Tom Ridges, CEO & Founder of Herdify - Transcript
Rory:
So welcome back to another episode of Mail Unleashed. And on today's programme, I'm delighted to be welcoming someone who's actually quite an old friend of mine. but who is also a massive inspiration to me. This is Tom Ridges from Herdify. And Herdify look at what I would call a really, really powerful force. In the operation of every single market, indeed almost every facet of human behaviour. But it's one that we tend to actually completely overlook or neglect.
Which I think leads to a mixture of confusion and wasted opportunity. So tell me your background, your background in fact was, as a computer scientist. I'm always really keen on people who come to marketing from outside marketing, because I think you bring a fresh perspective. What was yours?
Tom:
Yeah, so I'm a tech guy by trade. I did a lot of work studying satellites in the early days. So actually when I came into this world, I thought, why would you use mail? It's not 1986, right?
You know, we've got the internet. We've got all these hugely powerful data tools you can do.
Fast forward a few years and, you know, I now run a business where lots of our customers use mail. I flipped 180 and I'm like, why would you not use mail? The results that we see, if I was to start any sort of consumer business tomorrow, the first thing I would do would be pushing mail. And that's something I say on every customer call these days. I'm like, why are you not using mail? We see so many other issues, it just delivers.
Rory:
And the reasons I think are often around fashion, or sometimes convenience, you know, it is quite labour intensive producing a good piece of mail. But one client famously described their direct mail to me as ‘annoyingly effective’. It struck me as one of the strangest sentences I've ever heard. But effectively they wanted to be able to tell the story that everything they were doing was digital. Because people in finance, people on the board would automatically see that as evidence of modernity. But the simple fact was that not only did mail work disproportionately well, but also it worked on people where nothing else worked. Yeah. I think that's particularly important, by the way. In other words, something that converts someone who is unconverted by any other means. That's what I call... that particular communication is 100% efficient. There's no opportunity cost, there's nothing else to worry about. Yeah. And by the way, one of your huge insights, I think, which is… vitally important in why you're called Herdify. Is that geography and location matter?
Tom:
Yes. The thing for me comes back to and I'll build on that point, is most of our decisions are heavily influenced by people around us. Right? Herd mentality, hence Herdify. But really what we're talking about is social contagion. If you want to get really nerdy, it's about network effects. So we first have to appreciate that's why we make decisions. We then have to look at how we live as humans, so homophily is something that we talk about a lot. Birds of a feather flock together. We generally live in communities with people that have similar beliefs, values, interests, religion, whatever it might be. And that means that has a disproportionate influence on our behaviours. And that's where we live. This locality piece was sort of my, I guess, seeing the light with why we do a lot with door drop customers. I should add, we're channel agnostic, we don't book any mail, we're not a media agency. We just provide the insight. So there's no self-serving benefit to door drop. It's just that it works and it's that location piece, because if you think, disproportionate influence near where you live.
Rory:
Yes.
Tom:
So say for example, the houses I generally go into are people I know. So I walk into a friend's house, go to use the bathroom, they've got Who Gives A Crap toilet paper, like, on the side, right? I then go, you know, a couple of weeks later I go to a friend's house, right? Another friend's house, and I see the same thing. A few weeks later, I go to another friend's house for a bit. I see the same thing. This is all subconscious, I'm not walking out of there going, 'I'll make a mental note', but my brain's making a note. If then a month later, a door drop lands on my door drop, with some brilliant creative from Who Gives A Crap. That's not a piece of cold advertising, that's social reinforcement, of everyone around me. And I'm like, oh, do you know what? I see that everywhere. Like, and you're more likely to get a prompt.
Rory:
What's really interesting about this is, this is why I say people, this is a bit like, you know, trying to do marketing without understanding social contagion, is a bit like trying to do rocketry without understanding gravity. Yeah. It's a fundamental force. What's really interesting about it is, because it's intuitive and subconscious to a large extent. It doesn't show up in market research.
Tom:
Agree.
Rory:
And so you very, very rarely would you get someone say, 'I did this because two of my neighbours started doing it.' Yeah. And you make the point that, by the way, contagion in the marketplace, is not simple contagion, it's not binary. You know, it's not one zero. It's actually complex contagion where, there are people who will buy a car if one of their neighbours has one. There are people who will buy a car if two of their neighbours have one. And you know, there'll be people, highly conservative people, who probably wouldn't even contemplate it until the majority of their neighbours had made that decision.
Tom:
It varies depending on the study, but about 6 to 8, 6 to 9% of us will see something and act on it in any given context. Which means it's well over 90% that have to copy something. We have some form of threshold. And this is the bit actually, when you start to understand, your point there, some people might need to see two, some might need to see twenty. When you understand these thresholds, it actually becomes really interesting. Because a lot of advertising, particularly digital advertising, is what I would say is optimised for the clicky reactive type. Okay. They're the people that see stuff and react. If they react to your stuff, they're going to react to his stuff and her stuff. But if you can get people past this threshold, well, they're not just going to churn because they see an ad. I get we have short-term metrics. We have to satisfy the CFO. But if we can focus on quality, and by that quality is people who are surrounded by other people who buy, that means they're less likely to churn. These people are going to spend for long into the future, and therefore, when we talk about compound growth, you know, anyone that understands how you get rich, understands through compound growth. That's how brands get compound growth out of their returns. For me, I bang on heavily about the power of the network. And that's because it's the most under-talked-about bit. But we absolutely need to seed it, and there was a guy called Duncan Watts. He was a researcher at Microsoft, he tried to produce virality. In the end he backed out and said, you can't, and he coined 'big seed marketing', which is basically broadcast spray-and-pray. Because you don't know where virality is going to come from. So you still have to do that, and probably from a computer science point of view, we'd call this explore and exploit. So that's the exploration piece, let's see what takes. But then once you've got the seeds, actually if you can concentrate there, you can have all these people who haven't got their threshold. But they're much likely to get to their threshold, if you amplify this. And therefore you get the fours, you get the fives.
Rory:
So you big seed. Then you see where it takes root, and you disproportionately water and fertilise those places.
Tom:
That would be my product launch strategy. One example, we did some work in Putney. For the aforementioned toilet roll company. And what we were saying is because they're quite popular in London. So we found out, you know, where the herds were, and we go down to quite small areas.
Rory:
There's a big Putney concentration of Who Gives A Crap?
Tom:
Yeah. And obviously I have to be a bit careful with the channel. But this was an out-of-home channel. But there were big ads on Putney High Street, saying 2,374 bums in Putney had been wiped, something like that. Right, which I loved it because it ticked the random box, the numbers, you know, random numbers, hyper-localised because it was Putney. And to that scenario I've talked about, if you've seen it in your friends' houses, you're more likely to buy it.
And in that we used door drop as well, so it was all door-drop-reinforced out-of-home.
Rory:
But also the business of localising the creative content always interests me with door drops. Which is you don't necessarily have to have a name on it, that's what a direct mail is for. There are cases where simply putting in Kent, or in Tunbridge Wells, will do the job quite well, because of this same homophily thing, I suppose.
Tom:
Yeah.
Rory:
That people around me are doing it therefore.
Tom:
Yeah, 100%. Also, if you spend some money on the creative, it gets talked about. And I think often this is where I think people often go wrong for me with door drop, is they see it as a pure volume player, and I'm not anti-volume.
Rory:
No.
Tom:
Actually put some effort into the creative, okay? Do some smart targeting, you know, there's a little bit of a self-serving point there. But if you get the right thing through the right doors, it's funny, it creates a conversation, right? And you pin it up, you stick it and your friends come over and you see it, and it has this persistence.
Rory:
With personalisation I sometimes say, the job of personalisation is not necessarily to make something hyper-relevant, it's to make it not irrelevant. And sometimes, I suppose the job of social contagion, is that it's probably fair to say that outside that 7 to 9% of people who will act independently.
Tom:
Yeah.
Rory:
Effectively, most people find it deeply painful to do something which nobody they know, also does.
Tom:
Here's the example, so you will I'm sure you all have had, a friend or someone say they're going to buy a new car. And all of a sudden you see that car everywhere? Yeah. Now there are no more of those cars on the road, give or take. Okay. What has happened there is because someone you know has told you about it, it becomes relevant. And the more we see it, it builds a picture that people like me use these products, I then have a high likelihood to buy it. Put something through their front door, and then you're not pushing against something hard, you're like, oh yeah, seen this everywhere. And that's the journey we're trying to get in people's head, like, it's really hard to get people to buy stuff cold, unless you want to target that 6–8%.
Rory:
Yes.
Tom:
Let's go after the 90%, and let's find where momentum is already building. Stick something personalised, amazing creative through their door, and it's working with the wind I guess, as opposed to against it. You know, that's how I would phrase it.
Rory:
And it would work particularly well, wouldn't it? I mean, particularly in those categories where the product is sticky. I guess. And direct mail, if you think about it, tends to be used more heavily for things which have a membership component, or a direct debit component, or an ongoing relationship component. Because it's easier to justify the cost of the initial contact with the lifetime value. And also with those things with a large lifetime value, an expensive 5% response rate is actually a lot better than a cheap 0.5% response rate. Yeah. Because you need all the chances you can get. Yeah.
Tom:
And I love that it's about value and not just the response as you say there.
Rory:
Yeah.
Tom:
And, you know, we've been doing this for a good few years now, and when we look at every time we've been used in a campaign, the value in an area where word of mouth is detected or social contagion, word of mouth's our marketing word, social contagion. Is on average, two and a half times more than an area where word of mouth isn't detected. So for the same spend,the same £1, you get two and a half times more value out of that customer.
Rory:
So in direct mail, what's really interesting is once we're aware of these network effects. It should colour both how we target, how we communicate, in other words, is it memorable, talkable, keepable? Is it a conversation piece? A conversation starter? Is it displayable, by the way? Branded merch, mugs. Keepable, talkable, shareable. And then the other one is, you know, can you build into the mechanic of response some element of, 'By the way, you can share this saving with one other person'?
Tom:
I love all of that, and I’d build one other point. So I’d say, absolutely, to harness the networks you have to target properly and target where this word of mouth is strong. Let's not like, acquisition numbers are good, but let's focus on five good quality rather than ten who are not going to do anyone. So that's a piece. Absolutely spend on creative. Creative is… you could argue that mail is the ultimate social media. Because it does promote more conversation, only if you spend on good creative. And then the final one, to your point about the paying it forward. I'm always trying to get brands to think about, how do you incentivise joint use of the product. Okay. And the example I talk about a lot is gyms, if I refer a friend and we both get a fiver off, that's one thing. If we both get a longevity discount for as long as we train together, I'm not going to stop training because they're going to have to pay more. They're not going to stop training because I'm going to have to pay more. And all our friends are going to know we're training together. So if you can build some form of incentive, that's not just a short-term sign-up reward, it's a longevity usage reward, we start to make these network effects go even faster.
Rory:
Tom, thank you very much indeed, it has been fantastic. What I think you've provided us with as well, is a completely new way of looking at the market, but also a completely new way of looking at the long term value potential of actually addressable targetable, local or regionally targeted advertising of all kinds. And potentially, I think, a new way to think about it is far less transactional and far more relational.
Tom:
Yeah.
Rory:
Which I think is the direction in which all marketing needs to go.
Tom:
Yeah. Love that. Yeah. Thanks for having me. It's been yeah, been great conversation.
Rory:
It's a total joy. Well, thank you very much to Tom. This has been absolutely enlightening. And I think you can see how network science brings a completely new dimension to understanding markets, to understanding marketing. And in particular, I think, to a deeper understanding of how you can use the mail medium. So if you'd like to unleash the magic of mail for your business. give us a like, give us a subscribe. It always helps. And then make your way to marketreach.co.uk And see you next time.