Transcription
Welcome everybody to another episode of WFA's better marketing and thank you to our partners Meta for supporting us. So today I've had the pleasure of talking to Rory and my word, what a conversation. Long, as always, on magic and the power of creativity, harsh on procurement perhaps too harsh, and particularly smart on the problem that metrics cause, and particularly the problem of reward. And if you bonus people to deliver a particular thing, unfortunately, human behavior says they'll focus on that.
Um, but on the other hand, if you believe in the power of magic and believe in the power of building proper human relationships, you'll build brands that endure. So, please listen to Rory. Delight to see you. I had the absolute pleasure of watching you speak recently at Forum Connect in Amsterdam. I then, I know you then went to Pakistan to spend time at Madfest with Kamar and his excellent colleagues, and it's always intriguing, inspirational, and impactful to listen to you. But I, I thought we might start by unpacking one of your central themes, which is, what is it that marketers are getting wrong?
"Um, it's not necessarily that marketers are getting something wrong. Uh, it may be that everybody is fundamentally misunderstanding marketing. But I've got two suggestions. I think one of which is, in their quest for accountability, they allowed themselves to be man, to be measured on an incredibly mean-spirited, uh, idea of how the value of marketing is actually, you know, appears on, if you, on the balance sheet, on the credit side of the double-entry bookkeeping, which is, you're held accountable for every single penny of your costs, but the value you generate is only really accounted for in a very short time period. Now, that's my first criticism, which is that then drives marketers only to do the things which generate value very quickly and very accountably, which is not the most valuable function of marketing, which is, you know, an over-obsession with the bottom of the funnel because the bottom of the funnel obviously is far better at generating self-defensive statistics, uh, than the top of the funnel is.
The second criticism I'd make is that I would argue that like innovation, which is its natural bedfellow, marketing is fat-tailed, which is, it isn't realistic to judge marketing, any more than pharmaceutical research, on the basis of one quantum of expenditure should generate a quantum of value. A very large part of the point of marketing is that every now and then, by a mixture of intuition, luck, and, you know, factors sometimes beyond your control, you generate something which is just insanely disproportionately valuable. And that could be a long-term brand idea, you know, a positioning. It could be, you know, it could be a sentence. You know, I'm, I'm in awe of that, if you can't find the words, find the gift line for John Lewis, which I think is, you know, it's a multi-million dollar property in a single sentence, effectively. Um, sometimes I think it's something like the American Express card, which was an Ogilvy suggestion, in fact, putting member since on the card, which people at American Express have told me has been worth well in excess of a billion dollars to them in terms of retained card members. Yeah, nobody wants to go back to member since '25. It makes you look a bit of a Johnny-come-lately, and so it undoubtedly has this powerful loyalty effect.
Now, the point about that is, okay, you're not going to, you're not going to be able to produce one of those every day, but that doesn't mean they're not worth looking for. Now, my question is, Ogilvy probably got paid somewhere between nothing and $5,000 for that suggestion, and it's worth a billion. Now, Ogilvy in Australia, uh, partly with Coca-Cola, came up with the me, the idea of putting names on Coke caps. Now, they did it in Australia, the idea has rolled out to about a hundred different markets. Um, I was in Norway. This is 10 years after the idea originated. I was in Norway a couple of weekends ago, and all the Coke bottles had sort of "Secret" and "Thor" and so forth on them. Now, that's, that's a billion-dollar idea. Now, the interesting thing is, Ogilvy in Australia made, I think, $350,000 Aussie dollars out of that idea. And I thought, God, doesn't this prove that advertising is a totally business? In that you have a billion-dollar idea, you make enough money to buy a really small flat in a crap part of Melbourne or something. Now, then it suddenly occurred to me, no, no, no, no, this isn't an agency problem. This problem extends all the way to all our clients. But the interesting thing is, it suddenly occurred to me that in the next financial year, none of the value of that idea will be attributed to marketing. It'll be effectively attributed to, you know, someone in, like, supply chain management or procurement is claiming the credit for the revenue that that idea is continuing to bring in. And so you can't, when I say that marketing is fat-tailed, I mean that literally. David Ogilvy said, in my entire working life, I only had five really big ideas. I think he's being a bit hard on himself. It was probably more like 10. Our business is fat-tailed. But we're being judged by people on this microscopic level where every quantum of expenditure has to be justified by a quantum of incremental revenue. Now, you know, maybe the media world is a bit thinner-tailed, although not by definition, and, you know, maybe you can run the media business on a kind of thin-tailed, commoditized basis. But the point about creativity is that it's the freak outlier that is not the thing you should ignore. It's the thing that delivers probably the greater part of the value."
"Just to kind of unpack some of that, because I think you're touching on three [snorts] really important themes here. One is, you know, how agencies get remunerated and their inability to actually charge correctly for the value of an idea and making money in lots of other ways. That's one thing. Second thing is the whole metric set that goes to the suite, and what becomes acceptable and, you know, what's used or not. And actually, a lot of that is to do with the power of the person driving marketing to, to market marketing, to oversimplify it. And then I think the third thing, and you've been very vocal on this, is management consultancies, tech firms, and so on have used the metrics that suit them, that don't necessarily suit either marketing or the business. So, three broad brush things there. But, you know, as you look at this and you talk around the world, what is the metric set that an astute CEO should be interested in?"
"One of my assertions would be that we've allowed other people to supply our metrics for purposes of ease of comparison. And yet, I would argue that part of being a brand is that you should have some metrics which are entirely your own. Because if you're all pursuing the same thing, the thing is that if you're all pursuing the same objective, you're creating a bottleneck because everybody's trying to do the same thing in the same way. Now, that bottleneck is incredibly lucrative to Meta and to Alphabet because it's a lot of people competing for precisely what they sell, which is the perfect situation to find yourself in as a vendor. So, they're equivalent. They're, they're the equivalent to Scott Galloway says the greatest luxury goods brands are actually the American Ivy League universities. You've got a load of people, rightly or wrongly, convinced that the only route towards personal enrichment is to get a good degree from one of these universities. Everybody effectively competes to get admitted. Um, and at that point, kaching, your Louis Vuitton. Now, I would argue that two things. One of which is, and I, I think this is why influencer marketing, one of many reasons why influencer marketing is now becoming so important, is you have to find a way you can reach your customers without paying rent to what you might call the digital dukes of Westminster, which are, you know, Meta and Alphabet. You know, it's effectively, you know, it's a, you know, we've got, we've got exactly that kind of situation where you own a scarce commodity which is of necessity scarce, and they've created the scarcity by getting everybody to compete for the same thing.
Um, I, I made a joke suggestion, but it's, it's worth bearing in mind. So, I said, "If it costs you now $300,000 in, um, educational expenditure in the US, uh, to get a job at Goldman Sachs, what we need to consider is what's the opportunity cost of that $300,000 versus taking $50,000, going to the pub next door to Goldman Sachs and buying everybody drinks for a month." Okay, now that was a mischievous suggestion. But I said, I would argue that the second approach may be just as successful than the, as the first, and costs a sixth as much. And the person I was talking to said, "It's very funny you suggest that because I've got the daughter of a friend of mine couldn't get an interview at the BBC, and I told her to go to Cafe Nero next to Broadcasting House and hang out there for five days talking to everybody who appeared to be at a loss." Two days, she got her an interview. And my argument is, we need to find the Cafe Nero to, you know, the Cafe Nero alternative to the, uh, the bottleneck that's been created. And, and I'd argue that we've also bought into this thing, which is a whole point about brands. Whatever you think about brands, some part of them is whether it's differentiation or distinctiveness. Let's, let's not even worry about that. Some of your metrics should be entirely your own, because that's what makes you a brand. That's what makes you fundamentally different and distinctive. And just as, by the way, you're not really a human individual. You know, you're not really a free individual unless you define some of your metrics of success. Now, I don't know what yours might be. It might be eventually you want to move to Wales and sell jawsticks in a, you know, in a market. Or it may be that you, you know, you want an enormous super yacht. But some part of being an individual is not allowing other people's metrics to get imposed on your own. Uh, your parents' metrics, society's metrics, that you can devise your own particular measures of success which allow, you know, let, what's that, you know, you be you, effectively. Um, and the same applies for brands.
There's a final, I mean, there's a final point I'd like to make, which is about marketing, marketing. And I got irritated by this because I kept telling people, look, I've accidentally become famous. Why don't you see what I did and try and replicate it to see if it's of any value? And when I dissected what it was I'd done, which was not intentional, by the way, it wasn't a, you know, the product of a standing genius, it was simply that a, a clever person at Ogilvy realized that I was doing a lot of talks for free, and I could charge for. And, and for 25 bloody years, all the money went to Ogilvy. I finally, finally put an end to that. But as a consequence, I ended up talking at a load of conferences and events which weren't full of marketers. In other words, I'd literally go to a compliance conference, or, you know, you know, you know, a health and safety conference, and, you know, if they paid me a reasonable, be a reasonable amount of money for me to turn up, I'd turn up. And pretty quickly, I realized it's always quite fun to show these people a couple of ads. But fundamentally, I'm of limited value if all I do is show them a load of ads, because 95% of the people in the audience will never get the opportunity of making an ad in the first place. So, what I did is I repackaged marketing very simply, and I didn't realize I was doing it at the time, which is, don't sell what we do, sell how we think. That's it. And I would argue that you could rescue the entire advertising business, and to some extent, rescue the marketing profession, if you simply made this change, which is, when you're talking to people who are never going to, uh, you know, actually do marketing, justifying your existence on the basis of what you've done is underelling yourself relative to selling the value you bring by the different and complimentary way you think. Well, Mark Ritson calls it the 180-degree, the magic 180-degree flip, where when you look at things through the consumer's point of view, you see something entirely different. And sometimes you can, therefore, the great thing is, it's very difficult to create magic in supply chain management, but in psychology, you can. It's incredible how famous you have become, and it's almost impossible to escape you on YouTube, um, and talking about alchemy and talking about your fabulous book, but also behavioral economics, and then bringing what you've learned to any other industry. And, and the one I was watching, and it's a testament to you, that I intended to kind of dip in, and I ended up watching the whole thing, was when you were talking to the hospitality industry."
"That was the Welcome Conference in New York. Yeah. Hosted by the wonderful Will Gidara. Yeah. Yeah. So, I mean, can, can you, when you're in a conference like that, what conversations are you bringing to help them be better at what they do? Because actually, this is a really rich vein of the power of marketing."
"Well, it, it turns out that I would argue one of the major reasons why businesses aren't growing very much, and it's very interesting that in 2009, you know, most of our client businesses effectively stopped growing. And there is this question, is does that coincide with the moment they got absolutely obsessed with digital quantification, uh, at the expense of long-term brand building? But let's, let's park that for a moment. But it, going back into history, I suddenly discovered that a large part of this problem has been created by a divide in economics which happened for purposes of mathematical expediency. Mainstream, sort of Samuelson economics, as taught in, uh, economics departments, but which has also infected business schools, basically teaches that humans have stable, set, pre-existing preferences. In other words, they know what they want, and what they're trying to do is to buy that thing they want at the lowest possible cost. And it's obvious nonsense, by the way. I mean, you know, I mean, simple observation, um, can, um, uh, can actually disprove this. And, you know, I mean, you know, I mean, going shopping yourself effectively disproves this whole idea. But the idea was effectively contrived for reasons of mathematical neatness. It, it comes with a whole host of other assumptions that people have stable, transitive preferences, um, uh, essentially, and that they have a kind of utility function. Um, and consequently, they know their own utility function, and they know exactly what it is they want. It's just a question of, you know, how, how you can most, uh, cheaply acquire it.
Now, there was a different school of economics which was much more psychology-friendly, the Austrian school of economics, which of course Peter Drucker, and following on from Drucker, Roger L. Martin, are both exponents of this particular school, which says that effectively value is psychological and subjective. And the Austrian school would see marketing and advertising as as much a source of value creation as manufacturing is. And the Austrian school would also see the call center as a driver, a fundamental driver of business value, of customer value, not as a cost to be minimized. And by the way, I see call centers as completely analogous to the way in which people look at call centers and the way in which they look at their advertising budget. I think, I think they're in direct analogy. And I, you know, part of, part of the rest of my working life will be spent, I think, uh, trying to argue that really good call center employees should be paid six figures, because if you could properly quantify their value in the same way that we quantify the value of salesmen. Now, salesmen can lay claim, not necessarily accurately, to the idea that if it weren't for me, you wouldn't have sold this thing. A call center person doesn't have access to the same numbers to say, "If I hadn't handled that call so expertly, you would have lost a customer, or you would have lost an advocate, or you would have lost a loyal customer." No, a really, really good call center experience can literally have, you know, five years of lifetime value, you know, or, you know, in extreme cases, you can literally create a completely loyal brand advocate from one really, really good experience in that way. But it's vastly harder to prove the value of that. Not, not only because it's harder to prove in it, in and of itself, but because it's slower. Okay? So, anything that pays off slowly is effectively much more difficult to put on a spreadsheet than something that pays off really quickly. And that seems to me to create a massive asymmetry in the way we're looking at businesses fundamentally. These things, actually, by the way, they're also compounding investments. So, they're a bit like a pension. You know, the value of them is slow to appear, but it compounds over time, brand investment being an obvious case in point. Saying, actually, I mean, that's another point about marketing is we've become so frightened of saying benign, simple things. That I was saying recently in, I said, "Sometimes the best promise we should be able to make to a client is, look, you're not famous. You deserve to be famous. We'll make you famous." But the interesting thing about fame is it is inordinately valuable in terms of the way it, it, it's effectively an inflection point. It's a phase transition in how you do business. The best, the best expression of that was a guy called Matt Johnson, who wrote the book Blindsight, and also wrote a very interesting book on branding, uh, from a neuroscientist's point of view. And he said, "Having a great brand means you get to play the game of capitalism on easy mode. You, every transaction you have is fundamentally lubricated by your own fate." Now, precisely because it has multiple effects, it's very difficult to isolate its value. Um, and so I think, I think our quest for self-justification and accountability has in fact been self-defeating, that we've ended up doing exactly the kind of things which we should have been doing a bit less of. Um, and let's face it, a lot of digital advertising is a shelf wobbler without a shelf. You know, it's not, it's, you know, it's, it's not even in a good place. I mean, say what you like about shelf wobblers, they're right next to the product."
"Yes. Yes. And I, But, you know, I, we could have a huge tangent here on how poor digital advertising is and how poor the digital promise has been in delivering. But I think the, just to go back to your call center point, and to link it to another one of your themes. I mean, I think, you know, you, you can see that what's being lost in the tech bro world is human connection, understanding human beings, and understanding that, you know, if you want to be successful, and every anecdote you've given, you know, go to the cafe next door and talk to people, do a really good call center thing, I mean, human delivery of your brand promise and consistency is proven to work way beyond other things, but it's not, you know, it's not measured correctly. And I, that's when we then get into the long and the short of things. So, what do you think we could do, um, to make a real impact here, to get people to realize how important these things are?"
"One interesting question is, the investor community probably understands these things. Uh, one really telling finding was that four out of the five gold winners in the IPA advertising effectiveness awards were family-owned businesses. Laithwaite's, Yorkshire Tea, Specsavers, and McCain. And the fifth was Guinness, which is undoubtedly its success is the product of a very, very long-term approach to its marketing. Um, and, you know, let, you know, let's be honest, you know, Diageo and P&G and Unilever and, you know, Nestle and people are at least marketing-heavy enough to understand this in terms of, you know, the weight of where their attention is placed. I hope, um, uh, although it's only a matter of time in any of those organizations before the CFO takes over as CEO, and then you begin the long spiral to, uh, to the bottom. But there's something really, really important there, which is that, uh, if you have an efficiency mindset, it comes at a price, which is that you lose the, you lose the opportunity mindset, fundamentally. You know, there's a very interesting story I tell now, which fascinates me, which is the story of why Mike Smith, working for Decca in 1963, rejected the Beatles and signed, um, Brian Poole and the Tremeloes instead. And of course, widely touted as the worst decision in the history of music. Um, my argument is, no, no, no, he made the right decision, but in the, within the wrong framework. And Brian Poole and the Tremeloes went on to have a few number ones. They even bumped the Beatles off the number one slot on one occasion. They were probably a better band at the time in terms of immediate payoff. Okay. So, what was wrong about the decision was that someone had told Mike Smith, who liked the Beatles and found them very engaging and saw potential in them, that no, you can only sign one of the two bands that's auditioned that day. It's completely arbitrary, ludicrous thing which comes from the efficiency mindset, which is you frame everything as an either/or. And consequently, I, I can see there's this fundamental question, which is one of the reasons why the, uh, the Western economies outside the United States aren't really growing is because they've been captured by this efficiency mindset. Blair N, you may know him, wrote the book Win Without Pitching, brilliant guy. He calls it inefficiency. That if you're, if you're effectively, if you're preoccupied by the idea of efficiency, it's impossible to innovate, because in that mindset, any innovation looks like a waste. And it comes back to the thing, of course, being fat-tailed. The Beatles was the outlier possibility. In other words, the Beatles was betting on 17, and Brian Poole and the Tremeloes was betting on red. And the obvious thing was that in this case, there was no particular reason why you couldn't have signed both. But the mindset rendered it impossible."
"Well, you know, I, one of the quotes I wrote down from your speech in Amsterdam is this notion that a creative person always has to ask the traditional person for permission, but they never return the favor."
"Well, that, that's a very useful segue. So, what I, when I said we sell how we think, don't sell what we do, it always annoys me that CAM is a retrospective, right? It's, "Hey, didn't we do well? Look what we did. Isn't it good?" CAM. And then, by the way, you reward the creative people with beads. It's like selling Manhattan for beads. And they go away completely happy. The, the best creative ideas in CAM should come with a flaming seven-figure check. They're that valuable. That someone should be walking away with a, you know, you know, a stack of cash. If the TV industry, it's a sales festival in CAM. You go there and say, "I've got this idea. Do you want to buy it?" You don't say, "I had this idea. Can you please tell me I did really, really well?" You say, "Here's this idea. We own the format. Divvy up." But CAM is a total retrospective. And we're always defending ourselves on the basis of what we've already done rather than on what we could do. And my argument is that so Fobbs, okay, one of my favorite little marketing case studies, which is they had the insight that nobody gave their kids yogurt to take to the school lunchbox. Not a problem with yogurt. Kids like yogurt. Parents love their kids eating yogurt because of the calcium and D. Anyway, so they put yogurt in a tube. It says on the outside, you know, "Survives outside the fridge for eight plus hours." Bang. They capture the lunchbox. What we've done in the advertising industry is we've gone after the, we've gone after people with larger media budgets. We haven't been paid on commissions since 1992. There are people out there who need creativity and marketing inspiration. But because they don't have a media budget, no one from the advertising industry is bothering to talk to them. We, we have a very large B2B and very good B2B capability within Ogilvy. It's partly actually, it's kind of the legacy of having a very strong direct marketing, um, standpoint, because ad agencies weren't interested in B2B clients unless you were kind of the scale of IBM, because the media budget wasn't big enough, whereas direct marketing agencies paid on fee would, would actually, and, and because they knew how to do, obviously use targeted media, that was a natural strength of of direct agencies, and they get frustrated because they keep saying, "Look, there are hundreds and hundreds of enormous businesses out there which have problems which we can solve." But the weird kind of first hurdle of of being engaged in that agency is, are you throwing a load of money at, well, it used to be Rupert Murdoch, and now it's Mark Zuckerberg. It's irrelevant. We should be able to sell creativity independent of, you know, any consideration of the, the form it takes. And, you know, we, I don't think the people in marketing realize how uniquely the way they think differentiates them from other people. And as a consequence, I think they often get into complete misunderstandings because they assume that other people are thinking just like them. Most people in the organization basically have an efficiency mindset, a cost control mindset. Um, and consequently, the marketing people are talking at cross purposes. Um, and, um, fun, you know, fundamentally, that fact that family-owned businesses can now do advertising and brand building, and the PLCs can't, is I think highly significant. I, I grant you it's a small sample size, but you start to see the same thing with innovation. The family-owned businesses are allowed to consider risk, reward, and return over multiple time scales. They can do the short-term stuff, they can do the long-term stuff. What's actually happened as a byproduct of the shareholder value movement, which is a totally dumb idea, absolutely fatuous idea, is that companies are basically incapable of doing anything where the payback isn't immediate and quantifiable. Now, that actually makes you deeply untrustworthy. A, any the nature of a relationship is that it's some form of reciprocation over the longer term which transcends the idea of "you scratch my back, I'll scratch yours." It's the idea that over some period of time, we will engage in, in an ever-deepening relationship of deepening trust to our mutual advantage without actually counting the value of each individual transaction. There is a fundamental difference between transactional capitalism and relational capitalism. The, the math is different, the time scales are different. Transactional capitalism is where you don't expect to see the person again, and all you're doing is basically each party is merely trying to maximize the short-term return on the individual transaction without any consideration for futurity. That's a tourist restaurant, or at least it was a tourist restaurant before there was TripAdvisor. Your local pub is in the business of relational capitalism, and you know, which is, "Oh, I forgot my wallet today." "Don't worry, Dave, bring in the money." Right. Um, and fundamentally, people like relational capitalism, and they feel cheated if what they think is a relationship is handled as a, is handled like a transaction."
"Yeah, and that, um, explains the demise of many in industry, but, but we won't go there. But I think, Rory, just to kind of wrap us up, um, can I ask you, using your book Alchemy as your thought base here, if there's one thing global CMOs need to take from that book, uh, what would it be?"
"Uh, very simply, um, if you don't look for magic, uh, you won't find it. And if you don't believe in magic, you won't even, uh, um, profit from it when it falls in your lap. And I think that the economic idea of tradeoffs, uh, my friend Nicholas Gruen, the Australian economist, has written about this, that this idea that everything is a tradeoff. No, not everything is a tradeoff. The whole point about creativity is where you, you're presented with an apparent contradiction, and you find a way of resolving it so that it's no longer contradictory. Reassuringly expensive. Okay. Is a magical resolution of a tradeoff between price and quality, which is, you like paying, you like this because it costs more. And generally, Bulmer said of that, that it was the greatest advertising endline of all time, you know, "reassuringly expensive." And that's the point about creativity is you take two things which, there are other forms as well, there's patent recognition and so forth, but a very large part of creativity is exactly that, that you take some two things that appear to be opposition, and you provide a psychological or some other form of twist. Uh, "We're number two, so we try harder." Another example, uh, which, which effectively means that, uh, this is, you know, this is not a problem. It's no longer a tradeoff. It's two things acting in harmony. And the point is that for some reason, business schools teach people to run businesses as if they're controlled by the laws of physics. Now, the laws of physics are very annoying because you can't rewrite them. But the laws of psychology can be endlessly rewritten. My train story is an example of that, which is, well, do you need to make a train faster to make it better? Um, you know, I'm, I'm, I'm absolutely intrigued by the whole electric car hostility, because of course, you actually spend less time charging an electric car than you do filling a car with petrol, because you don't have to stand over a car while it's charging. My car's charging right at the moment, and it was charging while I was asleep. So, you suddenly realize that a lot of people get fixated on one particular metric."
"Yeah. And I think the, if I, if I can bring us to a close here, because I think your advice of, if you believe in magic, uh, you'll recognize it when it falls in your lap, and the best brands are indeed built on that wonderful combination of logic and magic. And Rory, thank you so much for your time. Wonderful to listen to you. Wonderful to talk to you, as always. And I'm sorry we're not paying you for this, but I'm glad that other people do."
"Thank you so much. But this whole thing when I say sell how you think, not what you've done. Um, uh, you will find, as Fobbs did, there are whole new sources of whole new markets for creativity out there. I get bombarded with requests from, you know, hedge funds, private equity, Blackstone. Okay. Yeah. Um, and the mistake we've made is we've thought our value was confined to our output. And in an AI age, of course, where output is going to be commodified to some extent, how you approach a problem in the first place is actually this, you know, the, the surviving unique benefit for which human intelligence and design thinking and effectively, um, what you might call, well, imagination, very bluntly. Yeah. You know, that there is still a desperate need for that, regardless of whatever technology tries to commodify."
"Wonderful. And on that note, Rory, thank you very much. Enjoyed it. Really loved it."
"See you soon, too. What a pleasure."
"Thank you so much. Take care."
"Bye-bye."
"Well, thank you very much, Rory. As I said, another fantastic, um, opportunity to learn from one of the greats of our industry, and so many meaty thoughts in there. I think you're going to have to listen a couple of times. I hope you do. Um, take care until the next time."