TED Radio Hour
Fri May 9, 2014
What's The Difference Between Real And Perceived Value?
Originally published on Fri January 16, 2015 7:10 am
Part 4 of the TED Radio Hour episode Brand Over Brain.
About Rory Sutherland's TED Talk
Marketer Rory Sutherland says advertising adds value to a product by changing our perception, rather than the product itself. He says perceived value can be just as satisfying as what we consider "real" value.
About Rory Sutherland
Rory Sutherland is Vice Chairman of Ogilvy & Mather and a former Classics teacher. He's the author of The Wiki Man. Check out his other TED talk, "Perspective Is Everything":
RORY SUTHERLAND: Put this down. Put my phone off, I suppose. And then it's just headphones on.
UNIDENTIFIED WOMAN #1: Yep. It's just headphones on.
GUY RAZ, HOST:
So one of the leading minds in the world of branding is Rory Sutherland.
SUTHERLAND: The vice chairman of Olgivy & Mather in the U.K.
RAZ: Which is a huge, global ad firm. So I have a question for you, Rory. And this is kind of a personal question. And I'm - I hope it doesn't offend you but...
SUTHERLAND: No, well, probably not.
RAZ: This is something you have written about before so it should not take you by surprise.
SUTHERLAND: Oh, fabulous.
RAZ: How do you wipe your bum?
SUTHERLAND: Sometimes with - I'm intrigued you asked this - sometimes with moist lavatory paper.
RAZ: OK. Stick with us please because you are about to discover why there is a huge vacuum, a huge potential in the toilet paper market.
(SOUNDBITE OF COMMERCIAL)
UNIDENTIFIED ACTRESS: Mr. Ripple, please don't squeeze the Charmin.
UNIDENTIFIED NARRATOR: New, squeezably soft Charmin bathroom tissue from Procter & Gamble. Take it home and squeeze it.
RAZ: OK, so toilet paper has been commercially available since 1857. And despite the creation of the automobile, flight, home electricity, the Internet - since then, the technology of toilet paper has stayed essentially the same.
SUTHERLAND: If you look at it rationally, no one will go out in the garden, get their hands dirty, say, repotting a plant and go in and go gosh, I've got mud on my hands. Clearly, the thing I must do now is rub them very vigorously with dry paper to ensure that they're clean. You'd use water.
RAZ: Now, the alternative to that, of course, is moist towelettes, also known as wet toilet wipes, which today are quite flushable. The technology is pretty good.
But in the U.S. and in some Western countries, moist towelettes command just 3 percent of the multibillion-dollar toilet paper market. And of the small number of people who buy them, most of them keep them out of sight like they're embarrassed. And Rory is constantly asking why.
SUTHERLAND: One thing seems to be that when you buy lavatory paper, when you look at a shelf, you will see, you know, six or seven major brands. They will come in various sizes - double-length rolls, standard rolls, packs of four, packs of six, packs of nine. That then dominates your field of view.
And then somewhere on the top left there will be two small packets of the moist variant. And without any engagement, the brain probably goes, well, clearly the mainstream thing to do is everybody's just using ordinary dry paper, and that's what I should do, too. And clearly this strange, moist lavatory paper at the top left is just there for sort of strange, deviants or people with a medical condition.
RAZ: Yeah. Like, you - what? - like, why would you use that if there were only two options?
SUTHERLAND: And of course, you can call that irrational - an economist possibly would - you know, the fact that our evaluation of things is massively affected by what other people think of them. On the other hand, the truth of the matter is that value is pretty subjective.
RAZ: And this is Rory's basic idea - that there is no such thing as objective value. That we view most experiences in life as good or bad based on how they're branded. Here's how Rory explains it from the TED stage.
(SOUNDBITE OF TED TALK)
SUTHERLAND: Here's one example. This is a train, which goes from London to Paris. The question was given to a bunch of engineers about 15 years ago. How do we make the journey to Paris better? And they came up with a very good engineering solution, which was to spend 6 billion pounds building completely new tracks from London to the coast and knocking about 40 minutes off a three and a half hour journey time.
Now, call me Mr. Picky. I'm just an ad man. But it strikes me as an unimaginative way of improving a train journey merely to make it shorter. Now, what is the hedonic opportunity cost of spending 6 billion pounds on those railway tracks? Here's my naive advertising man suggestion. What you should in fact do is employ all the world's top male and female supermodels, pay them to walk the length of the train handing out free Chateau Petrus for the entire duration of the journey.
SUTHERLAND: Now you'll still...
SUTHERLAND: You'll still have about 3 billion pounds left in change and people will ask for the trains to be slowed down.
RAZ: I mean, that is a simple solution. I mean, that is essentially rebranding the train.
SUTHERLAND: I think I ended up coining the phrase the hedonic opportunity cost.
SUTHERLAND: I mean, my more serious suggestion, by the way, was that they simply spend, perhaps, not quite 1 percent of that money installing Wi-Fi on the train.
SUTHERLAND: You'll be pleased to hear, listeners to my original talk, that I think in about a year's time, those Eurostar trains will actually have Wi-Fi installed finally. So somebody maybe was listening. I don't know. So, you know, it is interesting that, you know, one technology should sensibly change the metrics that another technology, in this case rail technology, uses. And yet, probably, you know, the rail business, having invested a lot in faster speed is slow to pick up on that.
(SOUNDBITE OF TED TALK)
SUTHERLAND: How many problems in life can be solved actually by tinkering with perception rather than that tedious, hard-working and messy business of actually trying to change reality? Frederick the Great of Prussia was very, very keen for the Germans to adopt the potato and to eat it because he realized that if you had two sources of carbohydrates - wheat and potatoes - you get less price volatility in bread, and you get a far lower risk of famine 'cause you actually had two crops to fall back on, not one.
The only problem is, potatoes, if you think about it, look pretty disgusting. And also, 18th-century Prussians ate very, very few vegetables. He tried making it compulsory.
The Prussian peasantry said, we can't even get the dogs to eat these damn things. They're absolutely disgusting, and they're good for nothing. There are even records of people being executed for refusing to grow potatoes.
So he tried plan B. He tried the marketing solution, which is you declare the potato as a royal vegetable and none but the royal family could consume it. And he planted it in a royal potato patch with guards who had instruction to guard over it night and day, but with secret instructions not to guard it very well.
SUTHERLAND: Now, 18th-century peasants know there's one pretty safe route in life, which is if something is worth guarding, it's worth stealing.
SUTHERLAND: Before long, there was a massive underground, potato-growing operation in Germany. What he'd effectively done is he'd rebranded the potato. It was an absolute masterpiece.
RAZ: Is - so is value just, like - is it a construct? Is it something totally invented?
SUTHERLAND: The one thing I would say is that in some cases, things that are bad can also be presented and framed in such a way that people actually perceive them as good. But an extraordinary finding I saw recently was that merely rebranding Germans who are unemployed as retired. In other words, when unemployed bricklayers, say, in Germany reached the age of retirement, simply because they were now retired bricklayers rather than unemployed bricklayers, they enjoyed a sudden and quite spectacular increase in happiness, which was equivalent actually to the boost in happiness found among newlyweds.
SUTHERLAND: Now, nothing really about their material situation had changed. They weren't richer than before. They weren't working before, and they weren't working afterwards.
But the reframing of unemployment as retirement completely changed their actual level of well-being. But the upper-middle-class British do exactly the same thing with their own children. If their children can't get a job, they rebrand unemployment as traveling.
SUTHERLAND: I think there's a similar case where Lufthansa were increasingly baffled because although practically everywhere on Earth, orange juice is much more popular than tomato juice - in an airline lounges or on an aircraft. Now, this may partly be the Bloody Mary effect, that well-known behavioral science finding. But actually, tomato juice is actually - outconsumes orange juice. You know, our preferences are highly contextually set.
(SOUNDBITE OF TED TALK)
SUTHERLAND: How you frame things really matters. Do you call it the bailout of Greece or the bailout of a load of stupid banks which lent to Greece? Because they are actually the same thing. What you call them actually affects how you react to them, viscerally and morally. I think psychological value is great to be absolutely honest. One of my great friends, a professor called Nick Chater, who is the professor of decision sciences in London, believes that we should spend far less time looking into humanity as hidden depths and spend much more time exploring the hidden shallows.
I think that's true actually. I think impressions have an insane effect on what we think and what we do. I propose that we can use psychology to solve problems that we didn't even realize were problems at all. This is my suggestion for getting people to finish their course of antibiotics. Don't give them 24 white pills. Give them 18 white pills and six blue ones, and tell them to take the white pills first and then take the blue ones.
It's called chunking. The likelihood that people will get to the end is much greater when there is a milestone somewhere in the middle. One of the great mistakes, I think, of economics is it fails to understand that what something is, whether it's retirement, unemployment, cost, is a function, not only of its amounts, but also its meaning.
RAZ: So, I mean, isn't so much of this about, I don't know, like, trickery? It's like, almost like a form of deception to get us to believe in these things.
SUTHERLAND: Well, my argument would be, first of all, it's interesting to see how doctors are generally uncomfortable with the placebo effect 'cause they regard it as cheating. You know, we must actually get people better through, you know, objective chemical means. The idea of actually tweaking their environment or changing their mental states to enable them to get better that way - that's not fair. And yet, the placebo effect is patently pretty valuable.
SUTHERLAND: And it is very interesting because advertising, of course, has always come up against this kind of attack, that this is manipulative in a sense. That even though we don't perceive the world objectively and indeed cannot do so, nonetheless you must design products and experiences for people as though they were objective. And my question is, well, maybe not.
(SOUNDBITE OF TED TALK)
SUTHERLAND: Now, if you had a large red button of this kind on the wall of your home and every time you pressed it it saved $50 for you or put $50 into your pension, you would save a lot more. The reason is that the interface fundamentally determines the behavior. OK.
Now, marketing has done a very, very good job of creating opportunities for impulse buying. We've never created the opportunity for impulse saving. If you did this, more people would save more.
It's simply a question of changing the interface by which people make decisions, and the very nature of the decisions changes. Obviously, I don't want people to do this because as an advertising man, I tend to regard saving as just consumerism needlessly postponed.
SUTHERLAND: But if anybody did want to do that, that's the kind of thing we need to be thinking about actually - fundamental opportunities to change human behavior. Two quotations to more or less end with.
One of them is poetry is when you make new things familiar and familiar things new, which isn't a bad definition of what our job is - to help people appreciate what is unfamiliar, but also to gain a greater appreciation and place a far higher value on those things which are already existing. The second one is the second G.K. Chesterton quote of the session, which is, we are perishing for want of wonder, not for want of wonders, which, I think, for anybody involved in technology, is perfectly true.
And a final thing - when you place a value on things like health, love, sex and other things, and learn to place the material value on what you've previously discounted for being merely untangible, a thing not seen, you realize you're much, much wealthier than you ever imagined. So thank you very much indeed.
RAZ: That's Rory Sutherland. He's given three incredibly entertaining TED Talks, all about branding, rebranding and perspective. You can find all of them at ted.com.
(SOUNDBITE OF SONG, "SELL IT TO YOU")
BRONZE RADIO RETURN: (Singing) I found myself staring at the shelf with a hundred boxes, and I need some help. They all look the same, each seem to claim that they're better than the other one. And on second thought, I don't need another answer to a phony problem 'cause everywhere I go, everything I see, everything is sold to me.
RAZ: Hey, thanks for listening to our show on branding this week. If you missed any of it or you want to hear more or you want to find out more about who was on it, you can visit ted.npr.org. You can also find many more TED Talks at ted.com. And you can download the show through iTunes or through the NPR smartphone app. I'm Guy Raz, and you've been listening to ideas worth spreading right here on the TED Radio Hour from NPR. Transcript provided by NPR, Copyright NPR.