Rory Sutherland

Horsepower was invented as a marketing unit to sell steam engines

James Watt and Matthew Boulton found mine owners didn't care about boiler specs; they wanted to know how many horses they could stop feeding. So Watt invented the horsepower, a sales unit that let buyers do the ROI math on the back of an envelope.

“So Watt went out and invented a unit we still use today, which is called the horsepower. And the reason it's not named after a famous scientist like the ohm or the Newton or the Coulomb or the Watt for that matter, or Celsius or anything of that kind, is because it's a marketing unit. It was invented for marketing purposes because he could then go and say, if you buy a 25-horsepower steam engine, you can actually get rid of 75 horses because I think the horses worked in shifts.”

Steal thisExpress your product's value in the unit your buyer already budgets in, not in your engineering spec.

Range anxiety is psychology, not physics: 16% battery vs 58 miles

Rory's Lotus Eletre at 16% still had about 58 miles of range and he panicked, while his wife drives her Mini Electric at 56% (about 56 miles) without a thought. How the number is displayed drives the anxiety, so reducing anxiety may be cheaper than spending billions to increase battery range.

“Then I look at the actual range and it's about 58 miles. Now my wife's car, that's 56%. Okay. In my wife's car, we drive around at 56%, i.e., with a range of 56 miles all the time without the slightest smidgen of anxiety. But when that's expressed as 16%, not 56 miles, okay, I'm suddenly having conniptions and really panicking. Now, what that suggests is that range anxiety is much more a factor of psychology than it is of physics.”

Steal thisBefore paying for the physical fix, check whether reframing the number removes the customer's anxiety for free.

Reverse benchmarking: be spectacular at what the category neglects

Instead of copying the category leader's strengths, list the metrics everyone ignores and over-deliver on one. Will Guidara did this after visiting the world's top restaurant, noticing the coffee and beer were mediocre and hiring a coffee sommelier and a beer sommelier.

“So I call this reverse benchmarking. In other words, you look at all the metrics that everybody cares about in the category, You find a metric that's been completely and ridiculously neglected and you double down on that thing. Now, I first came across this in Will Guidara's fantastic book, Unreasonable Hospitality.”

Steal thisAsk what was 'meh' about the best competitor's experience, then make that one thing spectacular.

Meet-and-greet car rental: keys at arrivals, AC already running

Airport car rental is worst in the first 20 minutes: queueing at the desk, hunting for the car, no instructions. Rory would happily pay £100 extra for a service that meets you at arrivals, carries your luggage, hands over the keys, explains the car and pre-cools it.

“Now, in some cases, I would literally happily pay 100 quid if the deal is we meet you at arrivals. Okay? We take the luggage to the car. We hand you the keys. We answer your questions about how the car works. If, by the way, they also turn the air. Now, you could do this with electric cars. If they also turn the air conditioning on ten minutes in advance.”

Steal thisFind the unmeasured, painful first minutes of a service and charge a premium to fix just that part.

The Economist's decoy: a pointless option lifted premium subs 200-300%

The Economist offered digital-only, paper-only, and paper-plus-digital, with the last two at the same price. Almost nobody bought paper-only, but its presence made paper-plus-digital look free and shifted subscribers toward the bundle that carries more valuable ad circulation.

“Paper only, paper plus digital, and digital only. And paper only and paper plus digital were the same price. So you looked at that and your mental frame was, if I get the paper version, I'm getting the digital one for free. Vanishingly few people ordered paper only. Now, if you remove the paper only one, so you effectively, you had digital or digital plus paper, Vanishingly few people chose the one in the middle, but the presence of the middle option increased by about 200 or 300% the number of people who subscribed to paper plus digital instead of digital.”

Steal thisAdd a deliberately worse option priced next to your premium tier to make the premium tier look like a free upgrade.

Thaler's bet: 6 of 8 division heads refused great odds to keep their jobs

Richard Thaler asked a company's division heads whether they would take a bet with a 50% chance of raising profits 50% and a 20% chance of cutting them 30%. Six of eight declined because a loss could cost them their jobs, while the CEO wanted all of them to take it. Pushing accountability down an organization makes it more risk-averse.

“Would you take a decision if it had a 50% chance of increasing your profits next year by 50% and a 20% chance of reducing your profits by 30%? And 6 out of the 8 of them said no. And Thaler goes back and says, well, you know, You're all good enough mathematicians, I assume, to realize these are highly favorable odds. To a gambling man, you know, this is a very, very good bet. And yet you decline to take part. Why is that? And they reply, 6 out of the 8 of them, because 20% of the time or 30% of the time I'd lose my job.”

Thaler's bet: 6 of 8 division heads refused great odds to keep their jobs

Richard Thaler asked a company's division heads whether they would take a bet with a 50% chance of raising profits 50% and a 20% chance of cutting them 30%. Six of eight declined because a loss could cost them their jobs, while the CEO wanted all of them to take it. Pushing accountability down an organization makes it more risk-averse.

“Would you take a decision if it had a 50% chance of increasing your profits next year by 50% and a 20% chance of reducing your profits by 30%? And 6 out of the 8 of them said no. And Thaler goes back and says, well, you know, You're all good enough mathematicians, I assume, to realize these are highly favorable odds. To a gambling man, you know, this is a very, very good bet. And yet you decline to take part. Why is that? And they reply, 6 out of the 8 of them, because 20% of the time or 30% of the time I'd lose my job.”

Red Bull and the data trap: all big data comes from the past

Red Bull was expensive, came in a tiny can, and tested as mildly repellent, so only intuition could justify it. Rory argues that requiring data for every decision builds in status quo bias, because there is no data about the future.

“But someone there was capable of making the leap of imagination into an uncertain future, where a drink which cost a lot of money came in a tiny can and research told them consumers basically found mildly repellent. Okay. In defiance of all the rational odds, this had potential. And it's worth noting that generally there's always a lot of data from the past because all big data comes from the past. There generally isn't much data about the future.”

Show visible progress steps: order trackers make waiting feel shorter

Rory says McDonald's and KFC miss a trick by showing only 'in preparation' and 'ready for collection'. More granular status steps, like Domino's somewhat fictional delivery tracker, give a sense of forward movement that keeps people content while they wait.

“McDonald's probably may, and KFC probably make a mistake here in that if you order on screen at McDonald's, it basically says, in preparation, ready for collection. And they could probably play a game there where they say, you know, being prepared, you know, on the, you know, on the tray, they could give you an impression of forward movement because it's all to do with dopamine and sort of effort and reward.”

Steal thisBreak any wait into several visible status steps so customers feel steady progress.

Direct response rule: test one thing or test everything

Early scientific advertisers like Claude Hopkins either tested a single word or an entirely different ad. Changing five things at once means you can't tell which one made the difference.

“It's very similar to direct response advertising where the rule is You either test one thing or you test everything. So in direct response advertising, this would go back to the 1920s, the 1930s, people like, you know, Claude Hopkins and the early kind of practitioners of scientific advertising as they like to call it, which is, you know, you either test the single word or you come up with a completely different advertisement with a different visual. If you test 5 things, you can't be sure which one of the 5 is making a difference.”

Steal thisTest either a single variable or a completely new concept, never a handful of tweaks at once.

Direct response rule: test one thing or test everything

Early scientific advertisers like Claude Hopkins either tested a single word or an entirely different ad. Changing five things at once means you can't tell which one made the difference.

“It's very similar to direct response advertising where the rule is You either test one thing or you test everything. So in direct response advertising, this would go back to the 1920s, the 1930s, people like, you know, Claude Hopkins and the early kind of practitioners of scientific advertising as they like to call it, which is, you know, you either test the single word or you come up with a completely different advertisement with a different visual. If you test 5 things, you can't be sure which one of the 5 is making a difference.”

Steal thisTest either a single variable or a completely new concept, never a handful of tweaks at once.

Direct response rule: test one thing or test everything

Early scientific advertisers like Claude Hopkins either tested a single word or an entirely different ad. Changing five things at once means you can't tell which one made the difference.

“It's very similar to direct response advertising where the rule is You either test one thing or you test everything. So in direct response advertising, this would go back to the 1920s, the 1930s, people like, you know, Claude Hopkins and the early kind of practitioners of scientific advertising as they like to call it, which is, you know, you either test the single word or you come up with a completely different advertisement with a different visual. If you test 5 things, you can't be sure which one of the 5 is making a difference.”

Steal thisTest either a single variable or a completely new concept, never a handful of tweaks at once.

"Member since" on the Amex card: a free line worth billions in retention

American Express printed the year a cardholder joined on the card. It cost nothing, but Amex insiders told Rory it has been worth billions, because members don't want to cancel and reset to year zero.

“There are little things that American Express did, like putting member cents on the card, which cost nothing but have been worth, and American Express people have told me this, have been worth billions of dollars to American Express since the card was started. People are more reluctant to cancel because they don't want to rejoin and go back to year zero.”

Steal thisDisplay customer tenure prominently so cancelling feels like losing status.

"Member since" on the Amex card: a free line worth billions in retention

American Express printed the year a cardholder joined on the card. It cost nothing, but Amex insiders told Rory it has been worth billions, because members don't want to cancel and reset to year zero.

“There are little things that American Express did, like putting member cents on the card, which cost nothing but have been worth, and American Express people have told me this, have been worth billions of dollars to American Express since the card was started. People are more reluctant to cancel because they don't want to rejoin and go back to year zero.”

Steal thisDisplay customer tenure prominently so cancelling feels like losing status.

Flat White or F*** Off: one pre-made coffee, tap and go

Rory inspired a coffee brand that sells only a pre-made flat white (oat or regular) for £4 by contactless tap, with no queue and no customization. It was designed for train stations and airports, but conference organizers turned out to be a natural market.

“For the vegans, there's an oat flat white and there's a regular milk flat white. You walk up, you tap your card, you pay £4, you pick up a pre-made coffee and you walk off. And my logic was at the time, train stations and airports were the natural home for this thing. They're expensive real estate. So the fact that you can sell more coffees in a given time, it's Henry Ford applied to coffee, basically.”

Steal thisStrip customization out of a high-volume product and name the trade-off loudly so speed becomes the selling point.

Explicit trade-offs: customers accept less if they choose it up front

Like Avis's "We're No. 2, so we try harder" and Slate's no-frills $25K electric truck, a brand can offer less as long as the trade-off is stated in advance. Cost-cutting backfires when it is imposed on customers instead of chosen by them.

“So it was absolutely explicit. And in a sense, that's what, you know, Avis did with, we're number 2, so we try harder. This is, okay, we don't have the scale of the other guys, but we make up for it somewhere else. And the consumer's very happy making trade-offs so long as they're explicit. The problem with a lot of kind of cost reduction and efficiency pursuit in business is it isn't chosen by the consumer, it's imposed on them, which is a very, very different thing.”

Steal thisIf you're cutting a feature, announce the trade-off loudly in your positioning instead of hoping nobody notices.

Sell young people's tech to seniors: bone-conduction headphones, folding phones

Bone-conduction headphones are marketed to joggers but bypass the parts of the ear that deteriorate with age, and big folding phones suit aging eyes. Rory says lots of tech is a godsend for people over 60, but they are never told about it because marketing always shows the young.

“Absolutely brilliant for people with hearing loss because it bypasses the stirrup and the anvil and whatever it is inside the ear, which are the bits that deteriorate when you get older, and the sound goes straight basically to your aural nerves. Absolute godsend to old people. No old people know about this.”

Steal thisLook for products marketed to the young that solve an older buyer's problem, and reach the over-60 market directly.

Obvious Adams: a 1916 ad-man book you can read in one sitting

Rory's top book pick for copywriting and idea generation is Robert Updegraff's Obvious Adams, a short 1916 story about an advertising man's approach to problem solving and a favorite of David Ogilvy's. His list also included Claude Hopkins' Scientific Advertising and Richard Shotton's The Choice Factory.

“Some of the, okay, some of them are very old. Obvious Adams, Robert Updegraff, published in 1916. Well, it, you can read it basically on a single toilet visit. It's about 50, 60 pages. I'm delighted to say I think Amazon keep reprinting it or somebody keeps reprinting it.”

Do advertising archaeology: old tactics went out of fashion but still work

Ad creatives chase novelty to impress each other, so working formats get dropped: long-copy print, direct mail, jingles and comic-strip ads. Rory tells entrepreneurs to mine old advertising and suggests manga-style ads could reach young audiences today.

“This is why I suggest to anybody here listening to this who's an entrepreneur, go and look at some advertising archaeology. And the reason is that advertising people, just as engineers want to impress other engineers, advertising creatives want to impress other advertising creatives, which means They want to do something that's brand new, never been done before. Da da da da da. Actually, loads of things get discarded by the advertising industry which never stop working. Long copy press advertising never stopped working. Direct mail never stopped working. Jingles never stopped working, although you have to call it sonic branding now.”

Steal thisStudy 1920s-1960s ads and revive a format your category abandoned only because it went out of fashion.