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This story appears in the April 2019 issue of Entrepreneur. Subscribe »
Imagine that you are sitting in the boardroom of a major global drinks company, charged with producing a new product that will rival the position of Coca-Cola as the world’s second-most-popular cold nonalcoholic drink.
How would you respond? The first thing I would say, unless I were in a particularly mischievous mood, is something like this: “We need to produce a drink that tastes nicer than Coke, that costs less than Coke, and comes in a really big bottle so people get great value for money.” What I’m fairly sure nobody would say is this: “Hey, let’s try marketing a really expensive drink that comes in a tiny can…and tastes kind of disgusting.” Yet that is exactly what one company did. And by doing so, they launched a soft-drink brand that would indeed go on to be a worthy rival to Coca-Cola. That drink was Red Bull.
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When I say that Red Bull “tastes kind of disgusting,” this is not a subjective opinion. No, that was the opinion of a wide cross-section of the public. According to marketing lore, before Red Bull launched outside Thailand, where it had originated, the licensee approached a research agency to see what the international consumer reaction would be to the drink’s taste; the agency, a specialist in researching the flavoring of carbonated drinks, had never seen a worse reaction to any proposed new product.
Normally in consumer trials of new drinks, unenthusiastic respondents might phrase their dislike diffidently: “It’s not really my thing”; “It’s slightly cloying”; “It’s more a drink for kids” — that kind of thing. In the case of Red Bull, the criticism was almost angry. “I wouldn’t drink this piss if you paid me to” was one refrain. And yet no one can deny that the drink has been wildly successful — after all, profits from the six billion cans sold annually are sufficient to fund a Formula 1 team on the side.
While the modern world often turns its back on this kind of illogic, it is uniquely powerful. Alongside the inarguably valuable products of science and logic, there are also hundreds of seemingly irrational solutions to human problems just waiting to be discovered, if only we dare to abandon conventional logic in the search for answers.
At Ogilvy, the advertising agency I’ve been at for more than 30 years, I founded a division that employs psychology graduates to search for illogical solutions to problems. We look at human behavior through a new lens. Our mantra is “Test counterintuitive things, because no one else ever does.” Imagine proposing the following ideas to a group of skeptical investors:
→ “What people want is an expensive vacuum cleaner that looks really cool.” (Dyson)
→ “The best part of all this is that people will write the entire thing for free!” (Wikipedia)
→ “I confidently predict that the great enduring fashion of the next century will be a coarse, uncomfortable fabric that fades, takes ages to dry, and to date, has been largely popular with indigent laborers.” (blue jeans)
→ “Just watch as perfectly sane people pay $5 for a drink they can make at home for a few pennies.” (Starbucks)
→ “And, best of all, the drink has a taste consumers say they hate.” (Red Bull)
No rational person would have invested a penny in these schemes. But what entrepreneurs know is that logic gets you to exactly the same place as your competitors. In fact, entrepreneurs are disproportionately valuable precisely because they are not confined to doing those things that make sense to a committee. Interestingly, the likes of Steve Jobs, James Dyson, Elon Musk, and Peter Thiel are often seemingly bonkers; Henry Ford famously despised accountants — the Ford Motor Company was never audited while he had control of it.
My contention is that nearly all really successful businesses — like Dyson, Apple, Starbucks, and Red Bull — owe most of their success to having stumbled onto a psychological magic trick, even if unwittingly. But you don’t have to stumble onto it. To find that magic, you must embrace the idea that anything — from consumer behavior to people’s perception of a product — can be transformed, so long as you’re willing to think like an alchemist.
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Alchemy: It was the Middle Ages’version of chemistry. Scientists of the day believed that matter could be transformed — and most notably, that worthless metals could be turned into gold. When this proved impossible, they gave up. Later, Newton would fill our heads with thermodynamics and the conservation of energy. Science was confirming that you can’t create something out of nothing — you can’t create a valuable metal out of a cheap one, and you can’t create energy in one place or form without destroying it somewhere else. Other disciplines would find their own version of this fact. Economists, for example, told us “there is no free lunch.”
But because logic proved so reliable in the physical sciences, we came to believe it must be applicable everywhere — even in the much messier field of human affairs. The models that dominate all human decision-making today are heavy on logic and light on magic. A spreadsheet leaves no room for miracles. But while logic may be right in the narrow sphere of physics, it is hopelessly wrong when it comes to the very different business of psychology.
The advertising agency J. Walter Thompson used to have a test for aspiring copywriters that included the question “Here are two identical 25-cent coins. Sell me the one on the right.” One successful candidate understood the idea of alchemy: “I’ll take the right-hand coin and dip it in Marilyn Monroe’s bag. Then I’ll sell you a genuine 25-cent coin as owned by Marilyn Monroe.
We don’t value things; we value their meaning. What they are is determined by the laws of physics, but what they mean is determined by the laws of psychology. The reason the alchemists gave up in the Middle Ages was because they were looking at the problem the wrong way. They had set themselves the impossible task of trying to turn lead into gold but had got it into their heads that the value of something lies solely in what it is. This was a false assumption, because you don’t need to tinker with atomic structure to make lead as valuable as gold. All you need to do is to tinker with human psychology so that it feels as valuable as gold, at which point, who cares that it isn’t actually gold? If you think that’s impossible, look at the paper money in your wallet; the value is exclusively psychological.
There are many ways to create alchemy in the modern business world. But at the core of it all is challenging the given explanation for something and considering every alternative, as illogical, irrational, and counterintuitive as it may be. Ingvar Kamprad, Ikea’s eccentric billionaire founder, was convinced that — rather than offering finished tables and chairs — the effort invested in assembling his company’s furniture would add to its perceived value. (When working with Ikea, I was once advised, “Do not, under any circumstances, suggest ways of making the Ikea experience more convenient. If you do, we shall fire you on the spot.”) Kamprad’s insight about adding consumer effort to increase the estimation of value is called the Ikea effect — though perhaps it should really be called the Betty Crocker effect. Back in the 1950s, General Mills launched a line of cake mixes under the Betty Crocker brand. All you needed to do was add water; what could go wrong? However, this miracle product did not sell well. General Mills brought in a team of psychologists to find out why, and they pointed to guilt: The product was so damned easy to make, people felt they were cheating. The “cook” felt awkward about getting more credit than he or she had earned. In response, General Mills revised the mix to require both water and an egg. When they relaunched with the slogan “Just add an egg,” sales shot up.
I employed this effect when asked to help promote a fabric detergent designed for the developing world — it required clothes to be rinsed once, rather than three times, to save water. Our idea was to create a more complex bucket to replace the three buckets previously needed, which would add a degree of gratuitous complication. The improvement to the detergent’s efficacy was only slight. The real point of the extra effort involved was to prevent the new process from seeming too good to be true.
Another alchemy trick is to create more choices than you need. In the early 1990s, I was working with British Telecom, one of the agency’s largest accounts, and they wanted to offer enhancements to their service, like call forwarding and call waiting. Their idea was to send an invitation and just have the customers call a number to sign up (it was a phone company, after all). Instead, we divided customers into three randomized groups and sent 50,000 letters to each. The group that was only offered the chance to call had a response rate of about 2.9 percent; a second group that could only reply by mailing back a form came in at 5 percent. But the third group, who had the choice of phone or mail, had a response rate of 7.8 percent, nearly the total of the other two combined. The lesson: It is harder to like something when you haven’t chosen it. People want to have a sense of control.
Another lesson I’ve learned is to always ask the real why. One of our clients is a large energy provider that sets up appointments for servicing heating boilers. Customers have been complaining that they have to take a whole day off work because of the company’s vague booking policy; it guarantees only that an engineer will arrive in the morning or the afternoon. These customers say they’d prefer a one-hour appointment window. However, if you were to attempt such a level of precision, it would cost a fortune — requiring, at the very least, a far larger fleet of engineers — and there would be risk of disappointment when an engineer couldn’t deliver on the promise. Also, the hour-long window wouldn’t really solve the customer’s problem. If the guaranteed time was between 2 p.m. and 3 p.m., for instance, they’d still have to take a day off, unless they worked a short distance from home.
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Our first recommendation to the client was to interpret what customers said laterally rather than literally. People clearly found something about the length of the appointment window annoying, but maybe even more, it was the degree of uncertainty involved in waiting. Anyone who has ever spent half the day on tenterhooks, afraid that your engineer might not show up at all, knows it’s a form of mental torture; you can’t pop out for a pint of milk, because you fear that the second you do, your guy will turn up. But how different might the experience feel if the engineer agreed to text you half an hour before arriving? Suddenly you’d be free to get on with your day, your only obligation being to keep an eye on your phone. Is it as good as offering one-hour windows? Not quite, but it might offer 90 percent of the emotional and perceptual improvements, at 1 percent of the cost. If the experiment works (and early indications are positive), we have performed a form of alchemy, using psychological alchemy to conjure up value from nowhere.
So often it pays to consider the less logical and more magical solutions, which can be cheap, fast-acting, and effective. Here are some other recent “butterfly-effect” discoveries, from my experience:
→ A website adds a single extra option to its checkout procedure and increases sales by $300 million per year.
→ An airline changes the way flights are presented and sells $10 million more of premium seating per year.
→ A software company makes a seemingly inconsequential change to call-center procedure—and retains business worth several million dollars.
→ A publisher adds four trivial words to a call-center script—and doubles the rate of conversion to sales.
→ A fast-food outlet increases sales of a product by putting the price…up.
All these disproportionate successes were entirely illogical. And all of them worked. In the modern world, oversupplied as it is with economists, technocrats, managers, analysts, spreadsheet tweakers, and algorithm designers, it is becoming a more and more difficult place to practice magic — or even to experiment with it. I hope to remind everyone that magic should have a place in our lives. It is never too late to discover your inner alchemist.
→ Adapted from Rory Sutherland’s forthcoming book, Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life (William Morrow, 2019).