What? The Opposite of a Good Idea is Another Good Idea?

Rory Sutherland, a renowned advertising executive and Vice Chairman of Ogilvy UK, is known for his unconventional yet effective approach to marketing and behavioural science. One of his famous insights is the notion that "the opposite of a good idea is another good idea." This concept challenges traditional thinking and encourages marketers to explore alternative strategies, even those that might initially seem counterintuitive.

The KFC Case Study: Rethinking Pricing Strategies

Rory Sutherland illustrated this concept with a fascinating case study involving KFC. The fast-food giant approached Sutherland with a challenge: one of their menu items wasn't selling as well as they hoped. Conventional wisdom suggested that the solution was straightforward—lower the price to increase demand. This is a common tactic in marketing, and it aims to make the product more attractive to consumers, potentially sacrificing profit margins to boost sales volume.

However, Sutherland proposed a radical alternative. Instead of cutting the price, he advised KFC to increase it. This suggestion might seem counterintuitive at first, but it was rooted in a deeper understanding of consumer psychology. Some of these are:

1. Risk Mitigation: By increasing the price, KFC wouldn't be risking any existing sales volume, as the item was already underperforming.

2. Perceived Value: A higher price could potentially increase the perceived value of the item, making it more desirable to consumers.

3. Flexibility: If the strategy didn't work, KFC could easily revert to the original price or try a different approach.

4. Profit Potential: If successful, this approach would increase both sales volume and profit margins.

The results were surprising: the menu item began selling "like crazy," and KFC achieved the desired sales volume while maintaining (or even improving) profit margins. This case study highlights a key lesson for marketers—sometimes, the best solution is not the most obvious one.

The Psychological Principle Behind the Strategy

Sutherland's approach is grounded in behavioural economics, particularly the concept of perceived value. When a product's price is reduced, consumers might interpret this as a signal that the product is less valuable or less desirable. This phenomenon is known as price anchoring—where consumers' perception of value is influenced by the initial price they encounter.

By increasing the price, KFC tapped into a different psychological trigger. A higher price can create a perception of exclusivity or premium quality, making the product more appealing. This is why luxury brands rarely discount their products; they understand that maintaining a high price point reinforces the brand's value proposition.

Examples from Other Industries

This strategy isn't unique to KFC or the fast-food industry. Several other brands and industries have successfully implemented similar approaches:

• Apple: Apple rarely discounts its products, maintaining high prices to preserve the brand's premium image. Instead of competing on price, Apple focuses on creating a strong value proposition through innovation and design, which justifies its pricing.

• Luxury Fashion: High-end fashion brands like Gucci or Louis Vuitton seldom offer discounts. When they do, it's often on limited items or during specific seasons, ensuring that the core value of their brand remains intact.

• Automotive Industry: In the automotive sector, brands like Tesla have used price increases to their advantage. Tesla has periodically raised prices on their vehicles, which has often led to a surge in orders as consumers rush to purchase before the next price hike.

The Default to Discounting: A Marketing Pitfall

Despite the success of these alternative strategies, many marketers still default to discounting as a primary tool for driving volume. This tendency is driven by a desire for quick wins and the fear of losing customers to competitors with lower prices. However, as Sutherland's example demonstrates, this approach can sometimes be short-sighted and even counterproductive.

Discounting can erode a brand's perceived value over time. Once consumers become accustomed to lower prices, it becomes challenging to revert to the original price without encountering resistance. This is particularly true in markets where price sensitivity is high, and consumers have numerous alternatives to choose from.

Practical Takeaways for Marketers

1. Challenge Conventional Wisdom: Don’t be afraid to experiment with pricing strategies that go against the grain. The key is to understand the underlying psychology of your target audience.

2. Focus on Perceived Value: Rather than reducing prices, consider how you can enhance the perceived value of your product. This could involve improving the product itself, offering better service, or creating a stronger brand narrative.

3. Test and Learn: Before implementing a full-scale price increase, conduct small-scale tests to gauge consumer reaction. This allows you to make data-driven decisions and refine your strategy as needed.

4. Be Prepared for Short-Term Risks: Increasing prices might lead to a short-term dip in sales, but it can pay off in the long run by strengthening your brand’s positioning.

5. Avoid the Discount Trap: While discounts can be effective in certain situations, rely on them sparingly. Overuse of discounts can lead to a race to the bottom, where the only differentiator between brands becomes price.

Sutherland's approach reminds us that in the complex world of marketing and consumer behaviour, there's rarely a one-size-fits-all solution. The most effective strategies often emerge from creative thinking, challenging assumptions, and being willing to test unconventional ideas.

As marketers and business leaders, we should embrace this paradox of good ideas (the opposite of a good idea is another good idea). By considering multiple perspectives and being open to seemingly contradictory approaches, we can uncover innovative solutions that drive both volume and value, ultimately leading to more sustainable business success.