Is your business taking the wrong kind of risks? Our Chief Strategy Officer James Champ looks at why when most agencies are encouraging their clients to take risks, the smart play is to do the opposite.
earHD is a pair of Airpod-sized ear trumpets, currently being funded on Kickstarter. Tiny little funnels that you stick in your ears, designed to help you hear more detailed, high definition sound. Each is milled from a single piece of titanium, and a pair costs £299.
Ridiculous, right? £299 for a product that doesn’t exist yet, from a company you haven’t heard of, to do something you’ve probably never even considered. Who would buy that?
On the surface earHD looks like a highly risky purchase: expensive, and weirdly low tech. You can’t try them out, because they haven’t been produced yet. And if they don’t work, you’ll feel like a gullible idiot.
But everything on that Kickstarter page is designed to reduce the perception of risk. Prospects can explore the science of sound waves. Look at intricate diagrams of the ear. Even watch a video of Stephen Fry wearing the prototypes. And at the end of your auditory exploration, you really, really want to buy earHD. You might not be able to afford it, but you certainly believe that it works. That Kickstarter page is a masterclass in risk reduction.
At the time of writing, with almost a month to go, earHD has exceeded its goal by 85%.
An industry on the edge
Perversely, the advertising industry is obsessed by increasing risk, not reducing it.
Agency people are incentivised to take risks (the unkind might say risks with other people’s money). If we push the boundaries, more people will talk about us. We’ll get more business. Move on to a better job. If we don’t, we’ll end up in a backwater.
For brands with lots of customers, this push-the-boundaries view makes sense. For example, in 2016 the Marmitegate PR disaster translated into a 61% increase in Marmite’s sales. (Even negative PR reminds people they’re out of Marmite.) And when Greggs came under fire for an advent calendar that replaced baby Jesus with a sausage roll, sales actually went up.
For the brands that need new customers, agencies have got risk the wrong way round.
But for most brands, the ones that really need new customers, agencies have got risk the wrong way round. We think about taking risks, but we should be thinking about reducing risks – the risks that consumers face when they’re trying something new.
A century ago, a Coca-Cola executive would have known this instinctively.
In 1887 Coke was basically one soda fountain in a pharmacist in Atlanta. It grew, massively. And in its quest for customers, the brand’s early days were an exercise in risk reduction.
Before it launched, Coke reduced the risk of people disliking the taste by asking them what they thought of the product. Reduced the risk of it being mistaken for other drinks by making everything red and using a cool font chosen by their bookkeeper. Reduced the risk of the serve being terrible, specifying the maximum temperature for a glass of Coke. And then reduced the ultimate risk – that people just wouldn’t hand over their money for that first Coke – by just giving it away. Between 1887 and 1920, 10% of all the Coca-Cola drunk in America was given away for free.
Risk reduction: a new urgency
In a way, Coke had it easy. It was a simple product for a simpler world. Today as consumers, most of the things we’re asked to choose are less simple and friendly than a soft drink; more expensive, and harder to get hold of. And we’re very good at saying no. We are, apparently, exposed to more than 15,000 commercial messages each day. If we didn’t say no to most of them, we’d be broke by breakfast.
Modern, connected communications give us lots of opportunities to reduce risk, if we choose to take them. And some brands are doing that. Energy company Bulb went from 70,000 customers to 700,000 with a member-get-member offer publicised on social media (and only at that point did they start running brand ads). And much of the success of the UK’s first end-to-end online car buying service, which we designed for Peugeot, came from a customer journey whose main purpose was to minimise the perceived risks of buying a car without seeing or driving it first.
But these brands are still outliers, in part because agencies are set up to take risks for brands, rather than reduce risks for their prospects.
Risk reduction requires a stable of communication skills that are hard to find together – skills that focus on explanatory content as much as advertising, that make full use of incentives, that connect customer data with prospecting media, that design integrated customer journeys, that allow messaging to flex quickly and cheaply to maximise results.
This sounds boring compared to a big glitzy campaign.
But risk reduction encourages creativity and ambition. We should be embracing it, because it’s better for the businesses who need our help, and it’s better for us. After all, you don’t become famous for building the next Coke by working on the last one.