The world of marketing is changing. It’s no longer the same old strategies with a new digital twist. Companies now use algorithms, the same mathematical systems that power everything from your Instagram feed to Google Maps, to optimize their marketing strategies and drive sales.
It sounds like something out of a sci-fi movie, but it’s happening right now, and if you’re not paying attention, your business could be left in the dust.
It’s an algorithm. Algorithms are like the magic genies of our e-commerce world —they provide just what we want when we want it.
This article explores how this works, how algorithms are designed, and what the future looks like for marketing through machine learning and artificial intelligence.
The Secret Currency for Exponential Growth
The biggest secret to exponential business growth is something the most successful companies have in common: a hidden currency that drives their sales. Even more surprising is that this has nothing to do with marketing, sales, or even your product.
McKinsey research reveals that forward-looking firms that combine robust AI adoption and strong digital capability with a proactive AI strategy can maximize revenue and profit growth.
One of the keys to exponential growth is algorithms.
A company’s algorithm is its secret sauce, a line of code that separates it from the competition. Its effectiveness determines how well a business can engage with its customers and how much value it can deliver to them.
Algorithms have become the invisible hand that guides success in today’s world.
Take Amazon as an example. The online retail giant has spent more than two decades building a sophisticated network of algorithms that drive everything from product recommendations to inventory management — all designed around serving customers better and faster at a lower cost. Netflix recommends movies based on what other people who have watched similar titles have also watched – even if those people don’t share any other traits with you.
Why are they so effective at driving sales?
Algorithms are effective because they are based on data. Data is a gold mine in digital marketing today. Algorithms can be used to find and target the right audience with the right message at the right time. It is effective because it is based on data: what people like or don’t like, where they go, when, who they follow and unfollow, and so on. They know how to present information that is most likely to resonate with consumers, allowing companies to get the most bang for their buck.
They can also take advantage of the latest technology like augmented reality to bring new experiences to consumers cost-effectively.
With algorithms, marketers have more control over the customer experience than ever before. Rather than having ads delivered randomly across different websites or channels, you can use algorithms to create targeted campaigns tailored specifically for each person’s preferences and interests.
There are many effective ways to use algorithms in your business. Here are a few of them:
Recency, frequency, and monetary value
This customer loyalty algorithm is the basis for many loyalty programs in hotels, airlines, credit cards, and retailers. It’s also a key part of what Amazon does to drive sales from its past customers. The idea is simple — look at how recently someone has purchased from you, how often they buy, and how much they spend each time. Then develop some tiers and offer different rewards or other incentives based on that information.
Personalization
A study by Accenture found that two-thirds of shoppers were willing to share personal data about themselves in exchange for a personalized and relevant experience with a brand. Many retailers now use algorithms to analyze their customers’ buying habits and preferences and suggest products based on what customers might like in the future. This is especially helpful for smaller companies who want to compete with bigger brands by building a stronger relationship with their customers.
Clustering Analysis
Clustering analysis is a method that assigns data points to different and distinct groups. This could be used to group customers so that you can give them recommendations based on what other customers who are similar to them have bought. By segmenting the audience into specific groups, it becomes easier for you to target these individuals with products and services that match their interests. The goal of clustering is to identify groups of similar customers based on their behaviors and purchase history.
Customer Behavior Prediction
Algorithms can be used to predict consumer behavior, even outside of their interactions with your website. By analyzing customer data, you can better predict what products customers are going to want and when. This information can help guide your future product launches and allow you to plan how to roll out these new items based on existing customer interests. You can create an agile business model that will respond to customer needs as quickly as possible by creating a data-driven marketing strategy.
Targeted marketing
Targeted marketing can significantly increase sales and profits by directing advertising to the people most likely to buy products or services rather than spending money on ads that most people will ignore. One example is retargeting — showing ads for your company’s products or services to people who have recently visited your website but have not purchased.
Customer support
Knowing who to prioritize and when is imperative in customer service. If you lose a customer due to poor service, you also lose any revenue they could have provided in the future—not to mention any potential referrals they could have given you. Algorithms help you gain insight into your customers’ needs so you can be more responsive and attentive than ever before.
Final Thoughts
At the end of the day, technology will continue to innovate, and these innovations will change the way you do business. The algorithms that control consumer behavior are powerful, and their effects can be dramatic. You don’t want to miss out on this.
