times what we say correlates to actual in-market sales or purchase behavior. 24%. So let that sink in. So the trillion dollars that we're putting behind all of this investment, 750 billion of it, we're actually wasting every year. And the reason why that happens is not that people are trying to lie when they're asked a question. The reason why this happens is that we don't have the power to actually know why we make decisions.

4:01You know, in Eastern philosophy, all of the work around being one with yourself, who is the self that you're trying to be one with that you don't know anything about? This, the subconscious, is the one. So we realized this a long time ago and said like, well, if we're not going to be able to articulate how it is that we feel, think or will behave, then what gets us there? So let's go to the source. And we happen to invent a brain mapping technology that looks at the subconscious drivers of motivation, what the brain chooses to encode into long term memory, a long term memory being the only thing that correlates to future behavior, because we are nothing but a set of memories ourselves.

4:42and essentially predict for governments, for the biggest brands in the world, what population level behavior would look like based on a certain kind of set of stimuli. So in short, if I have to summarize all of that, Neuro Insight kind of makes the invisible within us visible and gives access to anybody who wants to understand what truly drives us in a meaningful way, access to that information. That's a really, probably one of the best descriptors of marketing I've probably heard in a very long time, aside from, of course, like the one that we tend to use at Rival as well, alongside that. But I really like this idea of the fact that actually is just us trying to influence decisions, right, like multiple decisions a day, and over the course of a potential customer's lifetime as well.

5:27It's really interesting, because I think we're starting to see this almost resurgence, I won't say it's a new development, but this resurgence and this focus on what behavioral economics and the school of, you know, Daniel Kahneman and all this stuff, like kind of really rearing its head more in marketing, especially as we go into this, you know, this era of AI everything, you know, people are using AI personas, AI focus groups, all this stuff, synthetic research, all these things. And it's really interesting to tie it back to that point of like, actually, we're still trying to just influence human behavior and human decisions.

6:00So I really think that's a good, good overview and a good place for us to start. because one of the key things that we really wanted to talk to you about is, and I know you have strong opinions on this, so I'm looking forward to hear your take on this. Marketing today, really, if you take a step back, it feels very polluted and very confused. It feels almost broken. I've heard you say in a couple of other sentiments you've made. But what created that? Why has marketing broken over the past two decades, three decades? Yeah, I think marketing is broken because culture is broken, because marketing is probably a much more concentrated view of what is happening in culture.

6:47It takes from culture. It distills culture down to things that are of core importance to us. And then it has the power to, you know, to spread information. And I think so this is there's a problem on the inside and there's a problem on the outside. The problem on the inside is this. And this this happens to be, by the way, an issue with every profession, not just marketing. Right. When the profession becomes more about the tools rather than the craft, then that you you go farther and farther away from the philosophy of that creation. You know, you see these ancient, remarkable woodworkers in Japan who basically treat the wood a certain way.

7:33It has to age a certain way for them to work with it because they focus on the craft. And then you have these gigantic machines that can churn out that same piece of furniture in a couple of days. You price it differently. You price it differently in the world purely because you value that craft. Marketing, for some reason, undervalued its own craft. You know, you go back to the era of the madmen in marketing, and there were many things wrong with it, right, in the misogynistic culture and toxic culture that they created. But their obsession was not with creating the best marketing campaign. The obsession was, can I actually find the pulse or the unsaid truth or the reality of the counterparty in a way that I can actually, of course, it was exploitation in terms of finding the truth and making money off that.

8:29But actually, much like in any great performance that you're actually paying to watch, the truth sometimes were so good that you're like, yeah, take my money. That was good. Right. I mean, my favorite example to use is MasterCard, a company that totally makes its money because of the number of transactions that are run on that card. Correct. So you want more transactions, except the truth that they found was that money is not everything. exactly the antithesis of the the thing that you're trying to sell to the world and so what do they create in the campaign you know me me going out down in soho and trying trying to get a cup of coffee five dollars you know meeting someone striking good conversation that turning into lunch another 45 dollars you know making a friend for a lifetime priceless there some things money just can't buy that friendship but for everything else there's mastercard so they they They stayed true to the truth, the human truth of money is not everything.

9:30And yet marketing was founded on that. One of the greatest campaigns of all time, one of the greatest programs of all time. Now, what happened in and this is the era where, you know, you are you're beginning to see a resurgence in the late, you know, or in the early 2010s with the advent of social media. now you could do the task of reaching the person you wanted to reach fairly easily. The economy was booming in a way where whatever you kind of threw at the wall stuck. So you didn't even have to be a good marketer. You were getting to people, people were consuming media, and they had the money to spend.

10:08So you were actually making a lot more money. So if you see, and this is no criticism because they're all of my friends, the people who kind of came up the ranks in the last decade, decade and a half are people who kind of, you know, were rung through that system. So they never got to truly practice the craft of true marketing, finding the truth of the people that completely changes behavior. It became execution. And it was about like, I mean, my media is fragmented. I got these five new platforms right now. I need to hire people who understand the technology to be able to put this out in these places.

10:44Oh, my God, it's fragmented. But it was never about the truth. They went after the fragmentation rather than figuring out, do I go after the person? And slowly, I mean, the relationship between the person and the brand is the weakest it's ever been, right? We've created more brands in the past five years than any other time in the history of the planet. So what will sustain now? And now you've added AI to the mix, which is going to create infinite creation. So all relationships are broken. we have forgotten how to talk to people and infinite generations gonna happen who's gonna win now the only people who are gonna win are going to are the people who know how to work with the wood who know the character of the wood who know when sun shines on that wood it expands a little bit so i need to create room in my chair for it to expand the parallel being unless and until you understand the core true human nature and how it's changing with culture, you cannot be an outstanding marketer.

11:47And that's why it's broken. Sorry, long answer. No, great, great answer. Because I do think there's kind of this, it feels very much that, you know, outside of all the other professions or disciplines that exist within a modern business, marketing is the function which is really tasked, especially, you know, post the 2000s, with the idea of constantly chasing novelty. And I think that is kind of, that's definitely fed into everything that you're saying there, like this disconnection from customer and culture, because we're constantly chasing the new tool that's going to give us the edge. And then maybe that'll give us incremental gains on the next campaign, right?

12:27But actually when you miss the wood from the trees, like you just, you know, or the forest from the trees rather, it's just, it's pointless to add a new tool into the mix. And I do think we're kind of in a very strange position because whenever we go out to the rest of the business and we say, here's what marketing's produced this week, it's this novelty thing, right? So that we've trained our colleagues and counterparts and the market in general to expect novelty from us. So if we don't engage with the latest tool, they think, hold on, are you doing your job correctly? And I think that makes it harder and harder for great campaigns like MasterCard's priceless campaign to come through.

13:09So yeah, just an interesting time for sure right now. And like I said, it's a reflection of culture, right? Where have we gone? Who were our heroes 20, 30, 40 years ago, 50 years ago? And who are our heroes now, right? If Love Island and the Kardashians, and again, no criticism to them, they are doing what they're doing. It is the large acceptance in mainstream culture of that idea, which wouldn't have been accepted 20, 30 years ago, is a reflection of where culture is at. And by the way, that could take you in two different places. Either you could keep feeding this beast, which is what we have chosen to do in marketing, in what we produce.

13:51Also internally, like we just want the next shiny object. You tell me that you can measure attention by tracking people's eyeballs. Great, I will have it. And I'm going to talk about it in my conferences and make it my new shiny tool, even though it doesn't do shit for me. Or we can have the other path. The other path is where we realize that maybe, yes, there is a popular aspect in culture that is consuming this. And yet maybe they're consuming it because they are not getting anything better. And they're just trying to feed themselves something while something, you know, while they wait for something more meaningful.

14:29And I take it upon myself to create that meaning for them, that truth that they crave. This is when, you know, you create some of the most spectacular things in the world. You create movies that break through in a way that independent movies don't. So we just basically have taken the easier path, which is like, let me take my dollars that come with this division and attack the shiny objects rather than actually let me dig deeper and figure out where I need to be to be able to relate to people because as difficult as the past five years have been to actually get to relate to people, the next five will be even harder.

15:07So that's where the investment needs to go. And if you are a CMO today and you're looking at this or you're listening to this episode and we're thinking about, okay, I know that I have to contend with everything from, you know, AI tracking to new CRM tools, all these different things. Like, how would I go about maintaining that consistent voice, which maybe my brand has built, and I want to maintain that voice in the market for the next decade, two decades? Yeah, I mean, think about it, like, the voice doesn't have to be same, its impact needs to be the same, right? Like how I'd like to raise my kids the way my parents raised me, but the language my parents used with me is not the language I'd use with my kids for sure, right?

15:53It's a different world, different environment, but I'd like the values that were inculcated to be the same, right? So it'll have to come in a new language. I think all the people who are stuck in the same words or the form get lost. They need to adapt to where the world is at. That said, the only way for us to adapt to where the world is at is actually understanding where the world is at. So if I were a CMO today, my number one task would be my closest group of advisors would be a group I'd call the human intelligence group, where I'm looking at all the signals I can potentially get from the world to build from ground up what human intelligence is.

16:35I don't know if you've, you know, how deep you are in the AI world. and how you've seen different things kind of come up. You know, of course, GPT-2 was a revolution where, you know, you looked at a string of words and was able to predict the next possible word. We didn't know that that would transform, you know, the legal profession or copywriting or any of those things. Increasingly, we have over-invested in LLMs to actually double down on LLMs doing work that they're actually not good at doing. and there's a huge group of people who were like the initial innovators you know jan lakoon if you've heard heard his name if not please look at his work uh remarkable work who essentially says that we will eventually hit a dead end if we keep doing things that way there are other forms of intelligence out there that we need to build upon to actually build a more intelligent ecosystem And while every marketer can't do what Jan Lekun did is get a billion dollars in seed money and build that, they do actually for however long that brand has existed, own data that can allow them to, one, look at the history of that relationship and understand who that person is.

17:54and they have selective listening tools to be able to do that. And unless and until they are bringing human intelligence into the fold, they are going to fail like none other because then their tools are nothing but commodities. What are you competing on? It's the same data set. And by the way, you can look at any kind of any AI or LLM in the world who's training like you first scraped the internet, right? You took the lowest hanging fruit and you trained a data set on that. Wonderful. Now, in the past two years, 30 to 40 percent of all of the Internet is created by a bunch of these LLMs. Now you're scraping that and training your models on that.

18:34Do you think you see progress when you actually go through that loop? You're not. You're going to hit a dead end. And so finding your moat is going to be finding proprietary data streams that other people don't have access to for you to then implement them within your ecosystem to add to the intelligence. So that would be our number one advice to any CMOs. Not sure how many are doing that. I know a couple. That is definitely music to my ears and not just because of confirmation bias that I have, but we've been working on a paper called the AI Marathon because there's two things that we really, really strongly believe.

19:13It actually comes out next week and it talks pretty much exactly to those two points you've just made there. One, that as marketers and as CMOs, we need to consider this revolution as like, yes, it's not just another shiny tool, but we're in this for the long term. This is an infrastructure point which will fundamentally change the way we do marketing for the good or for the bad, just depending on how we engage with it. So it is very much a marathon, not a sprint. And therefore, the way you frame your successes and your interactions with AI as a marketer need to be cognizant of that fact. and then the second piece is this this idea you mentioned of like you know if everyone has the same tools and access to everything then you know what differentiates it nothing really it all becomes the same and this is a big point that we make this idea of the three-layer model like our chief product officer costas who's building out all of this for us internally he's very very big on this idea that actually like first party data like is the most important thing of this ai generation.

20:15It's not about the tool or the interface or anything like that. It's really about what's the data warehouse and the data pipeline look like behind the tool. Because otherwise, you just have the same LLM that everyone else has, and you're not doing anything distinct or unique. Exactly. And the third point I'll add to that, I don't know if you can sneak that into your paper, but I'll add to it anyway, is the sanctity of the data. Like not all first party data is equal, right? When I was in 11th grade, taking my A levels in Singapore, I clearly remember this from my first physics lab. We had to, you know, this is the written part of the physics lab where they would be like, what is the difference between precision and accuracy?

21:03And I may have used this anecdote over a few thousand times because I can't believe what was taught to me in that physics lab in my 11th grade is something that such a part of me and while the world doesn't think about that way. Precision means, I mean, when you're, you know, in the physics lab, dropping something like this, and you're essentially measuring the time it takes for this to fall, knowing the height and knowing the formula, which is speed equals initial velocity times times plus half of acceleration due to gravity times times square. That's the formula. And then you reverse that calculation back into calculating that acceleration due to gravity, which is supposed to be 9.8 meters per second square.

21:50Now, you can get an answer that says 8.54321. You're getting an answer to the fifth decimal place. That's precision, but that's not accurate. It's the wrong freaking answer. You're far away from the actual answer of 9.8 meters per second square. That's one decimal point. But actually, you know, a 9.3 answer would be better than the four decimal points. And we think in the marketing world, we're blinded by this precision tools because, you know, we don't do enough work to actually figure out what it is. So not all first party data is equal and figuring out the very foundation of what you're building for tomorrow.

22:31The sanctity of that data is actually also a very key thing, which again, CMOs are completely overlooking. That's an incredible point, actually. Precision versus accuracy. I like that a lot because, yeah, we are spending a lot of time focusing on things which seem seem appropriate because they seem important. But actually, they're not at all. In that world, and just not even switching gears, but kind of on a segue to that, you know, discernment, creative taste, all these things are things which you mentioned, you know, pre 2010s, like most marketers were kind of forced to learn these things as part of their marketing, you know, career, early education, all those things.

23:14but if you're thinking about you're a marketing graduate you're coming into a team today you're not going to see the same experience you're not going to have the same interactions yes you might be able to output a lot more than what one of your counterparts would have been able to do 20 years ago but how would CMOs teach about think about teaching their younger junior team members like what marketing actually is when you know an AI tool can pretty much do a lot of their work for them? Yeah. I mean, I worry most about people coming into the workforce right now because the way knowledge graphs in organization or aging works is, and by the way, there's a couple of papers recently written about this, and I don't want to butcher them, but I will try to give you what the gist of it is.

24:06There are high entropy models. So that basically enable a certain kind of learning. So when we're children, I mean, you can simplify it with like neuroplasticity, you get a lot of information and you react to that information a lot of ways. You see patterns, you create knowledge blobs, but your memory is not strong. You're not really encoding that within your system. Your system hasn't learned. You're reacting to basically new information all the time, high entropy system. As we get older, we begin to codify that information and create like knowledge verticals. And then as we get older, we get more and more tied to those knowledge systems that we build.

24:47So any information that goes from close to those knowledge systems, we just basically filter it past through them. And we get a similar answer as we would have gotten 10 years ago from that system. And we don't really evolve from there because the memory is high, the entropy is low. When someone comes into a workplace, the tasks they're given are kind of menial tasks. Those are the tasks that can be most easily be automated. But nobody in the organization wants to do that. So you get these people to do that. In exchange, though, they're getting exposed to work, to the craft. And so as you're getting exposed to the craft over time, if you showcase the ability to grasp nuances from the craft and learn, you then basically become the person who has both the craft and the tools.

25:36And that's kind of how evolution in the workplace has happened. But if we completely replace that entry point of coming in and actually using the tools, you don't actually then get to practice the craft either. So how does a CMO teach a young person coming in taste? Well, unless they are willing to actually pay for their time, for them to sit there, and for them to actually still do, regardless of AI being able to do stuff, they're actually basically, we're going to have a generation where the 30-year-old is not going to know what to do in the way the previous generation 30-year-old used to know how to do.

26:14Now, we have to invest in this generation to do that. Otherwise, you can't. So in the neuro insight world, right, we look at the brain activity and how people respond. There's often things that are black and white, but then there's a layer of interpretation to it. But I can't teach the interpretation of that data to an ad unless the person has actually seen enough ads themselves. So every new analyst who starts a neuro insight is supposed to watch 10 ads every day for the first six months. So five days a week for six months, you're watching 10 ads a day just to actually create the creative bank in your head of the variety of execution styles that can happen in the world, the variety of stories that can be told in the world.

27:01And then, only then you are skilled to apply a layer of analysis on that neurodata for you to actually give something meaningful to the client. And is that, so 10 ads a day, are they the most famous ads of history or are they just kind of relevant ads? They're just going through the database and just basically getting the whole gamut, right? What is the word that you actually associate most with taste? You develop a taste. You don't make a taste. You don't just take a taste. You develop a taste. And the taste is developed over time. You can't take that away from it unless we change something about the human brain.

27:43It develops over time. how you dressed 10 years ago is different from how you dress today that's taste you developed over time and will be hopefully different 10 years from now because you know we hope to continue to grow but once you hit a certain age you stop doing that too and that's the danger we fall into and that's the danger organizations fall into yeah i think that's a that's a really good point there has to be this constant evolution and i think when we had um raja from mastercard actually friend of I know a mutual friend of the show and of yours, he mentioned this fact that actually he's investing a lot in just education of the team.

28:21Like every month having a different professor come in and do kind of open office hours with the whole team to talk about the latest developments in AI or how they should be thinking about engaging with their customers and culture and all those types of things. And I think obviously at MasterCard, having the budgets to do so is one thing, but actually just having the impetus to do that is something which we can all apply at all levels. We just need to figure out how to do it. Yeah, I think it's how you want to build culture. I think it's true that not just in marketing everywhere, the exchange has become more like you are exchanging time for money.

29:05Um, but like traditionally, like the idea of finding a guru, the idea of actually teaching people, not just this craft, but how to live the, um, I think the workplaces need to go back to actually, you know, to, to be building culture and investing in people that way. Because again, in a time where everything is transactional, the only people who will know how to win is when they actually get to the core of human behavior and get people and ensure longevity, which we're not doing. Yeah, definitely. And I want to ask you a quick question, actually, given the fact that I think AI, yes, it impacts everything from metrics to now creative as well.