In this episode I review Rory’s second appearance on the Strategy Sessions. It’s a riot, as always, and covers hotels, trains and movies. The couple of bits I picked to focus on are:
- Premium economy
- Discretionary premiumisation
- The doorman fallacy
- Efficiency v effectiveness
Listen below or find it on Spotify, Apple and Google or just search for Strategy Sessions wherever you get your podcasts.
Links
Rory’s most recent episode
Rory’s first episode
Tom Critchlow’s episode on the Strategy Sessions
Strategy Sessions Host – Andi Jarvis
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INTERVIEW TRANSCRIPTION
This transcript has been done automagically using Happy Scribe and hasn’t been checked by a real person, so there may be some hilarious mistakes where the AI can’t work out our accents – I’m sure they’re trained on just the American accent.
[00:00:01.140] – Andi Jarvis
Ey up and welcome to the Strategy Sessions. Happy New Year. Happy Christmas. I hope you had a lovely holidays or happy holidays, as the American listeners insist on saying. And welcome to 2024. This is the first episode of the New Year. But let’s not start with a whole new number in sequence. I’m already struggling to remember the number in sequence between seasons and episodes and how many episodes in total and stuff. So anyway, forget about the numbers. Thank you for listening. My name is Andi Jarvis. I am the host of the show and the strategy director at Eximo Marketing. I’m here today with another dog poo podcast or dog shit podcast. Let’s just be real. Let’s call it a dog shit podcast because that’s what it is. What is a dog poo podcast? Well, the strategy sessions is for most of the episodes, a guest interview podcast. I interview some of the greatest marketers in the world and have a lovely time doing it. What I’ve started doing recently, thanks to a bit of feedback from an event in Exeter, is introducing a dog poop podcast. This is where in a shorter episode, I maybe review some of the things that people have said in the previous episode.
[00:01:11.440] – Andi Jarvis
Why? Well, it turns out that a lot of people listen to podcasts while they take the dog for a walk to have a poo in the morning. So a shorter episode because the strategy sessions mainly is 50 to 60 minutes. So a shorter episode where people can listen on the dog walk, typically 20 minutes or so, is good And then good for listening figures. So let’s try that. We’re trying a few of them to round up some of the episodes and to dig into some of the concepts that the guests discuss. And when you have guests of the calibre of Rory Sutherland, why wouldn’t you do that anyway? So I interviewed Rory Sutherland, which went out just before Christmas. And look, if you don’t… That’s the second time Rory has been on the podcast. If you don’t know who Rory Sutherland is, the first thing you need to do is go back and listen to the episode. Rory is tremendous, fantastic, amazing, knows a lot about marketing, an infinite amount about marketing, has written a number of books, behavioural psychology, how people work, all that stuff. And he brings it all in a real interesting way and just a real wide worldview, which illuminates everything he talks about.
[00:02:16.860] – Andi Jarvis
He’s fantastic to interview. You don’t ask that many questions. You ask him a question and he answers it in-depth over about 10 minutes, which makes the job fairly easy, most of the time, at least anyway. So have a listen to the episode that Rory was on. We talked about a lot of things. I asked him to come back on because we were supposed to talk about trains in episode one and why Britain is so bad at trains, and we never got around to it. In episode two, I asked him to come back, and we almost didn’t get around to it. We talked about trains at the end, but that’s not what we’re going to sum up in the Dog poo podcast, because what I want to do is pick up on two things he said which are connected. If you want to know why he watches Jason Stephen films in his pants or his underpants, again, for our American listeners. And if you want to know what his views are about trains and why the enjoying transport is underrated in our current thinking. And if you want to know why you should watch the TV show Columbo on read fiction as part of being a better marketing strategist, you want to listen to the whole episode.
[00:03:24.400] – Andi Jarvis
But there are two, maybe three things I want to talk about. And one of them I talked about in LinkedIn post, that again, there’s links to all of this in the show notes. So there’s links to the episodes, but also to the LinkedIn post. There was an interesting point that Rory made about premium economy, which is mostly you’ll probably know about premium economy from airlines. There’s business class and there’s economy, but in the middle there’s a premium economy. Usually it’s better leg room seats, you’re bored first, possibly a better meal, a little bit of fuss around, but you pay more for that. Obviously, it’s premium economy. And there’s an interesting backstory, I think, to premium economy. I think it was always seen as an upgrade from economy, but it’s now picked up a slightly different place in the market of maybe people downgrading from premium into economy because there is quite a difference in price. I know when I looked at my last flight across to America, it was something like the flight in economy was about, say, £600. Premium economy was about £900-£1,000. Premium was £4,000. So there was a big jump, right? I took a business class, which is the premium So anyway, look, broadly, that’s what premium economy is.
[00:04:51.270] – Andi Jarvis
Now, Rory then gave a couple of examples which we discussed, which I discussed on the LinkedIn post. He talked about the moxie hotel chain. He talked about another hotel in America and about a budget airline in Europe. They all have one thing they do really, really well, that they do better than maybe everybody else in the market, and that then helps them stand out. And he described that as premium economy. Now, that was a little bit of an interesting observation to me because it didn’t necessarily fit with what I thought premium economy was, which was premiumisation of a whole set of services to make it stand out from the basic option. And I discussed this because I thought the idea, the way Rory described it, actually made it a wider concept and actually made it more applicable to many, many things. Because if what you’re looking at is maybe just premiumising one facet. So the Moxie hotel chain just has better Wi-Fi the most and a really great We Work style bar area. The airline you talked about had a sandwich that was just better than everybody else’s, even though it was a budget airline.
[00:06:00.210] – Andi Jarvis
And the American Hotel, I can’t remember the name of it. I talked about having a popsicle hotline. They did this one thing that was great. If you were sat around the pool, the kids could just go and lift the popsicle hotline and somebody would deliver a popsicle. I think that’s an ice pop over here, is it? I don’t know. Anyway, so they did one thing better. What became clear when I discussed this on LinkedIn is that a lot of people agreed that that was a great way to go for marketers, but disagreed with the fact that it was premium economy. And I agree with And I was trying to think of a new name for it. So I thought, let’s go back to the source material. And I went back and had a listen to the episode with Rory, which is great fun to do. I really enjoyed it, even though I did the interview. I just love listening to the man. It was great. And During the episode, 26 minutes in, he refers to… He said, it’s what I call premium economy, where discretion with premiumisation occurs. Now, actually, and I’m not here to disagree, I probably don’t have the chops or the kudos to be able to disagree with Rory Sutherland.
[00:07:03.220] – Andi Jarvis
But I actually think discretion with premiumisation, as awful as that phrase is, is different to premium economy. If you think of the airline example, it’s not discretionary to premiumize one element of the service. The whole package is different for premium economy. And if you think of if you’re a membership organisation, you probably have tiers of membership and you get more in different tiers. And there’s lots of products that I like that where you pay more and you get a bit more. But this concept of discretionary premiumization, where you look at not trying to be better everywhere than everyone in the market, but just being noticeably better at one thing. I actually love that concept because it suddenly becomes a real way to try and differentiate yourself in the market in a, I’m not going to say simple, but relatively simple compared to trying to change product offer to offer an entirely different level of service or to become a premium economy provider. And if you think if you’re… I have a client who is a building services company, like a trade warehouse for want of a better phrase. So you need plank support, hammers, nails, whatever.
[00:08:18.100] – Andi Jarvis
You go there and get it. 98, 99 % of what they sell is other people’s products. And the reality is you can buy them anywhere. So what is that they do differently? Well, they talk about service and quality and price and all that stuff, the same things everybody does. But when you start to look then at this concept, discretionary premiumization, you think, if we conducted some research with the market And started to find out what matters most to the market in this area. Now everybody will say, oh, prices have to be cheap. But the reality is, everybody says price is a factor. But if you’re, I’ll keep going with that example, if you’re a builder and you’re out on site and you find out that you are missing something that is essential to the work that you have to undertake today. Your options are to go to the nearest or your option is to go to the cheapest. But the nearest is 10 minutes away, the cheapest is half an hour away. You go to the nearest because you do a calculation in your head about, well, if I’m off-site for an hour versus I’m off-site for 20 minutes, then, okay, what does that mean?
[00:09:28.790] – Andi Jarvis
So when people say, oh, your price is the cheap, price is always the key factor. You’ve got to really ask the questions properly and interrogate the data properly is what I’m saying. So that number one is you got to ask the right questions. But there’s a number of factors at play there. And you find out that there’s a number of things that are important. It could be customer service, it’s price, it’s delivery options, it’s stock holdings, it’s all those sorts of things. Because there’s no point turning up somewhere and finding out that they don’t have it and it’ll be six days before they can arrive. So you start to work out what really matters to the customers. And then you find a way of picking picking the one that really matters the most, where you can have the most impact by discretionary premiumization. So instead of trying to look at how do you improve everywhere across the business, you probably do still want to do that. But from a marketing perspective, you just want to find that one thing that you can go big on, that you can do better than everybody else. Again, I’m not saying it’s easy and I’m not saying it’s simple, but it’s easier and it’s more simple than You’re trying to change your whole offering to be better everywhere.
[00:10:35.300] – Andi Jarvis
Tom Critchlow, previously of this podcast, was writing recently talking about the importance of momentum in strategy and in making changes to organisations. I often say organisations are inert by default. They don’t move unless something moves them. There’s some physics about that, isn’t it? Unless a force acts on something. I don’t know enough about physics to know. Is that Newton? Possibly. Who knows? Who cares? Somebody tell me. Unless a force acts on something, it’s going to stay in its same state. Organisations are like that. You need some force to move them. Most people don’t turn up at work every morning going, How can we change the world? They turn up thinking, has anybody pinched the milk? What time am I going to get home today? Please don’t let the boss realise that I’m over three months overdue for my annual review, all that stuff. There’s a lot going on in organisations, right? So you’ve got to try and impact them and make something move when you’re trying to do marketing strategy. Some momentum, as Tom said, is really important. And when you start to narrow this to say, let’s look at this concept of discretionary premiumisation.
[00:11:47.880] – Andi Jarvis
Then momentum, instead of it becoming, how do you eat the elephant? Well, it becomes one bite at a time. So you then start to look at we can create momentum, we can move things forward, and we can start not to have an impact because we’re only looking at how do we do this one thing better? And that is the rallying cry, if you want to call it that, that can help get people around an organisation to say, look, okay, how do we do this better? How do we do a better delivery proposition or better customer service? And it keeps you away from prices, because every customer is going to tell you they want you to cut prices, especially in the current market. Almost everyone tells you they want to cut your prices. So you cut your prices, probably won’t impact your sales. It’ll impact your revenue, but it’s probably not going to impact your sales. You might get a short term bump, depends on what market you’re in. But if everyone else just cuts the prices because you’re in the market and you’ve got your prices, then you just led to start in a price war.
[00:12:43.900] – Andi Jarvis
And that takes you into a whole other world of pain. So I would advise, if you can, stay away from that. But I do like the idea. So yes, I am going to contradict Rory and say, I don’t think what he was talking about was premium economy. Hopefully he doesn’t listen to this and then come for me. But I do think he was right when he called it discretionary premiumisation, where I think that being able to pick one element and go big on it and then own it. And that then does play into being differentiated value. When people say, okay, in a year, two years, three years, you say, what do you know about Company X? You become known for that thing. It becomes really hard for anyone else to copy that, and especially in a world where if you’re selling other people’s products, people say, what’s your USP? I’m not entirely convinced USPs exist, really, for most companies. I think we fuss a lot about them and don’t really have them. Is it USP? No. Is it a selling point? Drop the U, yes. And does it become a selling point that you become known for?
[00:13:49.550] – Andi Jarvis
It’s not unique. Anyone can do it. But you’ve set in place that organisational structure. You’ve set in place the momentum. You’ve started moving it forward. You’ve started You’ve started doing the activity day after day. You’ve started telling your customers about it. You’ve started measuring it. You’ve started moving it. You suddenly become known, gradually and then suddenly become known as the organisation that does this one thing well. So what is that in your organisation? I would urge you, urge you to go and ask the market, what are the things that matter to them? Because if you just go, oh, we could just do this one thing better. Yeah, you could. But let’s see what matters to the customers first. And my advice on that would be, firstly, run a focus group of some focus groups and say, tell us all the things that factor into your purchase. They’ll say price and availability and opening hours and customer service and all the stuff that you probably expect. It depends on the sector. And that gives you a consideration set. Don’t make any decisions at that stage. Don’t. Please don’t make any decisions at that stage. But what you’ve got there is then you’ve got maybe seven, eight, nine, 10 points that the customer say, these are the things that matter to us.
[00:14:59.620] – Andi Jarvis
And then you run a survey with a wider group of customers or potential customers, people in your target market. And you say, rank these 10 things in order of preference, which is the most important, which is the least important. And at that stage, you’re taking away the bias of the people in the focus groups and you’re putting it out to a wider market. So then you get some information back and you’ll be able to derive a top three from that. Now, you might find that actually the top thing in there is really hard for you to stand out on. It could be a product issue. It could be pricing is really important, and it is in some sectors, some markets, it is hugely important. So it might be that pricing is an issue and you can’t do anything about that. So if that’s the case, then we look at number two. And you find what the number two thing is, and then you say, right, let’s see if we can make this. And you’ve got to understand your organisational set-up and ethos and culture and things like that. But find something from the top three, one thing that you think you can own that you can do better than everybody else, that you can make your discretionary premiumization.
[00:16:01.770] – Andi Jarvis
Premiumize the hell out of that service. And once you do that, hammer that message home to your customers, time after time after time. But you’ve got to build it out of research first. I will go to my grave with talk to your customers written on that gravestone. I say this almost every time this microphone comes in front of me, talk to your customers, talk to your customers. I have a T-shirt now with it on. I went to the Caribbean and did a presentation in a Spanish-speaking country in the The only bit of Spanish I learned for the whole presentation was habla con tus clientes, which is the Spanish for talk to your customers. The only bit of Spanish I learnt. So yes, I believe in this. Start by talking to your customers, understand what matters to them in terms of discretion with premiumisation, and then kick the hell out of it and do it relentlessly nonstop. Don’t get bored after six months and go, All right, we’ve done that now. No, you haven’t. You haven’t even started. Move. Keep going. Keep going. Keep going. It takes a while to build this up. There’s an old phrase that says trust arrives on foot and leaves on horseback.
[00:17:07.530] – Andi Jarvis
Fancy flowery phrase for saying it arrives slowly and leaves quickly. Building perception in a market is a bit like that. It arrives really, really slowly. You’ve got to keep going and going and going and going and going and going over and over and over and over and over. Keep telling people. You’re in marketing, you’ll be bored of it after months, because you see every single message, your customers don’t. They don’t care. You have to keep telling them. You have to make them care. Keep telling them, make them care. But if you don’t get it right, it’ll leave on horseback. It’ll be gone really quickly. So discretionary premiumisation is the term I think that we’re looking for here. So let’s focus on that. And I think it’s a really good, easy-ish way of being able to stand out and differentiate yourself in a market. So thank you for that, Rory. The other thing Rory mentioned, connected to that, is what he calls the Doorman Fallacy. And the The Doorman Fallacy hits on another element of things I like to get annoyed about in the business world. The Doorman Fallacy is where consultants, the McKinzis and the KPMGs of this world, other consultancy are available, turn And when they open, they look at a hotel and they go, right, well, you have a dorman on the hotel and that costs you, in salaries and benefits and all that stuff.
[00:18:23.390] – Andi Jarvis
It costs you £150,000 a year of making these figures up. And the dorman opens the door. So we can replace the Doorman, we can put in a revolving door, and that will cost us £150,000 in the first year. And then every year after that, you make £150,000 on the bottom line. So let’s sack the Doorman. The Doorman is sacked. Three years later, you realise that while, yes, you have saved £300,000, £150,000 each year for two years, what you have lost is a stack of revenue. Your bookings are down, your high paying customers have stopped coming as frequently And when they come, they don’t stay as long. Why? Well, when you actually go and talk to your customers, they tell you things like, well, yeah, you’re not as high end as a hotel anymore. Nothing else about your service has changed. You’ve just got rid of the dorm, but then perception is now that you’re not as high-end, or they have to hail their own taxi, or when they had a problem, they didn’t know where to go and ask because everybody at reception was dealing with checking people in, and they just used to go and ask the Doorman, Can you get us a dinner reservation?
[00:19:26.810] – Andi Jarvis
And the Doorman had sorted. So You may have gained £300,000 because you viewed the dorman as a door opening mechanism, but you have lost millions in revenue because your high spending customers have gone. Now, it’s a parable in this, but the point Rory is making there is the focus on efficiency over effectiveness, where if we look at things through the wrong lens, if you ask the wrong question, you get the wrong answer. Rory is fantastic at approaching problems in different ways. To go back to talking about trains, he talked about the mess in British trains as we ask the wrong question. We ask the question, how do we move people quicker from point A to point B on the train, when actually the question we should be asking is, how do we make the train journey from point A to point B so incredible that you’d make people feel stupid driving? That’s a different question that gets you a different answer. It’s about enjoyment. It’s about utility of that journey. It’s about the comfort of that journey. When all What you’re obsessed about is the speed of moving them, you end up with an awful train service that looks like a cattle cart, which is what UK trains are like, and spending billions trying to take 30 minutes off a journey, when we could spend a fraction of that by increasing the Wi-Fi, serving better food, and giving everybody a seat.
[00:20:46.790] – Andi Jarvis
Oh, wouldn’t that be better? Yeah, you arrive in style. You love what you do. Oh, that’s fantastic. So the Doorman Fallacy, I think, and also trains as well, talks about this focus on efficiency over effectiveness. And I think this is something that marketers, not just marketers, sorry, I think businesses are focused on a lot where they make a change because it immediately looks relatively obvious and maybe has a bottom line impact and go, oh, great. Yes, look, we’ve done this Where are we are now more efficient? But are we more effective? And I think in a marketing world, my concern over how some of AI is being used is this efficiency versus effectiveness. And I saw Ross Simmonds speak at MozCon August ’23, and it was probably the first time I’d seen someone give an AI presentation where they actually focused on effectiveness. And Ross talks about how he used certain tools and how the amount of time he had saved. And I was rolling my eyes in the audience going, Oh, no. Here we go. ‘ Another, ‘Yeah, this used to take us a day, and now we can do it in 10 minutes.
[00:21:51.890] – Andi Jarvis
‘ I said, But is it any better? ‘ And then he started to show the results. And he said, Look, here’s all the ones that didn’t work. Here’s where my engagement fell, the click-throughs fell, this fell, that fell, and it delivered less leads. But here’s the use case where it got better. That’s what I think we need to get to. I’m not pro or anti-AI. I don’t care. I’m pro customer, right? That should become really clear. Talk to your customers all the time. That’s my new tattoo. But the thing I’m always looking at is what’s the right thing for them? And it’s effectiveness. Oh, we can do this quicker. So your customer doesn’t care that you can do it quicker. They care if it’s better for them. And that’s the thing for me is that that isn’t to say that we shouldn’t ever make changes. Customers are wonderful at writing in and complaining when something’s changed from A to B. But sometimes you just got to write it out. I remember Catalogue business is getting rid of the old catalogue and moving to online. And customers, I will never shop with you again. They did, though, right?
[00:22:51.940] – Andi Jarvis
The business didn’t suffer. But that’s because it was done the right way and focused on effectiveness. It wasn’t just, if we stop printing catalogues, we will save a fortune. Because, yeah, you did save a fortune. But if you have taken half a million out in print costs but reduced revenue by five million, that’s not a good deal. Spend the money on print and keep the five million. The focus when catalogue business is move from catalogue to online only was taking the catalogue out, saving the half a million, but holding sales and driving sales. That was the key thing. What could we do if we spent that half a million on other things? Could we drive more business? And they did. That’s why the catalogue business moved. Efficiency versus effectiveness, the Doorman Fallacy is what Rory calls it. I think there’s a lot of areas of our businesses where we focus on that short term impact. And again, that’s not to say that’s not important. I’m aware of a number of my clients, a number of friends who run businesses where times are tough at the minute. Sales can be down. Costs are going through the roof still, even though we’re seeing inflation falling, it’s not negative.
[00:24:03.010] – Andi Jarvis
So costs are still up significantly on two years ago. And the number of conversations that I know people are involved in which are wonderful, we need to take 20 % out this year. How do we do it? So I’m not living in some fantasy world where I know these conversations don’t happen. And if you’ve got to save 20 % and you’ve got to reduce headcount sometimes, these are difficult decisions and difficult discussions to have. So if someone says, You got to take 20 %, 30 % out of your budget. If you can do something that helps to make that efficiency saving, of course you’re going to make it. My point is that you also have to look at long term effectiveness. We have to not just focus on what the impact is going to be on this month’s numbers, next month’s numbers, this quarter numbers, this half’s numbers. That is important because it keeps us in a job. It keeps us moving forward. But we’ve got to take that wider term view and say, is this the What’s the direction of travel we want to be going in? And just because it’s only down a couple of percentage, what’s the direction of travel it’s going in?
[00:25:07.900] – Andi Jarvis
Are we making the right decision? Are we talking to customers and understanding the impact it’s having on them? Is it having an impact on them? How do we know that we’ve stayed close to our customers? Why?. Habla con tus clientes – Apologies to any Spanish speakers out there as well, because I’m pretty sure my Spanish is awful. But talk to your customers, engage with them, understand what it is that they’re having there. So I think that those are the two things I really wanted to pick up on. Discretionary premiumisation, not premium economy. And talking to your customers, yes, but through the lens of the Doorman Fallacy efficiency versus effectiveness. Like I said, I’m not living in a dream world. I know sometimes there’s really difficult discussions and decisions to be made, and sometimes that just means something has to be cut because not cutting it and killing the business is not a great idea either. So I’m aware of these things. But focus on what the right thing is for your customer, not just what the right short term decision is. And I think that that’s a part of the discussion that you need to have. And the sooner you can do that with the voice of the customer rather than with I think, you’re on a much stronger ground.
[00:26:17.960] – Andi Jarvis
If you take the voice of the customer into a senior meeting, into the meeting where you have to discuss cuts and say, look, this is what our customers say about this thing, it can be easier to keep that. But again, just be aware that it’s effectiveness we need to think about, not just efficiency. Right. I think I’ve rambled on enough about Rory Sutherland’s episode. I really enjoyed it. I hope you did too. If you haven’t listened to it, if you’ve just dropped into this one, go back and listen to it. Links in the show notes. It’s fantastic. Next up. I’m not even sure how this happened, but Rory Sutherland pre-Christmas, and the first guest of 2024 is going to be Seth Gordin. No, I don’t get it either. Two of the biggest names in marketing, back to back on my podcast. Honestly, I don’t know how this works. So thank you for listening. Seth’s episode should be out shortly next week, but not everyone listens this week. So just the next episode out will be Seth Godin. If you have any thoughts on this, if you can remember the name of the physics concept that I can’t remember about what impacts on a stationary item to make it move and force and who came up with it, let me know.
[00:27:28.900] – Andi Jarvis
Get in touch. Please do let me know what you think of these solo episodes, the dog-shaped podcast episodes. They’re new. I’m going to try them for the rest of this series. I genuinely have no idea as yet whether people love them or hate them. So please do let me know. You can contact me on LinkedIn. I’m Andi Jarvis, Andi with an I. You can find me in the show notes. Just send me a message, send me an email, get in touch one way or another. It would be lovely to hear from you. Thank you for your time. We’ll see you next time with Seth Flipping Godin. Wow. Nice. See you later.