Transcription
Feel free to storm the stage in my point. Absolutely. Only in Manchester. You're actually the biggest buyer of bears in Britain. Is that right? The day we need to start measuring stuff like that, we should just stop doing it. I think the stuff you should just hear that everybody finance people. Yeah. And one thing I always give as a tip is Nick from fast feedback businesses. Amazon does it. And Amazon is a fast feedback business which tests everything. So if it didn't work, they wouldn't do it. If you look at all the companies that have been on the Fortune 500 or the Footsie for 100 years or more. In other words, they're really enduring. They're all marketing companies.
First off are two giants of the industry. Big hero of mine, a living legend who really does cut through all the noise and misinformation that clouds the true craft and importance of marketing. He recently commented that UK business was made great by innovators, creators, and pirates, but they were so successful that their grandchildren became accountants. Physics had Newton, and we have Southerntherland to equally oppose our costcutting frennemies. Sorry if there are any uh finance people in the room. Rory is joined by a northern great who famously after a one pound bet to set up a company turned white goods into gold. A passionate campaigner for supporting young people in realizing their ambitions, John Roberts will get Madfest out of the fridge and get things cooking. So AO, let's go.
So this is fantastic because this is year one of marketing, advertising and disruption up north and already I think it's the largest marketing conference north of Watford in its first year which is amazing and gratifying. Is it the only one? Uh no no there are others I promise. It's actually I think it's particularly appropriate because if you look at the UK's disruptive brands um they're disproportionately found up north and I think it also helps cheekily said to be actually based in a part of the country where creative people can afford to live which is probably a bo.
So how do you feel being on stage? Yeah great we were just laughing about it. Well we're a couple of frauds aren't we? us. I was laughing. I was looking down, you know, all you guys with all your marketing degrees. Uh, and uh, and neither of us have got one and we're and we're opening this thing. Uh, and I was looking down the list and I, uh, I noticed that Olivia McKe from We Buy Any Car as an extremely well-known brand is in the audience. And I was saying, why is she in the audience and why is she not here? And, and we're here as two frauds without any marketing qualifications whatsoever to open the show. So feel free to storm the stage. So they're only in Manchester. I mean there is an interesting thing though which is that really innovative businesses actually more often than they think usually start with a founder who has a really sound and also really distinctive marketing instinct. I mean you mentioned we buy any car. Okay. Uh you know a work of genius to name your business that. I mean I don't think there's anybody in the room going I wonder what they do. Okay. You know, and you said actually that they're the they're the fastest brand to get from naugh to 90% awareness. Yeah, I believe so. Ever in the UK. And if you you know, if you look at Dyson, for example, he would think of himself as an engineer, but against opposition from everybody else in the business, he wanted to make the vacuum cleaners transparent, whereas everybody else wanted to make them opaque. And the conventional wisdom was nobody wants to see the dirt. But his logic was vacuuming is inherently more satisfying if you can actually see what you're extracting from the carpet. And so quite often, I mean, I always tease Greg Jackson from Octopus Energy because they were originally going to be called Green Ecote Tech and they were funded by a company called Octopus Capital who demanded that they rename themselves Octopus Energy. And I said, if you'd been called Green Eco Tech and you hadn't had a pink octopus as a logo, you'd still have 15,000 customers. Yeah. You'd be dead. Yeah. You'd be dead. And so actually you know if you if you make a really good study of entrepreneurialism and you had actually the act of marketing genius which is there is one category okay where online retail has an obvious advantage over physical retail which is appliances. Yeah for sure.
I think the point that you make is uh and I still have it today which is uh that when I say to the team that if everybody says you're nuts uh that's normally a green light for me uh that that you're on to something. Yes. Uh otherwise everybody else is thinking of it. So just trying to evolve an idea that everybody else is doing doesn't tend to get you the cut through. Doesn't tend to get you where you want to be. Uh, you know, a great example of it, we were having a session in the cafe down uh downstairs, was uh the idea of giving away a little green bear. I mean, what on earth has that got to do with washing machine? You're actually the biggest buyer of bears in Britain. Is that right? Yeah. Yeah. Yeah. Uh we don't make a lot of money out of them. It's got to be said. Uh although uh it's it's a bit like the you know on Virgin the salt and peppers uh of stolen Atlantic and um Gordon Ramsey is now banging on about his lucky cat brass things that get stolen as well. Don't know where he got that idea from. Uh but the uh the green bears we give out. So the drivers give them we don't track any of it at all anywhere. Um but uh but there's quite a lot of our drivers liberate a few uh and then sell them on eBay. What uh and and so you know your you know your story about the potato uh and and how they took the potato made it a royal vegetable uh because they couldn't get people to eat it and asked them to guard it but not guard it very well and then everybody wanted them and so on. We've done exactly the same with the bears. So selling stealing bears as a driver is a sackable offense, but we don't police it at all because if somebody is wants to steal a bear because there's a market on eBay for somebody that wants to go on eBay for whatever reason and buy a green bear for whatever they want to pay for it. Why would we want to stop that? All we want to do is get green bears into people's hands. And if we can get them into hands of people that really want them and are willing to pay for them, which by definition is someone brilliant. And if some entrepreneurial driver can make five quid out of that, well, tick.
So there was there was a genius idea I heard which I thought was beautiful, which is slightly similar, which is there was a company that was selling something like cladding for homes. And the biggest cost they had in their business effectively was sending out samples. They're about 6 in square. And it was hugely expensive. And they got around the problem by selling the samples on Amazon for 99p. So they basically got Amazon to take they just said, "Yeah, yeah, you you can have all the samples you want. Just go on Amazon." Of course, Amazon Prime then takes care of them and they they get a tiny amount of money for what used to be a huge cost. Yeah. And I No, I mean it's an ad for your brand which is present in the home. Now the interesting thing about it, of course, is that it's impossible to quantify the value. So it is and my phrase has always been uh the day we need to start measuring stuff like that we should just stop doing it. I think there's stuff you should just hear that everybody finance people. Yeah. Right. Okay. Uh you know the there's stuff you should just believe in. That's easy from my position to be able to do. Um, and so you know I don't particularly if I want to create a budget for something I'm able to just do it. Yes. Um, but there there's just stuff that if you believe in it, things like that, they're impossible to measure. You know, there's loads of marketing nonsense uh around chucking mud at walls and excuses for waste as I think about them. Um, but equally there's you can get far too down the road of uh PPC and attribution. And I think if you use either Google or Facebook's attribution, I think they're responsible for about 650% of your sales. Uh so so there's no actual truth in all that either. And last click, which click, what are all that is, but there's more measurement in it. Whereas this the sentiment that goes around stuff like bears and green vans and the soft stuff as I think about it but that has I the phrase I use internally is cash the check in the second half. So so if we give you a bear today and we're in a low frequency purchase category when do I get the benefit for that? I don't know. But once I'm getting the benefit for that, the structural advantage that I have over my competitors at that point is huge and very difficult to compete against because you're right because actually if you think about it, I mean appliances are a slow feedback business, aren't they? Because repeat purchase is slow. Banking is slow because nobody actually leaves their bank. They just become inert as a customer. And one thing I always give as a tip is Nick from fast feedback businesses. Yeah. So, so I don't know if anybody's used Amazon's call me back button. You know, you have a problem, something doesn't arrive, you eventually get to a choice between live chat or call me back. And the phone rings in about 2 seconds. Of course, they know who you are. You don't have to go through a whole lo of pre-clarance nonsense. And I said to a bank, why don't you do that? They said, well, we can't prove that it works. I go, you kind of can, which is that Amazon does it. And Amazon is a fast feedback business which tests everything. Okay? So if it didn't work, they wouldn't do it.
So I think I think what's happened and actually Roger Martin talks about this. The worst effect of the power of finance and the shareholder value movement in business is you have a finance function which demands an absurd level of proof and certainty for everything you do. Well, and speed. And speed. Yeah. So we so so you know, we've been through a you know, a roller coaster over the last 25 years on AO. And uh and when you're in difficult times, what gets caught first? marketing budgets. Of course, uh TV advertising is always one of the first things to get cut because you can have the saving immediately and the impact doesn't happen for a while. Of course, uh and and so, you know, in in our case, whether it's green giving out green water bottles or giving out green bears or whatever it is, uh the payback on that is slow. And so, you know, I always talk about spray marketing money around when you've got loads of money, fix the roof while it's sunny, and invest in lots of the long-term things when the budget is available. But when you get, you know, I always say there's three types of accountant in this world. There's the ones that can add up and there's the ones that can't. And uh and so when you get them involved, yes, I've spent a pound. What have I got back for it? And and if and if you can't demonstrate that in in in the digital world in a week, in a month, in two months, three months, you're really pushing it, you don't build brands, you don't build reputation. You don't build feel over three months. And so it needs, and this is why I think founderled businesses really have an edge over corporate businesses, uh because you're able to think more long term. And it's that thing. I just believe in this, so I'm going to keep going. Your James Dyson, he didn't start off thinking about a clear. It was a It was a progressive series of steps, but everyone said he was mad. Yeah. By the way, Jeff Bezos, everybody thought Amazon Prime was nuts except Jeff. Yeah. Marketplace was nuts as well. A marketplace was in that side. You bought competitors on your own site. Yeah. And absolutely. and and with with Amazon Prime obviously I think 120 American million American households have it but million in the UK now with Amazon Prime is it and you have your own version don't you which everybody thought was nuts. Yeah. So exactly again you know so we've launched AO membership which is £39 you get free delivery free recycling and some member discounts on products. Uh and everybody said it won't work. You don't have the uh frequency of purchase. uh nobody will pay to join an electrical member retail scheme. So I went and spent a load of time out in the US with uh they've both retired now, but Richard Galante and Craig with the CFO and CEO at Costco who big lesson for everybody. People tend to be generous with their time. Uh I I must have spent three or four days with the two of them out. Yeah, you had to fly to Seattle was the only catch. Uh but Amazon were there as well, so they're a competitor. But Jeff Wilkey was running retail, then Dave Clark was running retail. They were really kind with their time. And the takeaways that I took away from Amazon were um box set toothpaste, which I know sounds simple, but they can track very very clearly the more box sets and video you watch, cuz when they went into video, everyone said they were nuts and it was a vanity project. Yep. Uh but if you watch more box sets, you keep your prime, you buy more toothpaste. So as a metric, that was one of their measurements for it. And and from Costco, just the absolute obsessional uh cost out model to be the most efficient and fix the margin that they make and return everything on the shared economics model uh to customers. And it takes time. The early days very generous to their employees, aren't they? They always pay way over minimum wage and they get beaten up for it all the time, but they refuse to budge. Yeah. And they can do uh because they are so ruthlessly efficient. Uh and they actually run about I think it's about a 5 billion net operating loss. Uh so they make as a profit 5 billion as a loss against what they get in membership. So their members pay for the business to exist in effect and then they operate the business in effect at a loss with and it's so ingrained in their culture whereas what do we do generally in business you go how do I make more money how do you make it more transaction more the idea of saying right well if twice as many buy we make twice as much money going well hang on a minute if we can get twice as if we can get the same amount of people to buy twice twice as much. What about if we shared 70% of that back with them and we'll just take a bit more but but it'll last for a lot longer. Of course. Actually, how are they owned Costco? Are they shareholder owned or are they privately? I'm just trying to It's listed. It's listed. Yeah. So, how they managed to do that? Because I always think the marketing fraternity and agencies in general made this terrible mistake which is they got fixated on the idea that you could prove everything. Okay? And they the whole thing was marketing accountability and they had this fantasy world where basically you knew the value uh of every dollar you spent and you knew exactly where to allocate it. And unfortunately that is true but only in a very limited sphere of marketing. The rest of it you have to to some extent either either it's slow you've just got to wait. I mean you could prove the value of a bear after all couldn't you? You you'd have a control group of customers to whom you refuse to give bears. But it's for me it's the classic uh 10 year overnight success story. Yeah. Uh that you know how many businesses are a 10year you know you're toiling away you're working it out. Um, you know we we talk about it as the fo project of just sort of about and find out. You don't really know what you're doing but we're relaxed about that. It isn't a problem. Uh, and the amount of the 10-year rule is incredible where you're much better in a private arena that doing that, not as a listed business. But again, as a founder listed business, you get a bit of a pass. Uh, because you're that well, he's that entrepreneurial crazy founder and he sort of gets a bit of it right. Oh, go on, we'll back him type thing. Uh, whereas if you're more corporate, you're meant to play the game more. Yeah. And actually a very interesting thing by the way which never occurred to me in 30 years working in the business until I read it in a book by John Kay. If you look at all the companies that have been on the Fortune 500 or the Footsie for 100 years or more in other words they're really enduring. They're all marketing companies. It's all PNG, Nestle, Unilver. And John K's explanation is the focus on the customer as distinct from the focus on operational efficiency keeps you agile and relevant over time. Whereas if you actually focus on operational efficiency, you end up being very efficient at doing the wrong thing. Yeah. In other words, you're doing the wrong thing right, which is actually worse than doing the right thing wrong, if you see what I mean. Yeah.
Well, but it's that point about it takes time for marketing to grip. Yep. Uh and and so you know Jeff Bezos would say that look I don't really want to talk about this quarter's results because they're the output of what we did three years ago. Yeah. Uh so what you really should be doing is you should be looking at what we are doing today and that'll be the output in results in three years time. And the most interesting thing when I did our IPO which was 10 years ago uh was and I kept I said this to lots and lots of different investors uh where we sort of had a quite a cultural clash me and investors generally uh and um is one of the biggest inputs of value uh is the culture in the business. I actually believe it's all gone a bit far if I'm honest. Uh with and and been accelerated through COVID with work from home. Uh and and as a creative audience, uh it amazes me how many of you lot work from home when I think you saw so much better and more creative bouncing ideas off each other together in a room uh rather than a screen. Uh so um but uh but culture in an organization often defines the customer experience. you know, for us getting drivers to care, uh that's hard. That's really hard. Yeah. And so, no investor, when you think about it, it's two very different jobs, isn't it? Navigating a van through busy traffic for two hours and then being really nice. Well, and delivering a smile rather than a washing machine. Yeah. And so, uh, but no investor I've ever met has any metric whatsoever for measuring the state of the culture in a business. Yeah. You're investing today for what the performance of that business is going to be over the next three years. That's largely going to be defined by the people in the business and how well they're working together over the next three years. But they all measure it on what happened over the last three years and think that is what's going to inform the next three years. For me, it's nuts. You're absolutely right. I've never seen a cultural I mean, David Oglev was the huge sort of prophet of this, which is that your corporate culture is a major source of competitive advantage. It sits on the balance sheet at zero. At zero. You're absolutely right. Yeah. And nobody's actually looking at HR data like staff retention for example where the difference between an experienced call center person and a new person in terms of the customer effect is monumental. I mean you're that's another interesting thing which is you invest a lot in effectively in customer experience. Uh you know one of anybody who's had an AO delivery will know you're kept brilliantly informed. You're never in that kind of dither state where you're hovering in under house arrest for a day and a half wondering when something's going to turn up. Okay. And they're text messages. There's, you know, and I think you can actually contact the driver directly, can't you? Yeah. Which is almost unique, you see. And I think so one of the way I talk about that internally is the best service is no service, which also happens to be the most profitable service. So costs walk into businesses on legs. Uh and every time we have to interact with you uh as a person uh it costs us money. Yeah. So and you don't we do actually bizarrely have people that ring our call center for a chat. I know it happens. Yeah. No, but and that's probably you know that we should we should take that as a nice point of the brand and how nice our people are. Uh but um normally you're only ringing to speak to us if something's wrong. Got it. or you want some help. And if you want some help, it's because we haven't provided the information correctly on the website in the first place to you. And so we we need to take all that as our fault uh that you've had to ring us. Uh and we should be pushing that information to you ideally just as you're thinking about needing it. Uh and again, that's for us about all the vertical integration and owning the vans. Nobody cares about your business like you do. All carriers pretty much are Uh, and you know, if I said yodel, would anybody has anybody ever had a good experience with yodel? Actually, I'm going to weirdly. Uh, generally bad, but we had one local driver who was really good. So, of course, it is highly spotty. Depends on who Yeah. Yeah. who your individual driver is. Yeah. But normally, they're playing javelin with your parcel from across the road. Yeah. uh and uh and if it happens to be a PlayStation well a oh well it might not work. There's a very interesting failure in e-commerce which is because the decision as to who delivers is taken by procurement. Okay. I would argue that nearly every e-commerce business would sell a lot more if it offered people a choice of who delivered. Okay. Not in your case cuz yours yours is obviously for well for small items. It would apply in your case. Yeah. Yeah. Offer people a because some people like Royal Mail, some people like DPD. Generally people have a preference and if you advertised up front that if you're paying for delivery you should choose who delivers which seems reasonable to me right okay and instead it's a procurement decision where they're driven to put everybody through the lowest cost supplier and in probably 20 or 30% of those people will discover at the last minute that that's who's delivering and will drop out of the basket. Yeah. Because 20 or 30% of people will have a really strong aversion to any given carrier. And it's always struck me that that's a classic case of the finance people making a decision which the marketing people should be making.
It's one of the things that I quietly take credit for on Amazon. In my time with Dave Clark when we were doing the membership thing uh he uh he asked me what would you change about Amazon's business in the UK? And they just launched Amazon Logistics. Uh where you know some pretty shitty old you know they screwed the price on everyone so hard. uh you know it was yeah the great Amazon experience but what actually turned up at your door was some disheveled in an old car on 50 p a week uh and uh and I said to him by the way if you want to do a favor for your Amazon delivery people use locker delivery cuz the drivers basically get paid per delivery so if they can drop off eight things at a locker it's like hitting pay dirt so that's that's your bit of ethical consumerism for the day like coming to our reception this Christmas where they come with a whole van Yeah, of course. And uh and so my idea for him was why don't you with all your scale, why don't you go and get thousands of Amazon branded vehicles and then force your contractor to use your van. So at least when you turn up to a customer's house, the presentation of your delivery is much better. Uh and then about 6 months later, thousands of these things I noticed and I was like, keep your mouth shut. The only the only the only worry about that actually is that I think they may have had a fear in that people would be aware how much they contribute to road congestion if they realized how many vans there were. I think that was one fear. But funny enough, it's very interesting that the super premium delivery firm UPS are absolutely religious about livery. Yes. So when a when a UPS van is finished, they trash it. You know, there no secondhand, you know. So, so that absolutely every single vehicle is brown and conforms and uniforms conform to case caused a bit of a problem when they launched in Germany because you're forced to wear a brown shirt which has connotations apart from that. Germany didn't go well for us. But you've got to tell us about the bet by the way the the one pound bet which started the whole business in the first place. Yeah.
Well, so uh so I'm not a marketeer. I'm not a techie either. I am the ultimate fraud. I'm just a salesman. So a friend of mine was a a guy who was a strange guy. Unfortunately, he's no longer in this world, but he he was a van driver during the day and a quantum mathemat mathemat mathematician at now. Uh and uh he was the weirdest bloke. He was a complete contradiction and we should never have met. And I met him in the pub. We got on well and over two or three years he kept banging on about this thing called the internet. this is sort of 97 and and I was saying I reckon you could flog gear on it. uh and he was saying it's not about that it's about information and uh organized Google didn't even exist at the time it was Ala Vista and Jeieves I think it was Yahoo and Yahoo back in the day so um anyway we had our one pound bets whether we were playing pool or uh whatever we were doing uh and uh and so on Christmas Eve 1999 he'd had enough of me banging on about vlogging gear on it and he said I bet you a one pound bet that you don't close your kitchen business in Manchester and actually do this uh and get on with it. So, uh I took the bet that trading places it was £1. It genuinely was. I have it in my bar at home. It is there. It is framed. Somebody interestingly, um Henry Moser, who collects old notes, uh gave me recently a crisp old-fashioned one from the mint note. So, I've got that framed as well. Yeah, people give me one pound. It's quite good actually. Uh if on my way out if you could all u well I mean it's been worth actually a lot more than that to everybody on the room. So don't you wouldn't feel this has been absolutely astonishing advice and I think what is so interesting is that the entrepreneurial mindset is vastly more marketing friendly and vastly more long-term friendly and they're not that's not a coincidence than the corporate mindset. the corporate mindset has become because effectively if you demand complete certainty the natural first thing is cost cutting because it's quantifiable and it's immediate well so I think and and for people in the audience I think that sort of looking at this from the other way around I think the biggest thing that you can deliver to somebody like me if you like somebody leading a business is uh is confidence in the idea and so I would always challenge you to ask why this delivers confidence, why should I be confident about this? Cuz I've had many, many, many, many pitches over the years. Uh, and uh, some of them have been good. Most of them are not. Yeah. Uh, and uh, and most of the ones that are good, you believe are good because of the passion and the confidence and the commitment to it that people deliver. And that would be the single biggest thing. And it's the same whether you you've got confidence in the crazy idea. If it's a design and marketing pitch to somebody, why are you passionate about it? Comes through in body language in every single way of what you're doing would be my takeaway. Absolutely fantastic, John. Thank you very much indeed. Absolutely fantastic. Thank you very much. Huge hand there. Wonderful. What a pleasure. Thank you ever so much.