Rory Sutherland on why luck beats logic in marketing

27:21But he absolutely went out on a limb for these Italian-made spoons. And what he noticed was that if he ever mentioned that ice cream stall anywhere, to anybody who'd ever been there, they all talked about the spoon. and in the same way there's a gym I know where they were quite shrewd which is it was a mid-priced gym to a low almost to a low priced gym but they always had I don't know you're probably a gym go and you have all those unguents and strange liquids they always had keels back in the day when keels was less well known but seen as very very premium and a few people asked them they said well you know you're a competitively priced gym why do you do this it's very simple every time we research our users, every single person mentions the keels.

28:12And so, you know, I mean, you know, I think that one of the problems you have is that those very, very potent things are the first thing that procurement or finance try and kill off. Because they go, it's not in our service level agreement. It's, you know, there's no record of anybody complaining about a hotel because it doesn't give you biscuits when you check in. So why on earth are we engaging in this discretionary expense? Because finance people have a kind of fantasy world which is just optimised around minimalist efficiency and as a result, they completely fail to understand human anthropology.

28:48Is it the Maynard Keynes quote, they know the cost of everything and the value of nothing? Oscar Wilde. Was it Oscar Wilde? Oscar Wilde, yeah. And of course there are these weird things, it's very similar actually, I was talking to Will about this, to the idea of Kano or Kano theory, the Japanese theory that all products have three attributes. So there are table stakes, which are effectively, you know, things where if you fail there, you're not even in the game. So that would be, for example, if you made a cassette deck and it constantly jammed or, you know, the sound quality was appalling, you know, you're out of the game.

29:27Then you have performance attributes, which are generally they scale linearly and then tail off, which is sound quality, battery life, volume, build quality, that kind of stuff. But then you have this third category of things. Now, bear in mind, Keno was at the University of Tokyo. He worked a lot with the Japanese consumer electronics industry. He called them delighters, or whatever the Japanese for delighters is. And that would be, to those of our age, the eject mechanism. In other words, you put a ludicrously disproportionate amount of effort into a gorgeous eject mechanism because although it has no real bearing on the functional attribute of the product itself, it disproportionately accounts for the person's affection for it.

30:13I argue there's this concept called reverse benchmarking. I was influenced in this by a Roger Martin piece called Benchmarking is for Losers. He argues that when you benchmark, you actually put enormous... He's very popular with people like sort of, you know, McKinsey, because you can do a really laborious benchmarking exercise. But you end up effectively competing on the expected. You become more and more alike to your competitors. You lose differentiation and distinctiveness. And he's absolutely right about this. My argument is you do reverse benchmarking, which is what Will Godara did, which is you find out what your competitors are doing badly and you basically double down on that.

30:51So he had the beer sommelier at a Michelin-starred restaurant. No one was expecting that. And I'd argue that that's what Steve Jobs did at Apple. I think that's probably what Dyson did to an extent. You take the things that all your competitors aren't doing well and you just do them brilliantly so that it gains so much attention and so much saliency that everything else you do, provided it's satisfactory to good, almost becomes completely secondary in their appraisal of what it is you do. I mean, I had a moment, you know, the Angel Hotel in Abergavenny, very simple thing, OK? It's a hotel in a Welsh market town.

31:34Check in, what's the latest I can have breakfast? And you're expecting the answer, aren't you? Nine, or since it's Saturday, it's 9.30. 9.30, yeah. You just go, well, 11, but basically as late as you like. You know, and so it's those things which actually go, oh, thank the fuck for that, you know. You know, I don't have that usual bit of... And I think it'd be very interesting for hotels and lots of service industries. I mean, actually, that's what Bucky's did with restrooms. You know, gas station restrooms were terrible. Everybody thought they were, you know, basically, you know, pretty ghastly.

32:11What they did is they didn't just have relatively clean restrooms, they made the things palatial, you know. and it's kind of the badge of pride of the whole. In fact, the entire business was basically built on that single act of differentiation. I almost wrote a book called Toilets of the World on a theory that you can judge any destination by the quality of the toilet. And you could literally have a toilet rating. Ah, Slavoj Zizek, the philosopher, has written a piece on this because he thinks you can tell a lot about the Germans from the inspection platform. Yeah. And I met the CEO of a big pub chain.

32:46and he said whenever he did a pub visit, he would go unannounced, and the first thing he'd do is go to toilets. He said, I could judge the kitchen on how clean the toilet was. So it's basically a fantastic heuristic. And interestingly, Rush, the hairdressing chain, they spend sort of 20 ,000 to 30 ,000 on their toilets, even though most people who get their hair cut don't use a toilet. And the argument is it's what you might call a delighter moment, because you're expecting the toilet to be dismal utilitarian, effectively a staff toilet, you know, with a mop leaning against the wall and a bucket and a few cleaning products stored, you know, in a pile.

33:26And instead you go in and it's kind of marble and gold. Yeah. And it's one of those moments which is... And I think... No, no, I mean, actually you also notice attention to design and things like... I always notice that in countries which have a really strong design aesthetic, if you go to Scandinavia, there is always a hook on the back of the door. You know, for you to hang your jacket or if you're, you know, I don't go into women's toilets generally, but I imagine you want to hang a bag because you don't want to put an expensive bag on a toilet floor. So there's a NatWest in Tunbridge Wells, which did the most brilliant thing.

34:02I only noticed it because I was there with my wife, really. But next to the cash machine, the indoor cash machine, they had a little handbag shelf. Now, when you think about it, retrieving, you know, a cash card, which we do less and less often because of contactless phone payment, retrieving a, you know, is slightly painful and awkward, but if you have a tiny little shelf, it probably cost them, you know, 100 quid to install the thing. But you immediately notice it because it's fundamentally a kind of empathy demonstrator. And actually, I suppose what it is, it's actually, what it is really is it's emblematic of your customer focus.

34:38It is. It says we're not a psychopathic business run exclusively for the shareholders. We actually spend some time trying to understand life from a consumer's point of view, not from an investor's point of view. Because businesses, I think we've created, the shareholder value movement has created businesses which are almost examples of institutional autism. In other words, I'm not suggesting that the people within individuals within the organisation are autistic. I'm suggesting that the way they interact and the way in which things are siloed and the way in which things are measured and the way in which things have to be quantified means that the behaviour of the business is effectively socially inept in a way or socially lacking in understanding of another person's perspective in some peculiar way.

35:31There are some times where it works in reverse. You gave this example earlier of Gales where actually inefficiency in how you deliver your service is sometimes a built-in feature. So I think they realise that if other passers-by, because bear in mind they have enormous windows, it wouldn't work if you didn't have the enormous windows, they see a queue and they infer that there's something highly desirable and some part of the queue in Gales is, to be honest, created in that they make you order your coffee right at the end and then you have to stand around waiting for it, which creates a kind of buffer in the system.

36:13That means, A, people spend longer staring at the bread. I mean, there may be some interesting finding that unless you've been looking at, you know, expensive sourdough for 40 seconds or more, you're less likely to buy. But it also creates the impression that this is a desired product and I'd better get there fast before it all goes. You know, worth queuing for. You know, it's a fairly common heuristic, well known in sort of Spanish nightclubs because you couldn't play this trick so well locally because people would get wise to it. But if you're running a nightclub in Benidorm, you basically artificially hold people outside and they queue for ages to get in and then when you finally let them pass the velvet rope, they just go and the place is half empty.

36:58And the entire thing is a kind of scam. This is true though. Like when you're on holiday and you're looking at restaurants, there'll be a restaurant that's absolutely packed and one that's completely empty. And rather than going the one that's empty, you make the assumption, which would be a nicer experience. There's an interesting theory there, which is that in some cases, that may emerge completely arbitrarily. So that both restaurants are empty, you come to sort of six o 'clock in the evening, and two or three people turn up, and they happen just to go to the restaurant on the right. And then you could literally have a kind of snowballing effect where of people who come along who are undecided, who have no prior preference, three people will go to the restaurant on the right to every one who goes to the restaurant on the left.

37:40And it could be completely arbitrary. So you might argue... Now, I have heard that Guinness pay people early on in the day, not necessarily in the UK, but in certain countries. Guinness is very interesting because if you see somebody else drinking Guinness, you're inordinately more likely to order a Guinness yourself. And I have heard the rumour that they employ people to stand around very prominently near the entrance around about opening time, very visibly drinking Guinness, on the grounds that then the knock-on effect, you know, effectively you create a flywheel effect, then after the first hour maybe that person can go somewhere else or go home or whatever they do.

38:21But there's this initial kind of decisive moment where effectively everything that follows on from there is a product of whether customers three, seven and nine order a Guinness or whether they don't. and I mean large parts of business success I think are often down to weirdly quite arbitrary what you might call feedback loops of this kind I think. I'm sure there are brands which have succeeded simply there's a company with which I do some work and I find them very interesting called Herdify and their whole approach is to look geographically at product sales so that you up-weight your advertising activity in places where there's already momentum.

39:09And it's obviously particularly applicable to anything which is visibly consumed. If you look at something like solar panel adoption, famously, once one person in your street has solar panels, everybody else becomes sort of 20 % to 30 % more likely to get them. And you could arguably use Herdify data in two completely opposite ways. You could say there are areas where we've completely failed to take off and we need to get some seed corn in there and just establish, you know, a little bit of normality, a little bit of visibility to this. And you can equally do it where, well, hold on, we've reached this sort of threshold here and actually one extra marketing push will effectively take us into the steepest part of the curve a bit earlier.

39:52And, you know, you could use it also negatively, which is, look, actually for the moment we've got a limited budget, there's no point in bothering in these 20 places. Electric car adoption, you'd probably see, would be pretty uneven geographically, for example, and some of that would just be these network effects. I think Red Bull did that famously, didn't they, when they launched. They went around nightclubs. They focused on nightclubs, and then they actually paid people to crush cans and leave them on the pavement just outside nightclubs. The overflowing bin phenomenon. Same logic. Of course, we draw inferences to the behaviour of other people.

40:27Completely rational thing to do. They are hacking that a bit. It's a bit naughty. But equally you could look at it another way and say in the consumer adoption of important new technologies let's take a technology which we all agree is quite important and useful, the washing machine or whatever it may be you do get this sigmoid curve which is people find it difficult to do something they haven't done before and they find it difficult to do something that nobody else around them is doing. Unless you're one of those people who's just willfully perverse or eccentric, most people, you know, their default mode in life is do what I've done before, do what everybody else does.

41:11And it's not a bad heuristic for avoiding catastrophe, certainly. And you can see why we've evolved that instinct. But it does mean that the adoption of new behaviours is painfully slow at first, which leads me to wonder, actually, what proportion of great ideas were abandoned too soon? Google Glass would be an example. Well, that's a great example. OK. Google Glass would be an example where I think because it requires quite a lot of behavioral change and it's visible and you've got to wear it on your head. I'm the sort of, to be honest, I'm the sort of awkward, cranky fucker who just go and do it anyway.

41:49And also we both have a superpower in that we're Welsh, so we don't really care what other people think. This is a bit true. What these Anglo-Saxon invading forces think of us is of no concern of us. But Welsh people are a bit, I would argue Welsh people are a bit less self-conscious actually about things like that. But nonetheless, it's going to be painful to do. And I would argue that a product like Google Glass really you have to realistically plan for a five-year wait before it makes it into the... I mean, mobile phones, for crying out loud, were... We all assume that they arrived instantaneously because we're looking at history backwards and concertina-ing it.

42:26No, no, no. There were years and years between the mobile phone becoming available, then affordable, then it reached a ceiling, and then they introduced pay-as-you-go. Because bear in mind, until they introduced pay-as-you-go, there was a sort of 30%, 40 % holdout of the population who weren't prepared to get a mobile phone contract. Yeah. They then got a pay-as-you-go phone, put it in the car glove compartment, and then discovered they were using it all the time. and, in fact, many of them ended up spending more on pay-as-you-go than they would have paid had they been on a contract, but they just didn't like the...

42:57they were commitment-phobes. And so the mobile phone, you know, television in the US was weirdly slow, slightly faster in the UK because the BBC kind of got it up to, you know, speed. You know, in other words, you already had the programming, as it were. But TV adoption in the US from the, what was it, 50s, I guess, if you actually look at it really really long period where it's it's almost being adopted in the air fryer now you know another example now here's an interesting thing so i think there are various things marketers need to teach the rest of the business world that we know and they don't and one of one of them is you know multi-channel that actually the same person at different times will buy you in one channel and won't buy you in another or vice versa and therefore you know that business of physical availability is crucial.

43:47What I think the finance people in a business do is they go, let's try and force all our customers to use the cheapest to serve channel, which is, I'm totally in favour of those screens where you order at McDonald's. I'm not in favour of getting rid of the person behind the counter, because they're different. You know, they're contextually different. You know, there are times... Also, is it really a restaurant if there isn't someone standing there looking at the tables? You know, what What are you? Are you a canteen? It's weird. I'm totally in favour of ticket machines at railway stations. I'm not in favour of closing down the ticket office because sometimes you don't know what ticket you need.

44:25And so I think that fact, that's one marketing lesson. The other marketing lesson I think everybody needs to learn is this business of the Bass Diffusion Curve, which is that adoption of... So I used to think that the bigger the idea you had, the less marketing it needed because obviously if it's a really big idea, it'll just sell itself. Then I realised it's the opposite, that the bigger the idea you have, the more behavioural change it requires, the more unusual it makes you seem by adopting it, and therefore the more marketing it needs. 100%. Because people need the psychological reassurance to get over all those initial hurdles.

45:00Now, a perfect example of that, you know, Penny Post, one of the most fantastic business ideas in the last 200 years, 1840 Rowland Hill, who suddenly works out, It's a mathematical insight in a way that whereas there had been single flat rate postal same day, next day services or same day services in London, he worked out that with the coming of the railways, you could get so many letters on a trunk route between, say, London and Edinburgh. that distance had become... Distance, price per letter per mile, had almost gone to zero. Because if you watch the film Nightmare with the Auden poem, I think there are quarter of a million letters on that train.

45:41So it's a sort of 400-mile journey, but actually, if you think about it, you know, the price per letter per mile is as close to zero as you can imagine because there are quarter of a million of the buggers. And he worked out, hold on, you can take this same-day principle which exists within London. You can extend it to the whole country. It then extended to the whole of the British Empire. That never made money, except Australia and New Zealand. You had to pay extra for those. But India, Canada, all of those, the whole of Africa, you had a penny post. And the interesting thing, of course, it lost money for the first few years because people weren't in the habit.

46:20They didn't know anybody 200 miles away and they weren't in the habit of writing to people 200 miles away because it would have cost a fortune. And so you had to wait three, four, five years before it hit break-even for the behaviour to catch up with the importance of the idea. And I think people think that good ideas are self-evident and therefore will be adopted immediately, and they go and look at the initial... I was hearing about a thing on a podcast, which is Cisco had invented a video conferencing for your TV. And the... No, I'm just trying to think of who it was. Was it Gary Hamill on a...

46:58No, the truth of the matter is, okay, the idea was it didn't succeed very quickly in the first year. Well, first of all, you've got to wait for somebody else to do it, right? Okay, so it's not an obvious sort of, hey, I'll just buy that and I'm all set. But actually what they needed to do was to maintain that product line, let it grow incrementally and, you know, and one hopes, you know, slightly exponentially, or geometrically at least, And wait for COVID. Well, exactly. They needed COVID. The use case said to come later. A very large part of life is staying in the game long enough to get lucky.

47:37100%. And if you're demanding instant returns, you're demanding a particular rate of growth and a very predictable rate of growth in line with city estimations, what you're doing there is you're destroying a completely different form of success, which is you hover around for ages and then something happens. You know, more people start travelling. You know, if you look at things like American Express, you know, I mean, for example, you know, the whole Penny Post was dependent on the railways to some extent. You know, things happen which suddenly change the whole game for everybody and you get lucky.

48:17And this is one of the most interesting sentences which suddenly I realise why a lot of businesses are being destroyed by excessive quantification, measurement, and also by excessive kind of internal regulation, an internal process, what you might call process consistency. So this guy, mathematician called, a brilliant guy called Stephen Wolfram, and I'm in this meeting with him. I'd never met him before, but I completely idolised the guy as, you know, recognised maths genius. And he said this thing which is really, really, sounds quite banal, but you suddenly realise it's critical. He said the reason evolution works in nature is because it actually has quite a loose fitness function.

49:04It basically says if you can stay alive long enough to reproduce and you can find an ecological niche of whatever kind in which you can meet those two criteria, then it doesn't matter whether you're a patch of moss or you're a shark, you get to stay in the game. and he argues that if you have a really narrowly, tightly defined fitness function, you don't get any of the biodiversity, the variation, the overall economic growth and just the overall variety that you get when you have loose fitness functions. And I would argue that you should give marketing a loose fitness function. In other words, you should say, you need to do, you know, we need...

49:46And actually, business objectives should be loose. So if you've got a call centre, you should say, actually as Greg does at Octopus, right? They're basically measured on customer satisfaction. They're rewarded on the number of people they look after and how well those people feel looked after. That's it. They don't have loads of call centre time, average call length, wait time, da-da-da-da. Those are total impositions by tragic nerds. And because those people impose all those stupid rules, all the innovation, variety, happenstance, lucky accidents, lucky discoveries, all the tacit skills, all the entrepreneurial urges of the people within that call centre unit get completely suppressed.

50:29If you give them a loose fitness function, which is make people really happy, and as many of them as you possibly can, then what you're unleashing is an enormous amount of not only human ingenuity and also intuitive judgement, which is valuable in itself, but you're also allowing people to get lucky. Which is, isn't it weird? I've just come up with this funny phrase and people who used to be pissed off, I used to say this and people were always pissed off and now I say this slightly different thing and people aren't pissed off. And actually then you can build a kind of intern, and then ideally what you'd do is you'd have frequent contact between the different groups where they'd share their best discoveries.

51:13And that's an evolutionary model of how a good call centre should work. You write for The Spectator and I discovered something today which I hadn't appreciated before, but The Spectator is the longest running weekly publication. Is it 10 ,000 editions there? It was during COVID actually because I remember I was actually on a bedroom floor reading these photocopies of 10 ,000. So it would have been about 2021 or 2020. They hit their, I think they were founded in 1828. I think I've got that right. And it's the oldest continuously published magazine in the English language. They sometimes claim in the world, but I think there might be something weirdly older, like in South America or something.

51:56And if you've got advertising, is that had advertising in it? Yeah, so it's had advertising in from the get-go, I'm pretty sure. And so they asked me to review sort of 10 ,000 issues worth, i.e. getting on for 200 years worth, of spectator advertising. and it was fascinating because it's still really interesting. Most of the content from 1850, or when they're having huge arguments about the Corn Laws or the Great Reform Bill, all of that stuff which we regard as important news, in effect, seems totally irrelevant and ridiculous, you know, in the light of 150 years later. But the advertising is still fresh.

52:40And you suddenly realise, of course, that base human, you know, what you might call all the noise around human activity, you know, the kind of thing that journalists regard as high-minded, wonderful, you know, tremendous journalism, is actually that's the chip paper, whereas the advertising, because it's focused on essentially eternal psychological truths that aren't going to change, every single advertisement is kind of interesting and you understand exactly what it's doing and it's really quite fresh and charming and pleasant to look at. And you see, by the way, also you see these recurring devices, you know, the advertisers, there are certain, you know, there are certain sort of narratives or certain strategies that worked pretty well in 1850 and work pretty well today.

53:32So I only got a cross-section. Obviously the whole section of the magazine would have required a... I was going to say, that would have kept you for the last five years. So I got a cross-section of interesting ads sent to me on enormous A3 photocopies, as I remember. But it was... I also think it's true that, in a weird kind of way, tabloid journalism is much better. So, in other words, there's information we really want and there's information we like to pretend to care about. And actually, advertising is quite... ..is, in a way, quite eternal because it does deal with the eternal human needs, verities, the need to be admired, the need to take care of your children, the need to do...

54:10Those things are all eternal motivations, whereas the other stuff is largely people showing off that they care about stuff. That's brilliant. Oh, Rory, that's amazing. Listen, thank you so much. As always, a complete blast. And I think for anyone watching, you've got a matching suit to this amazing sofa. Yes, I might be invisible on the furniture. Yeah, if you want to check this out on YouTube, go check it out because Rory and I have been probably the most relaxed, laid-back position ever to do an interview in. But listen, mate, thank you very much. Absolute joy. Pleasure. Anytime. I don't think we'll batch the last one in terms of Spotify.

54:46Well, I've got to say, we'll have to set a new target this year, top 30 in Spotify. But there are some really important questions about this, which is that marketing people are justifying themselves according to metrics laid down by finance, which is like fighting a duel where your opponent gets to choose the weapon. And that doesn't matter if it's the right maths. It isn't the right maths. But the worst thing we've done, and this is how I reverse engineered the fact that I got famous, if you like. What I suddenly realised is I had to talk to a load of people about what we did who weren't in advertising or marketing.

55:24And I realised you can't just show them 20 ads because if it's a procurement conference or a compliance conference or whatever, these people are never going to get to make an ad, so it's largely irrelevant to them. And so of necessity, not really intentionally, this is what I mean, that most of success isn't intentional, right? Totally. Of necessity, I stopped talking about what we did and started talking about how we think. And I suddenly realised, and I realised this even more when I wrote the book, that how we think has an audience and a market that's 150 times larger than the market for what we do.

56:01and we've all made a mistake because marketing people have defined themselves as marketing with a capital M which is a business function which is then associated with Marcoms and maybe with pricing and you know a little you know maybe staging a conference or exhibition it's kind of associated with things people do but capital M marketing is only about 5 % of small m marketing which is the understanding of business from a customer's point of view attached to the creative possibilities that emerge when you adopt that new viewpoint. That's it, really, okay? You know, in other words, marketing with a small m is actually a branch of phenomenology, which is around human perception and, you know, effectively, what we perceive and how we feel in response to it and that stuff, okay?

56:56Now, the market for understanding in that and the opportunities for improving the world through small m marketing, which isn't a function, it isn't defined by what it does, it's defined by how it thinks, that's an enormous market. And instead, we've all focused on what we do. But what we do is a fraction of the value of how we think. 100%. Well, that's a brilliant, brilliant place to end. Rory, thank you. It's a pleasure. Delighted. Absolutely happy. Thank you. Thank you very much for listening or watching Uncensored CMO. I hope you enjoyed that. If you did, please do hit the subscribe button wherever you get your podcast.

57:32If you're watching, hit subscribe there as well. I'd also love to get a review. Reviews make a big difference on other people discovering the show. So please do leave a review wherever you get your podcast. If you want to contact me, you can do. I'm over on x at Uncensored CMO or on LinkedIn where I'm under my own name, John Evans. Thanks for listening and watching. and I'll see you next time. Awesome. I think that's the fatal mistake, which we've allowed other people to define what we do. Yeah. And actually, it's not really... It shouldn't really... It's a tactic rather than a strategy. Yeah, yeah.