Algorithms Sound Cool, But They Don't Work Alone; Don't Base Your Dealership's Marketing on a Preset 

13.04.21 02:35 PM By Gina

In follow-up to our first blog in an unfolding series, "Headed Down the Path of Digital Transformation? Start Your Journey at the End - Where [Our] New Tech Begins.", we took a trip down memory lane through what we've coined the Path of Technology. We plotted out various data tech milestones with a brief definition of 5 methods currently used in the automotive retail sales and customer experience.  Here, we tackle the truth about algorithms.

WHAT IS AN ALGORITHM?

First, it is important to understand what predictive technology is and what it does. 

al·go·rithm     /ˈalɡəˌriT͟Həm/

In computers science, a sequence of instructions – a small procedure that solves as reoccurring problem.

In today’s world, algorithms are everywhere. The most common example for most individuals would be social media. With marketing specifically, the algorithms will use demographics and previous behavior to track customers’ interests. Algorithms analyze your interactions as well as that of similar consumers.

Said another way, an algorithm is a set of well-defined instructions for carrying out a particular task. It is, for the most part, deterministic, predictable, and not subject to chance. It works for all cases and gives a (presumably) correct answer. Many companies approach marketing this way, especially given the lure of managing 'big data'.  It looks for predictability in buyer decision-making and behavior in order to scale a campaign accordingly. It follow a set of marketing 'rules' that seems to have a history of generating results. It aims at making sense of, and controlling, a chaotic, unknown, and disorderly data environment. If you can figure out how to market to them, then you can end up with a set of instructions that always produce results.

IS SEQUENCE ENOUGH?

Algorithms are based off sequences or a set of rules. Is this enough to provide accurate marketing to consumers? According to Accenture, 91% of consumers say they are more likely to shop with brands that provide offers and recommendations that are relevant to them. 


Personalization is key to successful marketing in our consumer-centered markets. An algorithm is not sensitive enough to understand context. It bases marketing off of sequences that were created from past purchases and similar consumers. Everyone is different and so are their decision-making processes. Algorithms cannot combine every possible variable and only have the ability to use certain variables that are set in their sequences or rules. This results in unequal distribution of weight put onto certain variables. A prediction is not the same as knowing.

RELIANCE ON RATIONALITY

Algorithms rely on rationality and certainty. Two factors that are not true of consumers. 


Human beings are....well....irrational. Dan Ariely, professor of psychology and behavioral economics at Duke, gave a wonderful example proving this point. Everyone knows that texting and driving is wrong, right? Well, most people have admitted to doing it at one point or another. It is never about the lack of knowledge; everyone knows that it is dangerous. Yet, humans still consciously make this irrational decision.


As for certainty, it is almost impossible to be 100% certain when only using past data and demographics. This past year has been a great example of this. There is no algorithm that could have predicted COVID-19. Due to the lack of real-time interaction and data, algorithms do not take into account other factors. It is all about the inputs it already has and the sequence that it is based on. Overall, algorithms favor patterned marketing activities. If 2020 has taught us anything, it's that life is uncertain, and patterns can easily be interrupted.


The moment you think you’ve developed an 'algorithm', your buyers have already moved on.

BIAS IN ALGORITHMS

Algorithms are not initially biased, they are technology. The people who create them and the data put into them can create an unconscious bias. While no one wants to admit it, we all have biases whether they be big or small. The biases can end up in algorithms. It makes creating a bias-free algorithm extremely difficult. The human mind is complicated and hard to understand, so minimizing it down into sets of rules or sequences can become unproductive especially with accidental biases.

NO MORE SEQUENCES

3 Birds does not rely solely on predictive technology and algorithms to market to your dealers’ customers. The combination of these two technologies is over a decade old. Why use old technology when the tech has evolved into so much more? Would you rather have a 2010 Blackberry or 2020 iPhone? For us, the answer is simple. We want your dealership to have marketing that is based on the best and newest technology. 


Understand; however, this is not to say that data and analytics have no place. Of course they do! And of course we incorporate predictive technology and algorithms in our marketing mix. But they are simply indicators of buyer behavior from which we try to understand buyer decision-making and thinking.


With a customer-driven and data-blended approach, 3 Birds provides a single platform that activates all of a dealership's data to personalize the experience every customer experience. Data is based on current consumer behavior delivered in real time, not on the past. Blue Sky Dashboards allow Dealers to take a deeper dive into understanding their unique and ideal customers. The system duplicates immediate successes and leans in to changing demands. It provides actionable transaction data rather than an estimated guess; technology that increases leads, revenues, and sales.


Stay tuned to our path of technology series to learn more and how we have implemented the most innovative technology yet. 

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Submitted by:

Destiny Chafin

Staff Writer