Rory Sutherland - Behavioural Economics, Humans and Advertising

thank you very much and the okay time for our final speaker before lunch she's been described to me by herb as the Boris Johnson of the advertising world you can imagine my excitement I am agog so I'm gonna move on and welcome Rory Sutherland and so listen now examine the evidence Boris born in 1964 Rory 1965 it says here both had short early careers in proper jobs before they fell into writing I know how that goes Boris became the editor of The Spectator and Rory continued to write them a column entitled the wiki man and his day job is officially the vice chairman of Olga the UK but he's perhaps becoming better known as the hugely witty and insightful Communion communicator of counterintuitive thinking please give him a very warm welcome for each other in some ways it's a marvelous instruction a wonderful analogy in fact if I sort of up or ramble or just go off-topic it can be considered perfectly on brands so thank you very much for that one I just read myself an advert Aryan simply because one of the things that fascinates me in life is I suppose from behavioral economics is what you might call cognitive biases that when actually solving problems we are very very strongly biased toward certain solutions and against other ones one of the things that strikes me of interesting is that the way society seems to be structured is we are massively biased in favor of solving problems with stuff as well has quite a bit of bearing on what Andy was saying earlier we seem to have a massive bias both as individuals and as institutions towards solving problems with stuff with engineering with technology with gadgetry or possibly with legislation with compulsion and they're always the last resort we seem to adopt is actually psychological solutions now well I'm not saying I make this point absolutely clearly at the beginning is I'm not one of those people who claims that actually you know you don't actually need medical research all we need to do is feel better about being ill although actually it is interesting that this is one of the few countries where placebos are actually illegal now I think placebos are actually pretty good they're extremely cheap they're effective proven to work and they don't really have any side effects or if they do they're imaginary so you can satisfactorily ignore them but but I would say that I'm not one of those people who emphatically its anti scientifically is all we need to do is actually reframe everything in the world's problems will go away what I do think is interesting is how slow we are to actually look at psychological questions of happiness and what people really value in what we do and how comfortable we are always together with solutions that either involved you know using in some ways guess materials or large amounts of energy messing with reality or indeed something I also don't like which is some legislation and compulsion and actually one of things the government does it actually attempts come three solutions solutions involving coercion before it actually tries persuasion so this is just a subject that interests me widely and so I casually call myself an advert Aryan which is that I believe that actually where possible you should involve interfering with people's behavior and actually persuasion is a vastly preferable thing why is it the people it's uncomfortable I think it is particularly institutions far more certain individuals who thrive on a rational justification of actions to each other so every single committee or organization within a body has to explain itself rationally rather than emotionally therefore biasing the actions of that organization towards what you might call the obvious the direct the first level solution and what I also call really a kind of what I many called physics Envy well actually people love to think that organizations and people works the same way that machinery does if you look at people in management consultancy the overwhelming majority of them will actually have a background in something like engineering and they'll have spent their time dealing with systems where input a increasing input a probably increases in output B and those things happen in some sort of vague proportion one to the other absolutely fine if you're running a steam engine within reason pretty good if you're dealing with machinery of some kind essential if you're dealing with some form of a complex machinery the only problem is it's a pretty hopeless measure for dealing with people one of the things you mentioned is that a wonderful incentive scheme where of course by increasing number of pageviews the bonus goes up what that immediately what that's known as actually is a perverse incentive it's an incentive which two management consultants seems completely logical and sensible the only problem is that the effect it probably has is absolutely the opposite of that which is intended great example of perverse incentives came about in there I think about 18th century France when they're badly overrun with squirrels so if they set up a bunch II love ideological sort of incentive scheme for squirrels tails and you got paid a certain number of su for every squirrels tail you presented to the authorities and they thought well you know just a few years the whole problem of squirrels would have gone completely what seems strange the amount they paid out every year kept going up but the squirrel problem didn't go away at all in fact if anything it was getting worse and with only them that they discovered that people have actually started intensive squirrel farming in order to make money out of the tails that's what's actually called the perverse incentive now what you want to realize is that most human behavior doesn't follow physical laws ah this is very good I've paid people to solve this well most people are actually extraordinarily oblique and strange in their behavior in many cases a logical incentive will actually have the opposite effect there's not a lot of research that says that paying people to perform creative tasks rebrands that activity as work and makes people less keen to do it if you actually reward children for painting pictures they actually stopped doing it earlier than people who are doing it for fun quite a lot of human behavior is actually first of all it's disproportionate unlike physics you know input a and I put B there very little sort of linear relationship one to the other the other thing is they can actually be opposite that actually the very output is actually the opposite of that you would expect under those circumstances now this does not mean the changing human behavior does not involve science what it means is it's a different kind of science in this case less like physics it's more like climatology it's small butterfly's wings effects have enormous effects on human behavior utterly trivial little things transform the way in which people take decisions and the way they act at the same time fairly massive interventions often have either no effect or indeed a perverse effect where people end up doing the opposite it doesn't mean you shouldn't actually use the while the wonderful mechanisms of science and you know the belief in actually new just prove ability and so forth in your activities merely that it's not the sort of science that people who are actually by and large quite bad scientists think science is so that's the vital point what interests me about the advertising world is that I think three things have happened to the last 15 years that make this all the more important the first thing is obviously digital media that's the most obvious and actually that has transformed the way in which we can actually create interventions in human behavior does this mean we can be extremely evil and manipulate people into doing bad things I think generally yes that does what we've simply got to do is actually realize that you can equally use the same interventions as a power for good very good I recommend called BJ Fogg who's a professor at Stanford describes himself as the professor of persuasive technology what he effectively focuses on is the extent to which interface design and the creation of various technologies can actually without the need for compulsion change people's behavior for the better in many and exciting ways that to me is very interesting the second interesting thing is that the task that faces advertising is less and less about selling packaged goods which is very much an attitudinal job where we believe that what people thought about a brand translated fairly perfectly into how they acted more and more of the challenges we face have a very very strong behaviorist component you would argue patently anything to do with the environment most people already have the intent to do the right thing what they patiently fail to do is to back that up with action and so the second area of interest is the extent to which we can actually now digitally intervene both by changing the actual nature of the product itself those shoes being a perfect example or actually by intervening very very contextually close to the moment where decisions are made now let me give you an example of this technological in a medical intervention for the good if you look at the decision to take a car versus to take the train one of the worst things that happens it encourages everybody to go by car is in many cases unless you live right next door to a railway station you take the decision do I Drive or do I take the train when you're already in a car on your way possibly to the station or to your destination that isn't a symmetric decision okay let's lie this little thought experiment imagine presumptive this reason you live right next door to a railway station where a train takes you to work but there's no parking there so you've got to park your car three stations down the line it is in a different decision to get off the train which is taking you to your office and actually start the car and drive to work most of the time you go will I'm on the train now I might as well stay there the problem is that most train journeys start with a car journey therefore the symmetry of decision-making is imperfect if by the way you have kids you've already packed the car up with seven tons of the decision is already made for you because there's no possible way you're getting to the Train you're also uncertain about for example is there room to park at the station I've got to get out of the car will my car be safe I now have to buy a ticket what time is the train are the trains running it's an asymmetric decision if you can use technology or pricing to get people to book train journeys a day in advance and possibly reserve a car parking space if you can simply move that decision one day earlier the asymmetry doesn't quite apply and therefore you will get people making a wait up intelligent decision about the relative overall benefits of train versus car can they still win by the way but it is a fundamentally different decision when you look at it from a distance versus a decision which is do I stay in this car wear some nice music is already playing on the radio and hot or do I haul my arse out park the car and endure a bit of rain go through some barriers and pay money to tickets therefore by using technology to change the place that decision gets made you will fundamentally change the decisions make that people make and that brings me to the third aspect which excites me about marketing persuasion and general what I call persuasive technology which is the development of behavioral economics and if you want behavioral economics the work of absolutely tremendous scientists based mostly in the United States but increasingly a few in the UK as well Daniel Kahneman being the founding father if you read nothing else read his Nobel Prize acceptance speech interesting thing being he won a Nobel Prize for economics when he's not actually an economist he's a psychologist then what's interesting about that behavioral economics within a sentence simply says to you that the context the medium and the interface within which a decision is taken may have a far greater effect on the decision we make than the long-term consequences of a decision even when we know those consequences so actually you can actually get more people to sign up for a credit jobs if your dr. evil by redesigning the application form to make it very attractive then you can by dropping the APR now through regretable whirring maybe but nonetheless through the actual interface you present people with to make a decision from the menu if you like or the situation or the context in which they decide will often have a greater decision on the course of action they adopt then actually the consequences of that course of action I jokingly occasionally say if you take immediacy bias into account in other words people are disproportionately biased in their lizard brain but what does this decision feel like right now up front I've actually asked the question it's always assumed that actually men are more reluctant to get married than women okay and it's assumed that men somehow have a great aversion to the institution of marriage I don't think is necessarily true as you men who have married lived considerably longer seem to have happier lives what it might be is that men have a disproportionate aversion to the actual business of a goddamn wedding now I'd like you to imagine for a second if you think about it a wedding is the most feminine possible goddamn thing you could possibly conceive in the history of the world is that it could practically be a test of devotion on a part of the man to spend several days discussing floral arrangements and colored sashes for crying out loud okay now that you imagine just for a second what a wedding consisted of is basically a three or four day period of adventurous sex and travel where you were bought really high-end electrical goods by all your friends you actually have a world where loads of men were desperate to get married and deploring their girlfriends lack of commitment okay that's that's what I mean by the upfront business in which you decide may have a far greater great effect on your decision than the long-term consequences of the decision but well I half believe that but I'm making that half of the humorous point but if you look at this by the way once you get married as a bloke no one ever buys the bloke a present ever again once you'll now no one will ever buy you ask electric set okay I go in instead something they'll come back and say I've got you a tablecloth well whoops shocking do you know in any way don't do this it is it is if you think about it is the institution which does not have huge upfront incentives to being a bloke so I just thought I'd make that point so that's behavioral economics that the understanding that actually now another great example of the context of decision making is simply that a glorious example of a waiter going up to someone in a restaurant saying we have two specials today we have fish or chicken because only in which case are think I'll have the fish and that's swimming today the waiter comes back in Terry sighs forgot we also have beef and the person pauses goes our well in that case I'll have the chicken now the reason that it does actually happen the reason for that is that actually if you only have fish or chicken fish seems like the healthy option but the presence of beef on a menu serves to make chicken seem acceptable healthy so if you're a fast food chain just bring out a look large burger and actually everything else on the menu practically seems like rocket and part of that okay but actually there are huge huge comparative forces in how we actually exercise judgment now you could say well there's advertising man I can use this for evil and it's absolutely true I have to admit that possibility exists what we have to do however is also just be aware of these forces because it's almost impossible to understand human behavior unless you take that into account this problem is my first book recommendation of the day John Kay's obliquity going back to my little analogy with climatology one of the things you understand is that many many things in life particularly those things involving human psychology not very well solved by the most direct and obvious solution I mentioned that earlier actually if you apply the most direct and obvious solution you may have opposite results in many cases it's an example this is the businesses which seek to make the most profit are not the most profitable by enlarge the most successful businesses are those which pursue an oblique end they have some vision or big ideal that drives them and motivates them and if you look at the world's great brands they are all the creation almost all the creation of someone who is slightly mad at jobs nights Kellogg Ford they're all barking basically but the fact is because they were barking they actually pursued something which was actually a bigger metter ideal than the simple pursuit of short-term profit as a result interestingly and Kay makes this point their businesses were more profitable for it that the shareholder value movement is actually something which is a very very direct approach to how a business should be run and as a result it's arguably completely inimitable to the business of creating business value partly because of course it's it purely looks at the interests of the shareholders where the great business actually is great because it actually manages to create some unifying appeal that actually motivates not only the shareholders but also the organization's customers and its employees and that what's interesting about a business with a higher big ideal and the entertainment industry would be a very good example of this at its best is that actually it manages to enthuse everybody the second you become a shareholder focused organization arguably you may actually be completely unless your bank in which your employees just as greedy as everybody else you're actually creating an entity where we're actually the motivation suddenly become dissonant or actually fighting against each other so that's my point there this is a great red book the other thing you have to understand they left any Marxists in the room surviving unless you hold to the Marxist labor theory of value that the value of any good is proportionate to the work that goes into it the other thing you have to accept is just that value is subjective you also have to accept of our perception of value as human beings is colored by two million years of evolution which in some ways makes us very wonky indeed one justification for advertising which I will give it's contentious one is that in some cases the human perception of value is so badly wacko that actually to meddle with it is a healthy thing for example the human tendency disproportionately to value things as gas rhinoceros horn Tiger's Claw you know career hard words for furniture the fact that we are all biased and we can't it's almost impossible for us to overcome as well to think that because something is rare and expensive it must be valuable and packed with you know wonderful things that is a huge human bias which actually we need to overcome a second thing we need we need to overcome is the human bias to view things that are inexpensive as less valuable because one of the great problems of capitalism is that when you actually produce things at an increasingly low price because they are efficient to produce or indeed because you can produce them very sustainably because they don't involve any rare commodities in their production or indeed they involve very little labor in their production what you interestingly do is you bring the price down and with it the value in which people attach some to something goes down to give you an example of this subjectivity of value by the way who did in Toronto is the Spanish foreign business from Buenos Aires the the dollar signs not the dollars for peso and it's the Spanish for orange juice this is someone who's actually very much cleverly adopting price discrimination but the point about that subjectivity thing is that our whole value system is very very subjectively driven we tend to view rare things very highly we can view scarce things as valuable we can to see things as getting cheaper and mass market and we value them less obscure story builders we tend to value them then less less so coach travel or frozen food to extraordinarily efficient forms in environmental terms of transportation and of a food preservation because they produce Iceland and national Express therefore become mass market therefore become down market and therefore become inferior goods televisions which frankly you know knew either for teens we look at your house you'd say it was but he'd give you half of Burgundy for your television and yet because you can produce one for a thousand pounds we value them less and less so the best of the job capitalism does the less appreciative we get because of this perverse way of valuing things according to how expensive they are if practically it's a causality that operates in both directions we pay more for things we value but we also value things more highly that we have to pay for now there's a vital question to me which is to some extent the job of advertising maybe to actually not to do added value but actually retrieved value in economic terms what's interesting is the consumer surplus which is the difference between what you would pay for something and what you have to pay for it generates no human pleasure or appreciation whatsoever now looked at that way there are many of you in this room who would happily pay three thousand pounds for a flat-screen TV if you had to you can buy one for 800 do you view it with the joy as if well I've just paid three thousand for television and someone's given me a two thousand pound 200 pound rebate no you don't you simply pay for things whatever you can get away with paying for them as a result there is a huge loss in human happiness because actually as prices get lower our appreciation of things actually diminishes so much of the efforts of capitalism in producing things at a lower cost and greater efficiency it actually failed to translate into human happiness this seems to me a really vital point and it seems actually to me to be quite worrying now one solution to this is to look at advertising and particularly you want to do digital advertising look at it in a completely new way and to economists in this case Gary Becker and a chap called Kevin Murphy did this for us their definition of advertising they refuse to accept that advertising was necessarily persuasion and they defined advertising is basically the creation of complementary goods that you create advertising when just a best way if you want to sell a burger you can get a fairly crappy price for a burger selling it an uncooked patty as a cook patty on its own you can get a tolerable price rate and chips and a bun and some lettuce and you can get a very good price indeed their argument is that advertising is purely the creation of sometimes through entertainment or through media or through communication or sometimes to other things the creation of the addition of the lettuce the bun the fries it's actually the creation complementary goods that actually surround the core good itself and enable it to be better appreciated and to command a higher price now what's interesting about this definition of advertising another British definition would be free peanuts at a bar which adds value to the consumption of beer they probably increase your consumption of beer but actually to some extent advertising works like those free peanuts it's a complement parity popcorn and movies would be complementarity the two things will become linked together such that the two in combination creates far more pleasure they're not individually actually movies on their owner okay popcorn without a movie is complete crap if you think you've actually it only works it's the Pernod of the food world turner only works if you're in France if you're in front of a sophisticated delicious drink in the world so you buy a liter bottle you take it home and the second you get back to Britain you pour yourself - you what the hell i buy this piss for it's only Pernod and from complimentary goods that's the way to look at it now interestingly if you are particularly in digital this new definition of what advertising is and can be is hugely liberating this is probably almost as close as advertising has ever got to art which is the early shell county guides for the UK produced by shell as a complementary good to petrol consumption people would enjoy motoring more and therefore motor a bit more if they know what they've got to see and so betterment John Benjamin was one of the people who actually wrote the early shell County guides that was perfect that now conventionally we tell that strange that's like branded content it's really weird actually if you use the definition of complementarity that is a very very pure form of advertising so I suppose is package tracking it's an informational component that actually adds huge perceptual value to distribution but if you think about it like this that with that effectively where you go instead of thinking how can I persuade people to buy my product how can i bludgeon them with arguments and ration rationality and reason to buy what I have to sell if you sit down and go I have a burger what's the equivalent of ketchup a bun awesome fries or a bit of lettuce in other words how can I create complementarity for this thing you will come up with much more interesting did advertising solutions than you will if your first port of call is persuasion apart from the elf it's not altogether clear that persuasion is actually very persuasive I'm a bit of a fan of Bob Dylan who in his song Brownsville girl that makes the point or rather he or one of his characters makes fun people don't do what they say they believe they do what's convenient and then they repent a simple question is what might you do actually to make your product easier or pleasanter to buy just you know if you do not you should not sit there and think my first job as an advertiser is to persuade people things here's another complimentary good a lot of times our idea which works whichever airline you fly on called my sky status and you sign up for this thing tell it where you're flying which means goes Luft Hansa know how many other airlines you might be using and it tweets or posts to your Facebook page both when you take off and when you're in mid-flight it's tender sweet it also has a little live globe which shows lots of lots of Twitterers in mid-flight all over the world that's a lovely little creation of complementarity in other words we've actually improved the travel experience I tried in an example of continentality to get British Airways to give all their best passengers these things I'm wearing which a buzz not Airport friendly nonmetallic braces which if you're sort of person who's sick of taking a belt or braces off when you go through the x-ray machine makes more difference to your enjoyment of travel than practically anything else now I'll skip um very very quickly the brilliance I'll skip that as well because we only have to have so much time but one of the brilliant things to look for in marketing is disproportionality how very very small things have a huge effect this is from a hotel in Sweden in Stockholm where those are the lift buttons nothing remarkable in that except those are the buttons that's another row of buttons and other banker buttons would say grand first second mezzanine garage this row of buttons in the lift in a pretty cool hotel in Stockholm says garage funk rhythm and blues country rock and roll you choose your lifts music now at the expense of maybe a thousand pounds or not much more they have done more to brand that hotel and differentiate it from other hotels than those many big hotel chains that tell you you know this hotel has recently undergone a programme of refurbishment of twenty five million dollars so that your hotel room could resemble every other goddamn hotel room you've ever seen in your life this is Virgin Atlantic where the little salt and pepper things on after class you think well I might steal those they're quite cute and you picked them up and embossed on the underside it says pinched from Virgin Atlantic upper class they don't see anticipated your very move that is you you will remember that years after you remember whether you're in a 777 or an Airbus now that's a glorious thing about marketing is you can create huge amounts of desire delight and memorability and distinction with actually trivial levels of expenditure this is the member since our date in the American Express card if you ever send someone anew it doesn't mean anything and it doesn't actually make any difference to the service you see if ever you send someone by mistake a new replacement card which says member since 10 rather than member since 95 about a third or half people complain and demand you reinstate them now the effect that had on card member loyalty we think must have been we have a few hundred million dollars since American Express first started and yet the cost of that those two digits is practically nil this is the euro style you probably know this example why on earth do a lot of Engineers think it reasonable spend six billion pounds making the journey forty minutes faster that is a typical engineers definition which is numerical journey time duration we can improve this by 17.4% the trouble is there are not numerical measures for how nice the journey is to everybody when given some money spends the money making the journey faster rather better I put a brief at some creative teams okay they're a marketing budget of six billion what you do with the Eurostar one lakhs had put Wi-Fi on the trains there is still no Wi-Fi on the train they said it doesn't really matter how if your journey is three hours or two-and-a-half if it's useful time I think perfectly fair point three other the more interesting creative teams that I employ all of the world's top male and female supermodels I get to walk the length of the train handing out free chapeau truce you'll still have five billion pounds left in change and people last for the trains to be slowed down if the conservative governs interested I also have a plan for cross rail which actually is to trap cross rail but to have New Orleans style paddle boats going up and down the channels people table it's much much slower I said yes but they solved that problem Louisiana in the 19th century if you have nudity and gambling nobody cares how long the journey lasts now at a smaller and more high-minded level Esther Duflo The Economist is actually showing how the way to eradicate poverty is with tiny little strange interventions tiny little disproportionate things the incentive of a kilo of lentils when you inoculate your child combined with the fact that you make inoculation of children a social event where five mums turn up with seven kids rather than one mum turning up at a time with one kid massively increases the confidence of actual inoculation which in turn then has the greatest effect on the eradication of poverty but where sort of flow is interesting is if you're a guy at the UN with a budget of 200 million it is beneath your dignity it's simply infra dig it doesn't satisfy your own self love to say solution to poverty free lentils okay you always look for a big grandstanding heroic thing and this is the fundamental organizational problem all organizations like businesses and governments look for huge grandstanding solutions to problems where human behavior is just as receptive arguably more receptive to the small thing these things ten percent of the cost of a speed camera that prevent twice as many accidents or some of the clever ones show a smiley face when you're going under the speed limit and a frowny face if you're going too fast you don't need to find people you don't need to give them three penalty points this thing has a appealing to people's better judgment actually has more effect than the threat of punishment that is the case which is completely in opposition to the assumptions of conventional economic thinking this is a single way in which the underground was best improved most train journeys are more improved by the installation of dot matrix boards than by anything to do with the trains themselves why psychologically a 12-minute wait when you know it's 12 minutes is actually less stressful than a six minute wage when you're uncertain that's the beautiful cycle that the dot matrix display is a brilliant psychological solution to a problem don't necessarily double the number of trains just tell people how long you gotta wait and this is my this is my big debate here which is you have in the world stuff that have a big effect stuff that cost a lot of money we call that strategy okay and that's good it's worthwhile company has to have a strategy but the trouble is that everybody because of their own urge for self advancement is looking in that top right hand corner of course there's some people on the top left that's called consultancy ah there's stuff in the bottom left that's trivial out of their mind that it just doesn't cost anything doesn't do any harm doesn't have much effect but what do we call this and what I think we needed every business needs a director of detail and governments needs a Ministry of detail for the people who are saying actually and what what the Minister of detail and the director of detail should have an absolutely tiny budget but after the immense power and the job is to sort out all the small irritating stuff that everybody else is too grand to actually look at it's what I call terminal 5 syndrome where the building is magnificent but the signage is atrocious has anybody flown into terminal 5 how many of you when heading for the Heathrow Express ended up facing a brick wall at the end of that ok because the thing is there's a yellow sign saying trains and then the next time is actually a blue sign to your left of those III Express so about 1 in 3 people ends up facing a completely blank wall at the end of something that's about the length of Coventry Cathedral something I go now that's the case where the building is brilliant the expensive stuff is fantastic the detail is atrocious this is my second book recommendation nudged by sailor and Sunstein absolutely tremendous book on what he calls paternalistic libertarianism as very much you know the origin of much of this thinking with small things have huge effect this is my suggestion for the saving crisis we have tons and tons of ways of impulse buying we can they're called shoe shops and clothes shops goodness knows what else a much more suggests that women's clips fashion should be have a VAT rate of 80 percent W down well than my female friend but my point is that actually you know why is it that women actually need 20 times more shops to close themselves than we do I just thought it's just worth asking oh no no no my everything if we're going to start with environmentalism I think me place you could start but anyway um but actually what happens if you have a red button at home it's entirely malicious by the way female fashion because men don't notice and women don't like it so um anyway um but anyway the if you had a button at home what about impulse saving a little red button at home every time you press it it puts 50 pounds into your pension scheme sailor and Sunstein invented a beautiful pension scheme called the save more tomorrow pension all they did was they change the interface the context in which you actually took out a pension instead of going oh my god I'm 25 this is to get people under 35 getting a pension it's every day oh my god I'm 25 under Patrick 100 pounds and months away which means they won't be able to get at Dave's party on Wednesday they said you sign up now you can cancel anytime but you sign up and you choose a percentage let's say 20 and 20 percent of all your future pay rises goes into the pension scheme so you never see your salary your disposable income at the end of the month actually go down it's merely that when you're going to pay rise in a bit of good news your salary goes up a little bit less the net effect of changing this format was that actually among the 25 - I think in between 35 year old age group pension saving over the whole period went up by over 200% the only change was a simple change to the format in which people find out I'll skip a few of these I've mentioned the coach travel one I've mentioned frozen food things that because they're ecologically efficient and because they don't involve months waste actually become cheap and because they become cheap they then become devalued I think that's a vital role that advertising has to play what could you do to make coach travel really cool it's cool if you're a rock star after all there must be something that can be done and the final joy of digital media is the ability to communicate contextually Google realizes that a target audience is quite often not a target audience at all it's a target moment it's a target when not a target who this is a beautiful example of advertising when you're in a traffic jam you advertise trains on Friday that poster talks about virgins offers so you can get home to your mum's Sunday roast this Sunday for only some thirty pounds according to climate traffic conditions time of the week kind of year message actually changes and gives you a different incentive to go and take the train according to the actual context in which you find yourself in I think that's a wonderful wonderful potential for all digital communication another lovely case is what I might call context a creative team brief to advertise their arms florists in a town I think in Gloucestershire and they said the thing is nobody notices flowers in the 5-star Hotel you expect to see them there they do have flowers left over at the end of the week she said yes okay take the flowers make up a nice bunch four or five bunches and put them in the phone box the men's public lose the women's public lose might have in the buff shelter and the police station places where you don't expect flowers and underneath was just good a little line which just said surprise them on the flowers and the telephone number and the address of the florists the brilliant understanding of context of you when you go into a five-star jail you go yeah big big deal flowers when you go into a public lavatory where the most interesting thing you're expecting to see is a large drawn penis on the back of the door or whatever it is the women draw and actually there's a big bunch of flowers there that really really works so a beautiful beautiful use of creative use of context which is great extent what the digital revolution is all about we can now actually engage in a kind of conversation rather than a monologue simply because we can actually say things that are sensitive to circumstances but we can also design choices very very quickly I mean we can design choices that are actually sensitive to context so whoops one more that's my last book recommendation Dan Ariely predictably irrational tremendous book on behavioral economics by one of the best people and this is my last example of how actually two things we're not perishing for ones of wonders where perishing for one to wonder the great problem we have in life I think is not actually that we're failing to provide for ourselves a lot of interesting things it's simply that our appreciation of those things needs to be heightened now we know it literally is we know the amount of Wonder and amazement we actually express that the world we live in is too the second thing I think to understand is that the great definition of poetry is to make new things familiar and familiar things new and one fascinating thing that advertising can do is actually get people to look at old things in a new way rather than making people want more of something else the complementarity definition of advertising the fries with the burger definition of advertising the peanuts definition of advertising is to actually add appreciation to what already is so not added value actually but extracted value in many ways here I think is the most perfect case if you can roll a film of actually creating value through perception while doing absolutely nothing to the product at all here we go Freddie's is supposed to be square how many of these diamond shapes wanna new diamond shreddies cereal stay 100% whole grain wheat in the donation Simon shape [Music] isometry brothers in Canada and it caused the major sales uplift and shreddies no water on the left if it suddenly caused you to see boreal square shreddies in the new light what possible harm has been done the point made by the floss of the Jaime white who said you have a car you sell it for five thousand pounds or ten thousand pounds you want to sell it for eleven thousand pounds there are two things you could do you could spend five hundred pounds per car putting in leather seats and get in charge an extra thousand pounds or you've spent five hundred pounds per car and advertising persuading people that cloth seats the cool of never seats and he says in terms of the creation of value if you accept that value is subjective the two are absolutely equivalent I would argue actually they're not equivalent that the second option is decidedly preferable if you're a cow and finally the Canadians being very conservative people some of them weren't very keen on the withdrawal of their old traditional square shreddies and really it was a bit of a new coke moment for Canadians and so in a gloriously Canadian way actually eventually arrived at a compromise my final final point is one way you add value is simply indulgently producing advertising which is indulgent and beautiful this is the Peacocks tail theory which is that the Peacocks tail has meaning to female peacocks because it's useless it's what Darwinian is call self-handicapping the fact that actually is an still function of the bird while carrying around this completely impractical thing on your back means you must be pretty damn fit genetically okay now actually to some extent some advertising does that by proving that you actually invest a huge amount of intent attention and expense in your reputation it gives you a reputation to lose and having a reputation to lose gives people much more confidence buying from you than they do if you have no reputation at all it's rather like you're much more comfortable I hope buying a second-hand car from the Archbishop of York than from a bird you just met in the pub okay the fact that someone has a reputation to lose is one of the many many things that gives you confidence to do business with them it's the feeling that actually where is normally a single transaction it's in their interest simply to rip you off as much as you can some of the reputation is by definition not only interested in your transaction you're they're interested in your subsequent transactions your friends transactions and your friends friends transactions and the fact that they care about reputation and advertising is simply a visible means of demonstrating that is actually what gives you it gives you gives people the confidence to buy from you I'll give you a perfect example is if you want to have a bad meal I can guarantee you a bad meal go to a tourist City and eating a tourist restaurant they know you're never coming back in it that is effective your business which has no reputation or component whatsoever because every single person is a customer of that restaurant only once okay so it's in their economic interest to give you as bad a meal that doesn't actually kill you before you get your credit card out but when you have a reputation and patently they're interested in actually your 10 meals your 15 meals your lifetime value then you can actually have a confidence in eating in a place which an unknown tourist restaurant doesn't give so the vital thing is that sometimes the role of advertising in terms of complementarity is simply to be gorgeous and I always say that because in a climate and economic climate where we try and measure the value of every penny this argument fits very uncomfortably nonetheless no one's actually told peacocks about accountancy and they continue to do what they do so that's the final thing very very interesting thing in behavioral economics the Peacocks tail is one of them two final little lessons which is the one perfect lesson the reason women love being bought jewelry and flowers by men is actually because of a kind of sacrifice it's precisely because men aren't interested in jewelry and flowers so it's actual evidence that he loves you that he's prepared to buy you something that he doesn't like if you buy your girlfriend the complete first season of Battlestar Galactica on DVD there exists a small suspicion that self-interest may be involved that's the one tragedy of behavioral economics you'll never look at the world in that same unblemished way again for which I apologize but thank you very much indeed [Music]

Channel: Thinking Digital Conference

Views: 60,464

Rating: 4.9344797 out of 5

Keywords: rory sutherland, thinking digital conference, thinking digital, economics, ogilvy, ogilvy sutherland, rory sutherland marketing, rory sutherland TED, rory sutherland 2020, rory sutherland alchemy, behavioural economics, behavioural science, behavioural economics documentary, The psychology of digital marketing, Behavioural Economics Innovation and Beyond, ogilvy on advertising, behavioral economics, rory sutherland perspective is everything, rory sutherland behavioural economics

Id: zUeJoS3cTu8

Length: 43min 44sec (2624 seconds)

Published: Thu Feb 23 2017