The Perils of Algorithm-Based Marketing

By: Staff | Aug 19 2015

If I told you this article was written by an algorithm (and you believed me), chances are you’d be creeped-out, suspicious of the content, and unable to muster much if any emotional response to it.

That’s a natural response. Yet companies don’t seem to be able to see algorithms from the consumer’s point of view. They think nothing of deploying algorithms as marketing tools. Instead, they should be looking for ways to inject humanity — and, yes, actual humans — into their efforts to reach out to customers.

I’ll explain why.

Originating in computer science, algorithms are simply sets of “if–then” rules. But a number of factors — easy-to-use predictive analytics and data-visualization tools, the proliferation of mobile devices, and companies’ ability to track and measure customer behaviors — have helped companies find an astonishing variety of ways to use algorithms, particularly in marketing.

Algorithms help marketers utilize customer-specific knowledge — demographics, previous behavior, fellow customers’ choices — to craft customized offers and deliver them, often in real time. They help companies track customers, cross-sell to them, and promote products. Banks use algorithms to suggest new products to customers, online retailers deploy them to set and change prices, and media companies rely on them to recommend and deliver streaming content and ads.

But despite the broad adoption and growth of algorithm marketing, companies should be cautious about it, for four reasons.

  • Algorithms aren’t sensitive enough to context. Effective marketing relies on messages that are attuned to the customer. Customer response, even for the most mundane of products, is sensitive to a host of ever-changing factors. On any given occasion, everything from personal factors such as how well a person has slept the night before, current moodhunger, and previous choices, to environmental variables such as the weather, the presence of other people, background music, and even ceiling height can influence how a customer responds. Algorithms can use only a handful of variables, which means a lot of weight is inevitably placed on those variables, and often the contextual information that really matters, such as the person’s current physical and emotional condition or the physical environment in which the individual is tweeting, Facebooking, or buying online, isn’t considered.
  • They arouse suspicion and can easily backfire. In a climate where privacy concerns are perennially at the forefront of customers’ minds and trust is at a premium, customized marketing of any sort is risky. If customers feel the marketer knows too much about them, algorithm-based personalization can seem creepy or backfire badly. Something as innocuous as a customized Facebook feed highlighting the past year can generate tremendous grief for users in certain circumstances.

For all the reasons companies should be cautious about the growth of algorithm marketing, visit http://bit.ly/1GZ79Je

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