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The Diary of a CEOThe Diary of a CEO

The Marketing Secrets Apple & Tesla Always Use: Rory Sutherland | E165

Rory Sutherland is the author of Alchemy, a senior advertising executive, and the man who understands why some ideas connect with people and some ideas don’t. He’s a columnist, an innovator and a trailblazer in the world of marketing and advertising. 0:00 Intro 02:07 The concept of how we value things 18:56 Recursive Trends 23:42 The brain's marketing function: Signalling 34:43 technology making location irrelevant 41:07 making something bad to give it value 48:14 Scarcity of product 51:38 Personalisation 56:37 How to deliver a product to the world 01:02:59 Why business are focusing on the wrong thing 01:11:00 Personal branding 01:17:25 Why do you think you successful 01:33:43 The last guest question Rory: https://twitter.com/rorysutherland?s=20&t=4azefUUEPFOUa986gpwmeg Rory’s book: https://www.amazon.co.uk/Alchemy-Surprising-Power-Ideas-Sense/dp/0753556529 Listen on: Apple podcast - https://podcasts.apple.com/gb/podcast... Spotify - https://open.spotify.com/show/7iQXmUT... FOLLOW ► Instagram: https://www.instagram.com/steven/ Twitter: https://twitter.com/SteveBartlettSC Linkedin: https://www.linkedin.com/in/stevenbartlett-123 Sponsors: Huel - https://my.huel.com/Steven Crafted - https://bit.ly/3JKOPFx

Rory SutherlandguestSteven Bartletthost
Aug 1, 20221h 38mWatch on YouTube ↗

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  1. 0:00 – 2:07

    Intro

    1. RS

      I think the NHS could create massively greater patient satisfaction by deploying certain behaviors and techniques. Like what? Tsk, well ...

    2. SB

      Rory Sutherland, he is an author, columnist, and the vice-chairman of Ogilvy UK.

    3. RS

      One of the largest marketing companies in the world, he's an ad man. Stories of the PDF files of human information, they're the vehicle we use for storing information and the vehicle we use for sharing it. If you want to improve how people feel, psychology is a better area for exploration than rational improvement. Don't make the Eurostar faster, make the journey more enjoyable, and that's one of the cleverest reframings you can do. The Uber map is a psychological moonshot. What bothers us about waiting for a taxi isn't actually the duration, it's the degree of uncertainty. And if you have a map which shows you where the taxi is, you're basically relaxed. You can genuinely perform magic in perception. What is the seat covering for the Tesla? Mm. It's called vegan leather. (laughs) Now actually, to be honest, we would have called those plastic seats back in the day. If it makes things feel more valuable, is it a con?

    4. SB

      Without further ado, I'm Steven Bartlett, and this is The Diary of a CEO. I hope nobody's listening, but if you are, then please keep this to yourself. Rory, first of all, thank you for being here. As, uh, as someone who built a marketing business and has worked in a s- sort of similar industry, um, to you for a huge portion of my life, um, you're someone that I've always looked up to, and even young members of my team here cite you as being an inspiration on an ongoing basis for the work they're doing, just broadly on s- m- even of these new platforms like TikTok, because the principles and the psychology and the, the sort of rationality underneath much of your work is, is really, really timeless. Um, so thank you for being here. I want to-

    5. RS

      That's a great honor.

    6. SB

      Ah, no worries.

    7. RS

      And, um, uh, but we'll get into mutual fanvying later.

    8. SB

      (laughs) Okay, good.

    9. RS

      Um, but no, I mean, I, one of the great insights, I think, which I hope helps motivate everybody working in our industry and related industries,

  2. 2:07 – 18:56

    The concept of how we value things

    1. RS

      is that when you create perceptual value, you are creating value. Value can be created in the mind every bit as much as it can be created in the factory.

    2. SB

      Mm-hmm.

    3. RS

      And I think there was a, an unfortunate story about marketing that treated it as kind of optional extra. It was the fairy dust on top of the real intrinsic value that resided in a product or service.

    4. SB

      Mm-hmm.

    5. RS

      And I completely dispute that. I think we value things according not to what they are, but what they mean, and what they mean is context dependent. It can be, uh, massively transformed by storytelling, framing, re-contextualization, and you can absolutely use psychological, um, mechanisms to make things more valuable, more enjoyable, more precious. That's one important point. I might make the additional point, which is, to be honest, over-ambitious, but I make it anyway, which is that I actually perceive value as a very environmentally friendly form of value to create. Because you can generally create meaning and imbue a product with meaning, um, with a lot less carbon consumption-

    6. SB

      Oh, yeah, with action.

    7. RS

      ... than is necessarily involved in making the product three times bigger or five times faster. And, you know, m- my argument would also be if we're looking for breakthrough 10X moonshot improvements, it's actually much easier to find psychological moonshots than technological moonshots. You know, making a train ten times faster, you know, it was possible in 1840, 1820, okay?

    8. SB

      (laughs)

    9. RS

      Very difficult to do now, um, to a point of just dangerousness or, you know, e- extraordinarily difficult, uh, engineering problem. Making a train journey ten times more enjoyable, that's still doable, in my view.

    10. SB

      Give me an example then. What's the, the example that always comes to mind for you of where someone has managed to put tremendous moonshot-style value on something, j- a brand potentially, just with marketing and advertising?

    11. RS

      B- what I'm always very fond of is I think the Uber map is a psychological moonshot, and it's based... I mean, the, the, the story, which may or may not be true, is that one of the founders of Uber was inspired by watching Goldfinger, and when he saw Bond effectively following Goldfinger using a tracking device, there was a scrolling map in the dashboard of the DB4 which showed him where Goldfinger's car was so he could trail it while remaining out of sight. Um, uh, then, um, what was extraordinary about that was that it was based on a very clever insight into human psychology which most of us ourselves aren't really aware of, which is the, we would say, and we'd confidently say we believe, that I hate it when a taxi takes a long time to turn up. I like it when a taxi turns up quickly. So, a rational person or an engineer would react to that by saying, "What we need is a predictive algorithm so that taxis tend to be available in areas where we predict heavy demand so that we can service customers more quickly." And by the way, there's nothing wrong with that. It may be a very worthwhile thing to do, although it's worth saying that it requires quite a lot of scale in order to achieve that. But the real insight with the map is that deep down, you know, somewhere in the amygdala, what bothers us about waiting for a taxi isn't actually the duration. It's the degree of uncertainty. In other words, "Is he here yet? Maybe he's parked around the corner. Oh, what if he can't find the house? Maybe he's already left. Was the person on the phone lying?" And so wait- that period between booking a taxi and waiting for it to arrive was one of general high stress. Now, what's interesting is you could reduce that stress, I admit, by getting the taxi to turn up very quickly, or at least you'd reduce the period of stress, but the stress would still remain. On the other hand, if you have a map which shows you where the taxi is, you're basically relaxed, okay? Instead of going, "Oh, my God, you know, where is the, where is he? I'm sure, you know, maybe he's already left. I'd better go and stand out in the rain so he doesn't miss me or get impatient," you just look at the map and you go, "Oh, look, he's stuck at those traffic lights. I'll have another pint." Okay, now what's interesting is that the quantity of waiting is the same with or without a map-... you know, in pure quantitative measured SI unit terms of time and duration, no difference. The quality of the waiting is totally transformed.

    12. SB

      It's almost taking it from a- a system dependent on tr- on trust, how much you trust that particular firm, how have they performed in the past-

    13. RS

      Yeah.

    14. SB

      ... do they sometimes lie to me, have other taxi drivers sometimes lied to me, to a system that is almost completely trust-less, where I don't need to trust you because I can see for myself.

    15. RS

      And I suppose there's also an element of trust which, uh, okay, was provided historically in London by the knowledge. And the knowledge was an interesting thing because I- I occasionally debate this, which is, was the knowledge really about knowledge? In other words, we don't need black cab drivers to study to this level of detail. Now, we have the technology of the sat-nav.

    16. SB

      Yeah.

    17. RS

      And pure sort of utilitarian people go, "Why on earth am I paying a premium for a black cab driver to learn all this stuff, um, when he could simply buy a TomTom for 300 quid and stick it on the dashboard?" And there's some argument for that, okay? The only other point is that you have a very high degree of trust. One of the great things you could say about the knowledge is it's sunk cost. It's commit- it's proof of commitment. You're only going to actually go through that process if you're pretty serious about being a really good cab driver.

    18. SB

      Mm-hmm.

    19. RS

      Also, it provides you, if you think about it, if you've spent, what, a year and a half, two years scuttling around London on a moped with one of those clipboards, rehearsing for your sessions of the knowledge, okay? You'd be a bit of an idiot, uh, effectively losing your taxi license day one, wouldn't you?

    20. SB

      Mm-hmm.

    21. RS

      Okay? You know, it's f- you know, in other words, it is to some ex- it's rather like medieval guilds. They required extraordinary stringent conditions of entry into the guild, but that was what ensured honesty.

    22. SB

      Mm-hmm.

    23. RS

      Because, uh, the cost of being thrown out of the guild, given the effort you'd put into actually being admitted in the first place, was therefore made it not worthwhile to cheat.

    24. SB

      You, you also say something in, in your book about how making a process more difficult can sometimes make it more attractive to consumers. Do you-

    25. RS

      So, I mean, th- this is known sometimes as the IKEA effect, which is that, um, certainly, um, Kamprad, who's the kind of owner and founder of IKEA, believes that the fact that you assemble the furniture yourself contributes to its perceived value. In other words, you've committed something of yourself to its assembly and creation. You might also argue it destigmatizes low prices. Okay? So, I'll give you an example of that. There's a very big difference between cheap strawberries and pick your own strawberries. Now, pick your own strawberries are cheap, but there's a narrative as to why they're cheap, which is, "I put into some of the effort into the harvesting of the things and I have to go out into a field and pick the things myself." Cheap strawberries, by contrast, may create some degree of uncertainty because you look at the market and go, "Well, if these strawberries were really good, why wouldn't they charge full price for them? What's wrong with this?" And so quite often, uh, you know, sometimes you have to make things more expensive to make them trustworthy, oddly. Okay? You know, you can be too good to be true, that consumers won't necessarily trust something that's cheap unless there's a narrative around it as to where the cost savings are made. I mean, I think, I think a lot of low- if you think about low-cost airlines, okay? They spent quite a lot of effort talking about what you didn't get. You don't get a meal, okay? Uh, you have to pay to check in your luggage. Uh, you don't get - originally with easyJet, you didn't even get pre-allocated seating. Okay? It was, you know, effectively like a bus. Uh, you had to book online, you couldn't book through a travel agent. And those constraints, to some extent were there to make it believable to the consumer that there was a legitimate form of cost saving going on. Now, if you'd said, uh, if you'd launched easyJet and you'd said, "We're just as good as British Airways, well, but we're half the price," the untrusting consumer is gonna ask, "How are you doing this?" Okay? "Does it mean you're not servicing the engines or the pilots are all on day release from prison or something?" Right?

    26. SB

      (laughs) .

    27. RS

      You're gonna start having doubts. So interestingly, sometimes negative stories around a product can be used to offset the negatives which a consumer would tend to imagine. If IKEA had ready assembled furniture which wasn't sold in a warehouse, it was sold in a kind of posh Hill's style emporium, we'd think there was something a bit iffy going on. So, you know, a- a- and there's also the wonderful IKEA effect, which is the effort of actually going to an IKEA and navigating the maze makes it more or less impossible for you to go home empty-handed, you know? You have to buy some tea lights at the very minimum, just to validate your trip. Now, the, I suppose, the earliest manifestation of this, although it's sometimes called the IKEA effect, was a very famous marketing case study, um, for Betty Crocker cakes, where they had a cake mix where you just added water, p- put it in the oven, created a cake. And it didn't sell very well, and a psychologist came in and said, "There isn't enough effort involved in this to make it feel like cooking." And so they added the slogan, "Just add an egg." The addition of the egg, although it actually imposed a cost and a small degree of effort, suddenly made the product much more popular.

    28. SB

      Why?

    29. RS

      Now, the idea would be that now it was actually cooking. You were preparing something for your family. You weren't just cheating, perhaps. I mean, it's an interesting debate because we don't fully know that there's in- this wasn't tested to an absolutely robust level of academic, uh, certainty, uh, you know? Um, uh, but nonetheless, it's a very common an- it's a very popular anecdote within marketing that sometimes the counterintuitive... I think that's all you need to derive from it. Okay? All you need to derive from it in business decision-making is sometimes the counterintuitive approach might be better.

    30. SB

      ... and this, um, I was, uh, thinking then about these modern sort of meal delivery companies. So, you have, obviously, on one end, super convenience, you have Uber, Uber Eats-

  3. 18:56 – 23:42

    Recursive Trends

    1. RS

    2. SB

      The example that I ... that comes to mind for me, and it's also to do with a Quooker. I didn't call it a Quooker.

    3. RS

      Hmm.

    4. SB

      I just called it the tap, but ... Yeah, i- i- instant hot water and instant cold water, um, is music. And I ... A friend of mine told me the story of standing with the HMV, I think it's HMV CEO, looking out on the shop floor at all these people buying CDs.

    5. RS

      Hmm.

    6. SB

      And he said to him, "We'll always have a business because people love music." Now, what he got wrong is ... He was right that people love music-

    7. RS

      Yeah.

    8. SB

      ... but they don't love getting in their car, driving in the rain, and then getting a plastic c- uh, piece of plastic, which they ... can then get damaged very easily. They can only carry a few of them in driving it back to the house. People loved music and he only really found that out-

    9. RS

      But they didn't really like CDs.

    10. SB

      Yes.

    11. RS

      I, I mean, I might make a point, by the way-

    12. SB

      And it's conflated the two.

    13. RS

      ... that in terms of its ... I- if someone has a design sensibility, in terms of its proliferation-

    14. SB

      Hmm.

    15. RS

      ... the CD laughably named jewel case, the plastic hinge case-

    16. SB

      Yeah.

    17. RS

      ... in which the CD came was probably the nastiest single, you know, manufactured item.

    18. SB

      (laughs)

    19. RS

      In everything from environmental terms to just usability. You know, the fact that it opened with a horrible sort of s- cracking snap.

    20. SB

      Yeah.

    21. RS

      Now, what's interesting is that vinyl has made a resurgence, but I don't see any sign of a CD resurgence any more than I see-

    22. SB

      No. No.

    23. RS

      The- there are a few weird people who are back into cassettes, aren't there? They're, they're ... But, uh, I think that's fairly nichey.

    24. SB

      Yeah. I mean, not really.

    25. RS

      Yeah. I mean, that, that, that's kind of like lomography and photography. It's one of those sort of weird countercultures. But, but, but I can understand ... I can just about understand. It, it's slightly weird when my daughter asks for a, uh, a gramophone player for her birthday, because I'm kind of going, "I s- you know, I was born in 1965. I spent my whole life trying to get rid of the nuisance of physical music to, you know, effectively something akin to Spotify. And now you're weirdly reverting to this thing." You know, it made no sense to me. Um, possibly there's an element that if you're really devoted to a particular band, you want to spend money and signal your devotion in some physical form. I don't know what's going on there fully.

    26. SB

      I, I think ... Is that not just a case of, like, scarcity?

    27. RS

      Yeah. I th- I s- I s-

    28. SB

      You know what I mean?

    29. RS

      Uh, well, I suspect one of the c- one of the curses of capitalism is that ... is recursive fashion.

    30. SB

      Exactly, yeah.

  4. 23:42 – 34:43

    The brain's marketing function: Signalling

    1. RS

      the term for this is sometimes counter-signaling. It was a bit like, um, hipsters drinking Pabst Blue Ribbon. Ribbon, I think it's called. Uh, which is a ... It, it was historically downmarket, blue-collar American beer.

    2. SB

      Right, okay.

    3. RS

      Okay? It was downmarket of kind of Budweiser and the other ... You know, and Coors and so forth. And this is a really interesting thing in human behavior. Sometimes in marketing is- itself, but also in how humans market themselves. 'Cause I think, I think one of the conclusions we've got to come to, and we have to admit, and which the better understanding of will be, I think, central to understanding, um, how we solve things like the environmental crisis and indeed overconsumption, is that the human brain itself has quite a large marketing function.You know, it has an accounting function. It cares about the efficient use of resources. It has, you know, all kinds of kind of algorithms and heuristics that are kind of, in many cases, innate and built in. But it also has a marketing function. It very much cares about, uh, image and status. Effectively, what something you do means to other people. Now, one thing that is common to lots of animals is signaling. You know, the most common example is the peacock's tail, elk's antlers, things you do, often costly things you do, to demonstrate that you can do them.

    4. SB

      Ferraris.

    5. RS

      Okay? Um, and you know, in many c- Ferraris, in London, of course.

    6. SB

      Yeah.

    7. RS

      You know, I mean, the extraordinary thing, when you think about it, is having a Ferrari in central London is about as deranged a car choice as you can imagine.

    8. SB

      (laughs)

    9. RS

      Okay? But the very fact that it's impractical and ludicrous is almost what gives it meaning, okay? As I said, you know, if the, um... This is a very mischievous sentence. But if people were attracted to people who drove expensive vehicles, okay, then they'd find lorry drivers more attractive than Ferrari owners in many cases.

    10. SB

      (laughs)

    11. RS

      Because the truck is actually more expensive as a vehicle, or a really luxury motor coach. But the motor coach actually has a practical function which diminishes its signaling value, because if you want to show that you really have resources to spare, nothing beats waste, indiscriminate waste.

    12. SB

      Yeah, yeah, yeah.

    13. RS

      Shows that you really have resources to spare, you know? Or you pursue things that are disproportionately scarce. The really interesting thing with humans, though, and I don't think there's a case where animals do this, is they also practice something called counter-signaling, which is showing that you don't have to try because you're confident enough in your other attributes, okay? So, an example of that would be in academia, a, an, a s- a professor who's aspiring to get a, let's say, a named professorship or tenure will go around in a suit, okay? A tenured professor who has job security for life will go around dressed like a tramp, you know? If you've won a Nobel Prize, my hunch is-

    14. SB

      Mm-hmm.

    15. RS

      ... once you've won a Nobel Prize... I think famously George Stiglitz used to actually turn up at the World Bank with no shoes on, okay? Now interestingly, you do that, it's a bit like that old joke, why do dogs lick their own balls? Because they can, okay? And to some extent, people do what they can get away with. So, you know, the, the classic example is, you know, people who play in very fashionable bands can afford to be extraordinarily scruffy, because what effectively Liam and Noel are saying is that our presence in this band renders us so unbelievably cool and sexy that we don't even have to make an effort on the sartorial front.

    16. SB

      I've seen this in my own life. It's funny-

    17. RS

      Yeah.

    18. SB

      ... f- just through the journey of my career in the last 10 years. The example I'd give is, in my early career, speaking on stage, I would try and dress really smart and wear a suit. Now-

    19. RS

      Yeah.

    20. SB

      ... I think it's much better that I present myself in the tracksuit bottom, in the tracksuit that I would wear, like, going around the house when I speak on stage, A, because it's more akin to who I am, B, because I can-

    21. RS

      Yeah.

    22. SB

      ... and C, I think the psychological thing that I'm not admitting, because it might make me seem like an arsehole, is it's actually more of a sta-status play to not wear a suit and to not show off. And, uh, the same applies for Louis Vuitton. Like, early part of my c- first five years of my career when I was just about getting some money, I'd buy these designer brands-

    23. RS

      Yeah.

    24. SB

      ... like Louis Vuitton. Now, I genuinely think if I hold a Louis Vuitton bag- bag, it makes me look bad. So, I- I've- I've like, rid myself, and when I walk into somewhere I say to my manager, 'cause I've just got the one left that hasn't managed to break yet, I say, "Can you hold that?" Because I don't want-

    25. RS

      Yeah.

    26. SB

      ... to be associated with that level of signaling, if that makes sense, I guess?

    27. RS

      No, and, uh, the argument is that you no... You- you're famous enough now that you no longer need fashion brands, um, uh, to accord... You know, e- in, in fact, the very fact that you are trying, um, uh, given your fame, to actually, uh, signal your success through fashion would probably be counterproductive. It would suggest-

    28. SB

      Yeah.

    29. RS

      ... you were insecure or trying too hard.

    30. SB

      Yeah. Yeah.

  5. 34:43 – 41:07

    technology making location irrelevant

    1. RS

      flexible working, which is- Yeah, that's what I wanted to talk about, is- Yeah, yeah, but, but it was interesting, it was interesting that given the fact that the whole promise of the internet really, I mean, th- uh, I think this is in a Douglas Coupland book called Microserfs, where one of the geeks who features in this Douglas Coupland book, it was written in the '90s, I think, but he makes a very interesting comment, which is the whole purpose of what you might call Silicon Valley technology is to make location irrelevant. In other words, it's to make where you are irrelevant to the performance of a particular function. And by the way, there are negatives to that. There were great positives in my childhood to the fact that what you could do was constrained by where you were. So, when you left the office, you couldn't meaningfully work, okay, 'cause your computer was on a desk. Mm. You photocopied in the photocopier room, you met in the meeting room, you, you know, you, uh, you, you wrote things at a ty- at- at a keyboard. Where you were determined what you were doing, and so a certain focus arose from that which I think has been destroyed by the mobile phone to some degree, which technically lets you do anything from anywhere. I find myself on holiday on day three worrying about what I'm gonna order from Ocado when I get home. And I go, "Actually, you shouldn't be doing this." Another thing it probably does, by the way, is it encourages us to over-plan, and I- I'm a big believer, and I- I, I booked a holiday, um, in July and August, and I'm trying to say to my family, "No, no, we're gonna land in Chicago, we're gonna leave from New York." What we do in between those dates, we're gonna leave open until the very last moment. The, the other great problem the internet allows you to do, I think, with your holiday is to plan it down to a kind of granular level of detail, which is actually inimical to having a good time. You know, a good time often requires spontaneity, and, you know, my, my wife and I discovered New Mexico (laughs) ... in this whole American sta- we knew it existed, okay? But we discovered New Mexico more or less by accident. We were on a driving holiday, and we got stuck in El Paso and needed to get somewhere else, so we said, "Well, let's try this, you know, this Los Alamos, I've heard about that," right? Okay, fairly famous, okay? "Let's go and have a deco." Absolutely gorgeous state, and we've been that back five times. We discovered it effectively through serendipity. So, there are downsides to this, you can do anything from anywhere, but it is a bit weird that, you know, trillions of dollars invested in the capacity to ob- to obtain effects remotely-... hadn't made a dent in the commute at all. Now, I'm, by the way, I'm totally open to people who say entirely f- you know, uh, o- okay, Airbnb has gone, uh, effectively remote forever, fully remote forever. Now bear in mind-

    2. SB

      As a, as a company working company.

    3. RS

      As a company.

    4. SB

      Yeah.

    5. RS

      The entire company is, uh, is going to be 100% remote working. Now, there are two interesting things going on there, one of which is if you're Airbnb and your slogan is, "Be at home anywhere," (laughs) okay?

    6. SB

      Mm-hmm.

    7. RS

      It's, it's a bit countercultural to demand that people, "Why weren't you at your desk?" Okay?

    8. SB

      Right.

    9. RS

      There may be an element of Henry Ford to it. You know that Henry Ford partly created, slightly apocryphal, but not entirely, created a two-day weekend for his own workers because he thought if it actually spread, then it'd be worth people buying cars.

    10. SB

      Hm.

    11. RS

      If he could increase the salary and, for factory work and give people two days of guaranteed leisure, then you had people who could both afford and make use of a car. And with Airbnb, if you think about it, uh, they stand to be fairly major beneficiaries of working from anywhere.

    12. SB

      Oh, yeah, yeah, yeah.

    13. RS

      So doing it with their own staff, there was a rumor, I'm not sure it's true, so for God's sake-

    14. SB

      At least by the pandemic.

    15. RS

      ... don't sue me on this, th- though there was a famous rumor that Unilever created, uh, dress-down Fridays, okay? And that th- I, I, to be honest, I think it's a conspiracy theory. I don't think this happened. If it did, all credit to them. And the idea was if we could create a social norm where people went into work in chinos and, you know, sweatshirts on a Friday, uh, we get one extra day of laundry because you dry-clean a suit, but you launder a, uh, uh, uh, chinos, or you launder, um, you know, polo shirt. Well, you launder ordinary white shirts, but you launder cotton jackets and, you know, casual clothes. So the argument was it was actually a laundry maximization ploy by either P&G or Unilever. Not sure that's true. It would be very clever if it were. But Henry Ford undoubtedly did write about this, that creating leisure was part of his strategy for selling cars. Now, that's interesting because most businesses nowadays don't have that vision to say, "Actually, we don't necessarily have to optimize what we do for imagined static human economic behavior. We can actually change the way people behave. We can change what things mean. We can change whether something feels cheap or expensive. We can make Fila a really cool brand."

    16. SB

      Mm.

    17. RS

      You know? Th- and this is why I, you know, I wrote the book Alchemy partly saying we have a kind of culture in business, particularly in the finance function of business, which doesn't, which refuses to believe in magic. Now, I'm not saying magic is easy or that everybody can do it all the time. Um, it's certainly not that easy. But you shouldn't discount it because there are vegan leather, the Uber map. There are magical solutions out there.

    18. SB

      I had a few words to say about one of my sponsors on this podcast.

    19. RS

      What's this one? Huel.

    20. SB

      That's Huel. It's-

    21. RS

      So do I need to mix it with water, or do I-

    22. SB

      No, just drink it. It's, um... No, no, no, no, no, no, no, you wouldn't put it in the water.

    23. RS

      Don't put it in the water.

    24. SB

      Yeah (laughs) .

    25. NA

      Get a glass.

    26. SB

      We'll give you a separate glass if you want. It is a nutritionally complete-

    27. RS

      It's a meal and a drink, effectively.

    28. SB

      Yes.

    29. RS

      Oh, fantastic.

    30. SB

      This is a, this is an interesting brand, actually, for many of the reasons we've been talking about. So this is the, last year, the fastest-growing e-commerce company internationally. And think about what, what, what they're doing. So Huel are nutritionally complete, convenience. Um, it's basically, uh, I think the N-

  6. 41:07 – 48:14

    making something bad to give it value

    1. RS

      psychology, you can actually, uh, you know, there's Dyson, and there's the Henry.

    2. SB

      Mm.

    3. RS

      You know, they're both strong vacuum cleaner brands in entirely different, um, uh, directions, if you like.

    4. SB

      Mm.

    5. RS

      And th- the point I'm making is that I think that high school maths encourages us to believe that there's a single optimal answer, uh, which comes from resolving a trade-off.

    6. SB

      Chuck me one of those grenade bars.

    7. RS

      And, and economics, economics always assumes trade-offs.

    8. SB

      I wanna show you this grenade bar. It's in the drawer down there.

    9. RS

      Mm.

    10. NA

      Yeah, there's these ones.

    11. SB

      So this is, this shows how what you're saying about that th- the opposites can be two good ideas-

    12. RS

      Mm.

    13. SB

      ... because this company, run by another one of my friends, both these companies run by my friends, has taken the complete opposite approach. They are a pro- a protein bar, right?

    14. RS

      Yeah, I've bought them actually. Yeah.

    15. SB

      Tastes amazing.

    16. RS

      Yeah.

    17. SB

      Tastes as good as a chocolate bar. And I'm, I'm gonna probably tell a lie here, but I believe they are the fastest-growing chocolate bar or the most-bought chocolate bar in the UK. Now, they are a protein bar, and they focus entirely on taste. And they've just sold to Mondelēz, I think, for s- well, I know for several hundred millions, so the founder's very, very wealthy now.

    18. RS

      Good grief.

    19. SB

      Good friend of mine, right? They went for taste, and they won. These have gone for m- much the opposite, which is really, really focused on being nutritionally complete and healthy. And I've sat in the boardroom-

    20. RS

      Uh, and it's not repellent.

    21. SB

      It's not. It's re-

    22. RS

      It's absolutely not.

    23. SB

      It's, it's nice. It's nice.

    24. RS

      It's quite, quite the opposite. I would drink this perfectly contently.

    25. SB

      But you, it, it tastes good enough for you to trust it.

    26. RS

      Mm.

    27. SB

      If it tasted even better, I would stop trusting it. And having sat in the room with the CEO and the founder, we, they brought in these bars that tasted like this, what tasted good.

    28. RS

      Yeah.

    29. SB

      And there was a small compromise to the nutritionally complete, um, um, part in these new bars. And the founder and the s- the managing director said, "No, we'd rather have bars that taste worse and protect that nutritionally complete, um, sort of philosophy than to have it taste really good."

    30. RS

      Well, and, and an interesting, an interesting piece of psychology is that Diet Coke has to taste slightly more bitter than standard Coke-

  7. 48:14 – 51:38

    Scarcity of product

    1. RS

      because you could serve Michelin-starred food in a restaurant that smelled of wee and nobody would enjoy their meal even though the food was objectively superb. Um, I think the worst thing you can do in, in, in both environmental terms and in business terms is to create underappreciated value, is to go to the effort-

    2. SB

      Hmmm ...

    3. RS

      ... of manufacturing something without actually working out how to m- allow people to realize how great it is.

    4. SB

      Scarcity and packaging. Um, one of the things that I'm quite ... I, I saw one of my favorite brands the other day do a trip around their warehouse showing the warehouse. And on one hand, I loved seeing the warehouse, I loved seeing the craftsmanship that goes into it. And then they panned across to this big rail, and I saw the item that I buy, and I saw like a mid- like thousands of them.

    5. RS

      Yes.

    6. SB

      And I remember thinking, "Oh, fuck."

    7. RS

      Mm-hmm.

    8. SB

      And I, and it made me reflect on what Apple do by just laying out like one of the products on the shop floor, and how much m- how much more that makes me think there's tremendous value because I just see one iPad and one phone and one watch.

    9. RS

      There is a kind of genius to that wh- yeah. Uh, they will ... the ancillary products, they will show in some sort of bulk, won't they?

    10. SB

      Yeah.

    11. RS

      If you're buying mouse mats or something, they don't mind having ten of those. But the mainstream products, there is one of them, and the rest of them are kept out of sight.

    12. SB

      Yeah.

    13. RS

      Which is very interesting.

    14. SB

      ... brands don't do that enough, I don't think.

    15. RS

      Th- there is also an interesting question about the tour of the warehouse, which is, you know, how much do you want to let people in on the reality? (laughs)

    16. SB

      On the, yeah, 'cause it can be, like, it can kill the magic to a, to a certain point, depending on what's going on in that warehouse. It all depends. I, I went out and when we were working with La Perla, the famous Italian-

    17. RS

      Of course, yeah.

    18. SB

      ... you know, lingerie brand, and I flew out to the, they were a client of us. I flew out to Italy to their warehouses and I, I s- I read the story of golden scissors, the original founder who would make all of the lingerie with her hands and golden scissors. And I saw these women who all have a, another woman standing over their shoulders ensuring perfection in the garments. And my biggest thing to the, the CEO of La Perla at the time was like, "Oh my God. You've never told the story-"

    19. RS

      No.

    20. SB

      "... of golden figures? You've never filmed this process? You're now just competing on the High Street against, um, these sort of cheaper lingerie brands," who were selling at 30 pounds. "You're selling at 150 and no one knows why?"

    21. RS

      No.

    22. SB

      'Cause you just haven't told, you've not sort of, it's what you said about-

    23. RS

      Because by and large lingerie is a fairly unsubstantial product.

    24. SB

      No one sees it.

    25. RS

      So it's not as if you're getting-

    26. SB

      This is the- (laughs)

    27. RS

      No, no, so no one sees the craftsmanship. I had no awareness of that either.

    28. SB

      There you go and isn't that... And, and I tell you what happened to La Perla. They went bust. And it, and, and when I got, when I seen in Italy just the unbelievable, the fact that all of the people hand-sewed-

    29. RS

      They never told that story.

    30. SB

      They never told the story.

  8. 51:38 – 56:37

    Personalisation

    1. SB

      sauce, which I've just made in a factory, and I called it, I don't know, La Labelle's-

    2. RS

      Yeah.

    3. SB

      ... you immediately think of a family history that must've been attached to that product. And, and years and years of iteration from this family and it was so good that people now buy it en masse in Tesco. And I think that's, that for me is such an interesting example where just by calling it after someone who sounds Italian-

    4. RS

      Yeah.

    5. SB

      ... implants this whole va- you, you know, this, this story of-

    6. RS

      (laughs)

    7. SB

      ... heritage. What do you think about personalization? And when I say personalization, I really mean the s- the surface level of personalization of tickling someone's ego by... You know, I, I always talk about Starbucks. Them just writing your name on the side of a cup or this Share a Coke campaign where they put your name on a can of coke-

    8. RS

      That was us actually.

    9. SB

      Was that? Oh, wow.

    10. RS

      That was Ogilvy in Australia who instigated that brilliant idea. But, um, um, it's v- a very interesting thing personalization because it's one of those things you have to be very judicious about. You know, it can be spooky, okay?

    11. SB

      Mm-hmm.

    12. RS

      And, you know, there are companies that get it worryingly wrong, uh, by essentially, uh, playing back to people things that they shouldn't know or didn't need to know.

    13. SB

      Oh, yeah. I've had that. I've had that.

    14. RS

      And so it's often one of those things which I think is interesting 'cause it's best done obliquely.

    15. SB

      Spooky example, if you will.

    16. RS

      So if you know something about someone, in a personalized letter you say, uh, you know, uh, "You may be the kind of person who recently did this."

    17. SB

      Mm-hmm.

    18. RS

      Rather than saying, "You did this." And it can, it can be spooky and it's one of those very interesting things where knowing how to play it, uh, is, um, uh, really, really critical.

    19. SB

      I'm gonna give you an example where I think someone played it wrong 'cause I was thinking about-

    20. RS

      Go on, yeah.

    21. SB

      So one of the... This is maybe slightly different, but, um, I went, I s- I registered for a gym i- on the other side of the world. I won't say the country 'cause they might listen. On the other side of the world, right? And 30 or 40 minutes after registering for the gym, I got an email from the CEO saying, "Hi, Steve. I've just seen you've registered for our gym. Um, if there's anything I can do while, while you're in town, please let me know." Blah, blah, blah, blah, blah. Now on one hand, people might think that's, that's great and that's lovely of them to do, but I don't know how that individual got my details. So I gave it to an iPad on the front desk to a nice Indonesian lady.

    22. RS

      Right.

    23. SB

      And then the CEO, who's an, a British person, has clearly... What else did they see of my details? Did they see my, my password? Did they see my bank details? Like, so it just kind of, it, it hurt me, it, it would ca- I was a bit shook by it. I was like, "How in 35 minutes since I put that details into the iPad has the CEO in the UK emailed me?" Emailed not just... Has emailed my manager? And then I'll give you a good example, which is I flew to India. I got to a, a hotel in India and as I went into the room, they had a chocolate Taj Mahal and they had my company logo, Social Chain, in a small rice paper sticker on the, the, the thing. And I thought that, that made me feel special.

    24. RS

      Yeah.

    25. SB

      One of them made me feel like they'd invaded my privacy a little bit and the other one had made me feel really special. And I took my phone out and I do loads of Instagrams about this hotel and this Taj Mahal rice paper sticker that cost $2. So you're right. There is a fine line there.

    26. RS

      And you can... (sighs) I mean, it's very interesting 'cause there's a- you've also got to be very, very alert to cultural differences. So the Germans have a paranoia about data protection and privacy, uh, which is an order of magnitude greater than that you find in, say, the US.

    27. SB

      Mm-hmm.

    28. RS

      Where I think most people in the US kind of have the mentality that the horse has already bolted.

    29. SB

      Mm-hmm.

    30. RS

      It's too late. Everybody-

  9. 56:37 – 1:02:59

    How to deliver a product to the world

    1. RS

      about their postman going around and gossiping about them, because in a place like London, there's a level of a- anonymity. If you live in a small country village, totally different matter, 'cause the postman drinks at the same pub as your friends.

    2. SB

      Oh, yeah. Of course.

    3. RS

      And that's one of those cases where no- nobody working on the thing had had any consideration, because Londoners wouldn't be bothered by that. Equally, I suppose someone who shares a doormat with five other people might be bothered by that.

    4. SB

      Let me give you, let me g- I wanna get some rules, um, some advice from you then. So, I'm, I'm launching a, uh, a, a brand soon, and it's an apparel brand, and we've been working very hard on it over the last year or so. Maybe a bit too hard on it. When, when it comes to delivering that apparel brand to the world and making it, um, it's actually an extension of this podcast, so it's called DOAC, Diary of a CEO. Um, what advice would you give me as it relates to delivering that product to the world to make sure that it is inherently valuable and that people, you know...

    5. RS

      Uh, one, one piece of advice in any form of, uh, e-tail. Two, two forms of advice, actually. Uh, the two mist- And by the way, I think marketers spend too much time focusing on the addition of positives when a lot of time needs to be spent on the removal of negatives. Uh, one thing is, answer the phone (laughs) , okay? And do not hide your phone number.

    6. SB

      Mm-hmm.

    7. RS

      I, I find that... So, what seems to happen in most e-commerce is you have what you might call the sales area, which is everything that happens up to and including a point of purchase. And everything there is glorious and attractive and, you know, and slick, okay? Assuming, by the way, you don't have a weird question to ask. Um, but I would argue, one, um, what then happens is if something goes wrong with your experience, either the delivery of the experience or you need to cancel something, as soon as you deviate from that very narrowly preconceived sort of purchase funnel, you enter a world of pain, okay? And the two things which are, I think, grossly underes- underinvested in, uh, in terms of e-commerce are, one, giving... What, what tends to happen is once, once the marketing job is done because the person has clicked buy-

    8. SB

      Mm-hmm.

    9. RS

      ... the responsibility for that customer is now handed over to people whose metrics are anything but customer satisfaction, their cost reduction. How can we make sure that nobody phones us up? How can we make sure that every phone call is as brief as is feasibly possible? And how can we minimize the cost of delivery and distribution?

    10. SB

      Mm-hmm.

    11. RS

      Now, one of the things I think is a grotesque mistake that most e-commerce providers make, not all of them, but many, is not offering you a choice of delivery couriers, for example, okay? Now, I know why they do that. They want to put everything through one delivery courier so they can maximize their rebate th- through volume.

    12. SB

      Economies of scale.

    13. RS

      Economies of scale. Actually, I think, I, you know, I think many me- two, two problems happen there. One, if you don't get to choose how your item is delivered, if anything goes wrong, you blame the company, you don't blame the delivery company or yourself.

    14. SB

      Mm-hmm.

    15. RS

      If I'd chosen to have it delivered by Royal Mail and it went missing, I blame Royal Mail.

    16. SB

      Mm-hmm.

    17. RS

      If they insist that I have it delivered by, you know, without singling out UPS, DPD, whatever, and it goes wrong, I blame them.

    18. SB

      Mm-hmm.

    19. RS

      Um, secondly though, people have various preferences, y- you know. Uh, your liking for Evri, used to be called, um, uh, Hermes, okay, varies enormously depending on which postcode district you're in, 'cause if you have a very good local driver, it's incredibly good. And if your local driver's off sick, it's a disaster-

    20. SB

      (laughs)

    21. RS

      ... in some cases, okay? Um, and by not res- not respecting the p- the fact that the person is paying for the delivery should choose who delivers it-

    22. SB

      Yeah.

    23. RS

      ... strikes me as a fundamental failing. The business of hiding the phone number so that anybody who has a problem is effectively treated like a second-class citizen. So you have this very characteristic thing which I think is a problem with e-commerce, which is when it goes well, it's miraculously good, okay? But the second anything out of the ordinary happens, you enter a world of pain, you know. Um, and I think that is, that's a fundamental failing.

    24. SB

      This is a c- customer service point, the importance of customer service, right?

    25. RS

      A few people, I mean, Selfridges, uh, Selfridges do it pretty well, okay? Um, other things I'd do is I would offer a kind of Amazon Prime equivalent, where if you pay a few pounds for delivery, you'll get free delivery for a year. That seems to be a f- you know, a fairly obvious and brilliant idea, because why should loyal customers pay, you know, inordinately more for, you know-

    26. SB

      Mm-hmm.

    27. RS

      ... delivery than one-off customers do? Um, I think, you know, I, I think you can make an effort around how the thing is delivered and packaged and presented, which some people do well and some people don't bother to do at all.

    28. SB

      What do you think the secret is there to doing a good job with packaging and packaging?

    29. RS

      Um, possibly there's a little bit of costly signaling involved. I mean, if you order something from Selfridges, um, the, uh, inside of the box is actually yellow with the Selfridges logo on a kind of shiny backdrop, and there's a little bit of tissue paper.

    30. SB

      ... hmm.

  10. 1:02:59 – 1:11:00

    Why business are focusing on the wrong thing

    1. SB

      and there's this big movie that I'm releasing with every single item to explain the meaning of the piece. And then we've put a lot of effort into the packaging ex- the bo- unboxing experience. So it is limited. It'll honestly probably sell out in the first day. And, um, I don't even think we're gonna make money from it, but that's not really why I do it. It's more because I just love the, I love the process. But, um, on the-

    2. RS

      You probably will, you probably will make money. I mean, I, uh, merch is, um...

    3. SB

      I'm just really not bothered by making money from it. It's not the thing in my life I d- it's the same with the tour. Like, I spent every penny I could on, on the bloody tour because it wasn't really why I was doing it. There's probably more of a bra- a wider brand play-

    4. RS

      Yes.

    5. SB

      ... to doing it, which is like it's, it's bringing our audience closer to us. So it's maybe a lost leader in terms of the financials, but in the broader engagement to the brand-

    6. RS

      No, e- no, I mean, this is th- this is actually the great curse of a lot of modern business, given the t- title of your, um, podcast, which is that people generally over-obsess about things which are immediately quantifiable and under-invest-

    7. SB

      Mm-hmm.

    8. RS

      ... in things which are valuable but hard to actually put a figure on.

    9. SB

      Yeah, exactly.

    10. RS

      And so things like engagement or loyalty, of course, I mean, it's worth noting that customer loyalty is much, much slower to measure-

    11. SB

      Yeah.

    12. RS

      ... than, for example, conversion.

    13. SB

      Yeah.

    14. RS

      And so the extent that money is invested in performance marketing or the bottom of the funnel relative to, let's say, wider brand fame-

    15. SB

      Yeah.

    16. RS

      ... uh, it's a widespread problem in the whole business world, which is that the money isn't necessarily being spent in, in the, in the channels it is because it's more effective there, but simply because it's more ef- it's easier to prove that it has an effect. The truth of the matter is the world will always be too uncertain for us to know who our customers are in advance.

    17. SB

      Mm-hmm.

    18. RS

      And therefore since, you know, 97% of the potential customer base aren't in market at any given time, and therefore won't be uncovered by search or, you know, uh, remarketing or whatever, spending money on the 97% of people in advance ahead of times is still a very effective thing to do. Th- the reason people do too little of it is that it's hard to quantify.

    19. SB

      On that particular point then, h- having worked in the advertising industry, this is a conversation we have all the time with clients, which is s- that you'll meet a certain type of client who's-

    20. RS

      Yeah.

    21. SB

      ... very, uh, who, who's, they're religious about the bottom of the funnel. They're rel- if it can't, if I can't track it and I don't know exactly, m- exact tr-

    22. RS

      I won't do it.

    23. SB

      ... it, I won't do it. And you'll sometimes meet the opposite, which is-

    24. RS

      Yeah.

    25. SB

      ... someone who just loves to spend on brand. And I don't necessarily think-

    26. RS

      They're both wrong, by the way.

    27. SB

      Yeah. (laughs) I don't think they're two different things.

    28. RS

      Um, yeah, I mean, I mean, Mark Ritz, very good marketing professor, always talks about the importance of both-ism. And he says, "It's vitally important that when I actually speak about the importance of brand marketing, that you do not interpret this as denigrating digital marketing." In fact, I go a bit further and say the bottom of the funnel in many respects is the thing you have to optimize first.

    29. SB

      Hmm.

    30. RS

      Because there's no point in actually, uh, if there's a, a bottleneck at the bottom of the funnel, if there's some constraint or a problem or a failing, uh, you know, if you have very poor conversion, okay, there's no point in spending money on advertising because you'll just introduce more people to a disappointing experience.

  11. 1:11:00 – 1:17:25

    Personal branding

    1. RS

      counterfactual is that you assume that you wouldn't have sold it otherwise. But if you sell something for a high price, you can't in fact determine that without your advertising, you wouldn't have sold it-

    2. SB

      Yeah.

    3. RS

      ... for, you know, for that- for that premium price. So, it- it's, to some extent, this quest for perfect measurement to- to reduce marketing to a kind of Newtonian physics is a bit of a false god.

    4. SB

      Fame. You talked about fame there. Fame can also be applied in the topic of personal branding as well. Obviously, social media has allowed us all now to build our personal brands. You've got the Gary Vaynerchuks of the world who have built, you know... m- you know, their- their companies are famous because they've-

    5. RS

      Mm.

    6. SB

      ... they've branded a person. At Ogilvy and within your sort of, your- your marketing his- what kind of shift have you seen in the desire for people to become brands themselves? And how valuable do you think that is?

    7. RS

      I think advertising always had those personal brands. And if anything, it's slightly diminished actually.

    8. SB

      Really? (laughs)

    9. RS

      Um, uh, eh, Campaign magazine always did a very good job of, you know, making sure there were 30 or 40 sort of famous names within the- within the business.

    10. SB

      Now does th- that just happens in a different medium now, right? It happens on LinkedIn with-

    11. RS

      Yes. I- I agree. I mean, you know, so, I mean, one of the greatest things, for example, there's a wonderful, wonderful guy who now must be... I don't want to name his age, but he... you know, he's, you know, past retirement age, called Dave Trott. You probably know David Trott.

    12. SB

      Yeah, I know David Trott.

    13. RS

      Okay? Uh, he'd be a brilliant interviewee, by the way, on the show.

    14. SB

      I'm looking forward to that one.

    15. RS

      Absolutely fantastic. But what has been absolutely fantastic is that, um, uh, you know, he's a glorious advertising mind. I mean, and just an absolute ornament to the industry. And he, through Twitter and through, uh, blogging, has had a completely new lease of life and influence to a completely new generation of people. Um, and has been, you know, hugely valuable as a teacher. And what's interesting about that actually is that, of course, uh, he does that unpaid. And one of the things that is complicated about this new world, okay? Uh, you know, the most valuable thing I often do in the course of a working week is either to give something away or to put somebody in touch with something else. Neither of which, you know, that kind of barter, um, neither of those things is in any way monetizable, is it?

Episode duration: 1:38:18

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