The War of the Algorithms: Algorithm-based Marketing
Algorithms are biased, opaque, and scalable. Dr. Cathy O’Neil calls them Weapons of Math Destruction in her new book. In particular, those algorithms are used to segment customers into the good, the bad, and the ugly segments.
Today, unknown to us, many aspects of our individual and corporate lives are governed by algorithms. This is the opacity that we are unaware of. It is an inconvenient truth that no one is talking about. For example, several states in the US segment prisoners into various risk categories using an algorithm called COMPAS. We are also familiar with the FICO score that impacts our lives – the interest rates that we pay for our home, car, and credit card loans. A poor FICO score can mean the difference of thousands of dollars in a lifetime.
If you are a marketer, you are already acutely aware of the power and impact of algorithms. If you do email marketing on any scale, you may be well aware of the power of the algorithm that Gmail uses to segment your emails in the receiver’s Inbox. Who decided that my email to my friend was spam? Just because I emailed him from the new email service provider I am using now?
It was Gmail’s “classification algorithm” that, based on the subject line, content, and other mitigating factors such as the domain from which it was coming, decided that the incoming email was either promotional, social, or forum. This is what I mean by scale.
The stigma of ‘spammer’
It’s only after some time that many marketers realize their emails’ Gmail deliverability has dropped significantly. Delivery rates are down 70-80% for the Gmail domain only after the damage has been done. The outcome is painfully apparent, perhaps after a month has passed. Once you have been labeled a “spammer” by one of these algorithms, it takes enormous effort to overcome that. How do you counter this algorithm-based bias towards your marketing program?
Perhaps you need an algorithm of your own that not only mimics Gmail's but also counters it, helping you work around its bias.
If you are a reseller on Amazon’s ever-expanding digital marketplace, you may have wondered how to win the ‘Buy Box’. What price to sell your products in different markets and still make a profit? Some of our own studies in this area have created the naive impression that discounting leads you to win the Buy Box, encouraging retailers to discount by up to 30% more than they need to. On top of it, the 15% fees the retailer has to pay Amazon mean that winning the sale on Amazon may potentially mean losing the profit. You need an algorithm on your side to help increase sales and retain profits while selling on digital marketplaces.
You need a pet algorithm, or you may perish! What is the bright idea of being the millionth search result on Google Search? If “they” don’t see you, they won’t buy from you. You and your product/service are finished. Go home, or get smart and use algorithms in your pricing programs. You need access to the markets, and these algorithms are denying you access. Sir, you don’t have the secret password to access the walled gardens of Amazon, Apple iTunes, Netflix, or Google.
I foresee that in the future, we are headed toward times when cyber wars will include a war over algorithmic access, not just denial. If you want to navigate the walled gardens of the big companies such as Apple, Google, and Amazon, you'd better have the help of an algorithm on your side.
Whether you are an individual or a corporation, you may need some algorithms of your own to navigate in this world, whether to minimize your health insurance or to ensure your entry into the elite class of an airline’s rewards program. You need an algorithm to defend you.
