Algorithm-based Marketing: The War of the Algorithms

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, there are several states in the US that 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 of 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, the content, and other mitigating factors such as the domain where it was coming from, decided that the incoming email was either a promotional, social, or forum email. This is what I mean by scale.

The stigma of ‘spammer’

It’s only after a period of time that many marketers realize that their email’s deliverability over Gmail has dropped significantly. Delivery rates are down 70-80% for the Gmail domain only after the damage has been done. The outcome is painfully obvious, perhaps after a month is over. 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 but also counters the Gmail algorithm to help you work around the 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 thrown up the naive impression that discounting leads you to win the Buy Box, making retailers discount heavily up to 30% more than they need to. On top of it, the 15% fees the retailer has to pay Amazon means 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 get into the walled garden of Amazon, Apple iTunes, Netflix, or Google.

I foresee that in the future we are headed to times when the cyber wars will include a war of the algorithms for access, not just denials. If you want to navigate the walled gardens of the big companies such as Apple, Google, and Amazon, you 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 airlines’ rewards program. You need an algorithm to defend you.