Unleashing the power of algorithmic marketing
A new, scientific form of marketing is disrupting industries. It will require companies to consider new strategies, technologies, and talent to profitably use "big data" and fast computers.
- May 2012
- Gunjan Soni, Joshua Goff, Paul McInerney
A massively disruptive transformation is taking place at leading companies – a disruption that could rewrite the entire traditional marketing canon. Instead of gut instinct and experience, companies are turning to “big data,” algorithms, and automation to win and retain customers. To provide some context, it is necessary to revisit the past decade and look at what happened on Wall Street during this period.
“Leaders need to start thinking about whether they have the right strategy, technology, and talent to exploit algorithmic marketing’s full potential.”
Algorithmic marketing here translates to an approach for scientifically managing a full range of marketing issues, including targeted offers, communications, pricing, and more. It employs an evolving set of advanced analytical methods that include predictive statistics, machine learning, and natural language text mining. It harnesses big data such as customer location and behavioral information along with powerful computing systems to match customers with context-sensitive products and services. It also helps to optimize customer processes and experiences, such as customer service, and plays a role in core operational processes like cell call routing, payment processing, and risk assessment.
Algorithmic marketing is distinct from data mining practices, which form the basis for most of today’s customer lifecycle management (CLM) and related data-driven marketing practices. A key differentiator is that current data mining practices usually rely on retrospective data analyses, which lead to static campaigns and are not typically automated or executed in real time.
There are already some early signs that suggest that the algorithmic marketing transformation is underway, especially in industries that rank high in terms of big data value potential and ease of capture indices, such as financial or information services.
As algorithmic marketing takes hold, it is likely that big winners – and potentially even bigger losers – will emerge in the near future.
Read the complete white paper on algorithmic marketing (on McKinsey’s Telecom, High Tech, and Media site, registration required).
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