The next time your plane lands safely, your new car starts, or your package arrives on-time, either thank your lucky stars or thank an algorithm. Computer scientists and engineers are working closely with marketing professionals to use mathematics and today's computational power to improve the customer experience. This "hidden mathematical world" has the power to change marketing forever!
With exponential trends of data growth and computational power colliding, the world is literally drowning in data. There's too much data, and not enough analysis. Fortunately, companies are using technology to capture and integrate data and sophisticated mathematical procedures to analyze data and make better decisions–decisions that ultimately improve the customer experience.
An article from The Economist, "Business by the Numbers", highlights how companies are using algorithms to make book recommendations, choose optimum delivery routes for packages and even route calls to agents that can best diagnose a particular problem.
While the term "algorithm" sounds like geek-speak, the article notes algorithms are nothing more than, "a step by step method for doing a job." Some algorithms are simple, and some are very complex. Coupled with the power of a computer, "algorithms can execute tasks with blinding speed using vast amounts of data."
But how do algorithms improve the customer experience?
Take for example, something that on the surface sounds easy, but actually is very complex–package delivery. We often take for granted the operational efficiencies and supply chains of companies we rely on for package delivery. For example, we need a package delivered to Manhattan by 10am the next day. Using any of the global shipping companies, we would have a high degree of confidence in that package arriving on-time. However, peer behind the curtain and you'll see some pretty advanced algorithms make all this possible.
The Economist article mentions how UPS uses algorithms to route millions of packages each day:
"The simplest routes are easy to draw up. If a driver only has three destinations to visit, he can take only six possible routes. But the number of possible routes explodes as the destinations increase. There are more than 15 trillion, trillion possible routes to take on a journey with just 25 drop off points–and an average day for a UPS driver in America involves 150 destinations."
Now add other variables such as transportation schedules, special delivery times and shipping options (plane, train, truck, boat etc) and you'll begin to see there is a real science to ensuring timely package delivery. Algorithms help tackle complicated challenges–especially necessary as marketers race to take care of their "best" and/or most profitable customers.
Suppose you are a frequent flyer on a particular airline and have achieved some level of "status"–say Platinum. You've checked baggage for a flight to New York City, with a connection through Denver. Due to unforeseen circumstances, however, your flight into Denver is an hour late. In Denver, you barely make the connection and at this point are unsure whether or not your bags made the flight.
About fifteen minutes into the flight, and just after the plane has reached cruising altitude, a flight attendant taps you on the shoulder and says, "Rest assured, your bags are on the plane." Whew! You breathe a huge sigh of relief–especially because your business suits are in those bags!
Getting back to your flight attendant–how did he know your bags are sitting in the cargo hold? And how did you make your connection? Was it just luck? Perhaps fate?
While we cannot rule out the effects and benefits of luck in this instance, the more probable cause of making your flight (both you and your bags) is a combination of complex algorithms, scanning and sensing systems, processes and people executing in perfect harmony.
Ideally, the cause of the delay (weather, mechanical problems etc) was identified by systems or airline personnel. This caused a chain of events to take place with systems (running algorithms) that then started to identify possible alternative options (flights, aircraft, schedules) for you to make your connection.
Some systems examined the passenger records and recognized top tier customers (based on miles, profitability or some combination thereof). Other systems checked baggage and identified your particular suitcase in transit. Computers then sorted through thousands (if not millions) of options and either made automated decisions, or decisions supported by airline personnel to ensure that you and your bags arrived on-time. And of course, the flight attendant was notified via in-flight systems to tell you ... a valuable customer–that your suitcase had made the flight.
Our world is becoming more–not less–complex. As data volumes and decision options increase, algorithms and the systems that run them take on added importance.
Powerful and well designed algorithms are only part of the story in how companies are taking better care of customers. As the Economist article points out, an algorithm is only as good as the systems, data, processes and people behind it. Nonetheless, algorithms are helping companies increase competitiveness, improve efficiencies and enhance the customer experience.
Algorithms are all around us–helping marketing and other business professionals meet complex challenges, but sometimes we take them for granted.
So, the next time you decide to buy that book Amazon recommended, pause for a minute, and thank an algorithm.
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