The Diary Of A CEO Clips - Ad Expert Reveals The Worst Mistakes In Marketing: Rory Sutherland

i want to get some rules um some advice from you then so i'm i'm launching a uh 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 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 one one piece of advice in any form of uh e-tail two two forms of advice actually uh the two mr 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 okay and do not hide your phone number 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 under 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 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 now one of the things i think is a grotesque mistake that most ecommerce 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 rebates through volume economies of scale actually i think you know i think many me two problems happen there one if you don't get to choose how your items delivered if anything goes wrong you blame the company you don't blame the delivery company or yourself if i'd chosen to have it delivered by royal mail and it went missing i'd blame royal mail if they insist that i have it delivered by you know without singling out ups dpd whatever and it goes wrong i blame them um secondly you know people have various preferences you know your liking for every used to be called um uh hermes okay varies enormously depending on which postcode district you're in because if you have a very good local driver it's incredibly good and if your local driver is off sick it's a disaster in some cases okay um and by not resp not respecting the the fact that the person is paying for delivery should choose who delivers it yeah 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 and i think that is that's a fundamental failing this is a customer service point the importance of customer service right a few people i mean selfridges self just do it pretty well okay um other things i do is i would offer a kind of amazon prime equivalent where if you pay a few pounds for delivery you get free delivery for a year that seems to be a you know fairly obvious brilliant idea because why should loyal customers pay you know inordinately more for you know 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 it at all what do you think the secret is there to doing a good job with packaging and um possibly there's a little bit of costly signaling involved i mean if you order something from selfridges um the 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 okay so you're never left um that will have a halo effect on your perceived value of the product by the way you know i know we don't like it but actually packaging is to some extent packaging is where a product first becomes a brand it's where it first takes on a personality and identity uh you know um you know a kind of an implied target audience and so in in this thing now the interesting thing is how are you going to uh what's your shtick do you have for example scarcity is the clothing available yeah so limited runs we actually we actually sold some before when i did a tour of the uk and you had to come to the tour to buy it and every single night on the tour we did nine nine nights three nights at the london palladium took it up another country sold out every single night every single item to the point that we sold the ones on our backs yeah and we'll give them away but um every single item sold out and every single size on the tour so this is like the second drop of it everyone's well aware that the first the first run of it all sold out um we have a very limited line uh so we have a limited amount of items again this time and i think the key thing with this um release is we've just agonized over the story of the piece so it's like it really looks more like art than it does clothing and we've worked with artists 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 the unboxing experience so it is limited it will 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 probably will you probably will make money i mean merch is um i'm just really not bothered by making money from it it's not the thing in my life same with a 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 yes 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 no i mean this is this is actually the great curse of a lot of modern business given the title of your um podcast which is that people generally over obsess about things which are immediately quantifiable and under invest in things which are valuable but hard to actually put a figure on yeah and so things like engagement or loyalty of course i mean it's worth noting that customer loyalty is much much slower to measure than for example conversion yeah 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 yeah 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 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 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 remarketing or whatever spending money on the 97 of people in advance ahead of times is still a very effective thing to do the reason people do too little of it is that it's hard to quantify on that particular point then having worked in the advertising industry this is a conversation we have all the time with clients which is so you'll meet a certain type of client who is very uh who's they're religious about the bottom of the funnel they're really if it cut if i can't track it and i don't know exactly i won't do it i won't do it then you'll sometimes meet the opposite which is yeah someone who just loves to spend on brand and i don't know they're both wrong yeah i don't think they should 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 because there's no point in actually uh if there's 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 you're wasting money so you've got to get the back end and i would argue the first thing in theory you should optimize if you're being an absolute purist is repeat purchase because having gone through the expense to acquire these customers and actually that's the that's the metric that always fascinates me because we were talking earlier about electric cars and i said the question about electric cars isn't how many people are buying them okay it's not what percentage of the new car market in the uk in july were plug-in vehicles now only question worth asking really in the long term is does anybody who buys an electric car go back to buying a gasoline car because if the answer that is hardly anybody then okay you don't know the exact shape of the s-curve but you know the growth is going to be pretty spectacular and so the thing to understand i think in a market is to what extent does your uh product actually convert someone to something and then the lifetime so you'd start with repeat purchase then you go to conversion and then you'd work your way up but what tends to happen is that when people are obsessed are obsessed with quantification of everything okay it's worth noting by the way that all big data comes from the same place the past all right so there's a limit to how much big data particularly if you've had some major event like a pandemic in between how much big data can actually tell you about the future in any case um as david ogilvy famously said you're not advertising to a standing army or advertising to a moving parade people are coming in and out of market all the time um and so you're absolutely right you get some people who are just fame junkies and by the way i suppose there are brand categories where that's appropriate if it's sold through retailers you know in other words if it's mostly sold in the physical space you might you know you might argue to an extent you know for let's say a burger king or a mcdonald's that's not a totally crazy position although it is now because suddenly they've got to think about delivery and and whether people order through the app or order through an intermediary because it has a major bearing on their business but but at the same time yeah i mean the tragedy is this idea of this false dichotomy between brand advertising and what you might call performance or digital marketing as if you have to be in one camp or the other where is the balance though and how does one go about is it just intuitive is it just there are figures on this so if you look at the work of um lisbonette for example in peter field uh the ratio shifts a little bit but generally they'll stipulate a figure around about the 60 40 mark in favor of what you might call brand mass media uh expenditure because they have a mutually beneficial relationship obviously my first 20 years of my life was spent in direct marketing and actually you know because direct marketing was unfashionable we spent a lot of time denigrating advertising spend because they got much bigger budgets than us not necessarily rightly but they were also you know much more indulged than we were because they didn't have to prove effectiveness down to the same sort of level of statistical significance but we came to realize pretty quickly that actually um first of all there's nothing harder than direct marketing a product that nobody's ever heard of yeah and that every time just to give an example every time american express went on television or advertised big in mass media the response rates to direct mail would not quite double maybe but they increased pretty significantly you had to work less hard and you had to work it's that wonderful phrase which comes from a book by uh let me get his job right uh his his name right um i i think it's matt johnson who's just written a book called um brands that mean business and his wonderful line is having a great brand means you get to play the game of capitalism in easy mode and that's and what what is true is fame to some extent brings a load of benefits which aren't necessarily sales related so for example you can up and your customers will be more forgiving okay uh take the example of apple i mean on a couple of occasions apple has produced products which had fairly major flaws which might have proved pretty fatal to lesser brands you know the famous phone where if you held it in the wrong way it didn't make phone calls for example and given the reality distortion field around the apple brand people have passed over those incredibly rapidly and so there are all you know people are less price sensitive that's not easy to measure by the way as well it's very easy to measure the extent to which something has an effect on sales but the effect to which something has an effect on price elasticity and the extent to which you can command a premium because it's a great brand because it's a great brand it's harder to measure because you don't have the counter factual you know when you sell something the counter factual 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 for you know for that for that premium price so it's to some extent this quest for perfect measurement to reduce marketing to a kind of newtonian physics is a bit of a false god