Alchemy (Rory Sutherland)

Books · Marketing

(Read this in May 2019, adding to Notion in Feb 2021)

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Alchemy

Summary

  1. Economic theory is an insufficient way to identify value proposition - both in B2B and B2C scenarios. Loss avoidance and personal status gains are a much stronger motivators than prospects for economic gains
  2. The way a question is phrased can influence the decision. For instance, if a waiter asks “Sparkling” or “Bottled” before serving you water at a restaurant, you’re unlikely to say “Tap”
  3. A Management Consultant would define something narrowly, automate or streamline it, and then regard the savings as profit -- regardless of it's downside consequences. Be wary of narrowly defined problems
  4. Value is in the hearts and minds of the valuer. You don’t need to tinker with atomic structure to turn lead into gold. You can appeal to human psychology to change perceptions
  5. Always remember to scent the soap. Don’t just sell utility, sell the experience. Why people use things, and what thing is meant for, are not necessarily the same things

Highlights

In human behaviour, perception >> reality

There are many things that don’t make sense before the event, but work very well. There are also things that make perfect rational sense before the event, but won’t work at all

When we make the food industry logical, people hardly pay. When we add in bullshit factors like organically grown, they pay a premium. Introduce alchemy. Don’t just think about logic

What people really want us independent of what they say they want

Economic theory is an insufficient way to identify value prop. Both in B2B and B2C settings. Loss avoidance is a much stronger motivator than prospects for gain, specially in big companies

Ask yourself, why do people want to do things

The way a question is phrased can influence the decision. For instance, if a waiter asks “Sparkling” or “Bottled” water at a restaurant, you’re unlikely to say “Tap”

Broad vs narrow appeal (don’t just argue for logic)

Business, technology and government have spent the last few decades on an unrelenting quest for measurable gains in efficiency. But they’ve never asked if people like efficiency as much as economic theory thinks they do

Example: first you define the doorman’s role as opening the door. Then you replace him with an automated door opening mechanism. Then, you pat yourself on the back for reducing costs and increasing efficiency and give yourself a raise. In the meanwhile, who previously felt rich and important walking through your doors spend as much now. Other functions that were important (coordinating with the valet etc) age also not as well done. “Define something narrowly. Automate or streamline it. Then regard the savings as profit”. —Management Consulting, not real business

Turning lead into gold — Value is in the hearts and minds of the valuer. You don’t need to tinker with atomic structure to turn lead into gold. You just need to appeal to human psychology to change perceptions

Signaling competence, trust, and dependability is very important before the sale is made. Also after the sale is made. Do great stuff for your customers, and let them know that you’re doing it

Satisfice. Don’t optimise.

It’s more important that recommendations aren’t catastrophic. Don’t aim for perfection

The admission of a downside often makes a claim more plausible

Always remember to scent the soap. Don’t just sell utility, sell the experience. Why people use things, and what thing is meant for, are not necessarily the same things