Targeted Marketing and Artificial Intelligence

Stephen DeAngelis

October 13, 2014

“The age of intelligent machines has arrived,” writes Christopher Mims (@mims), “only they don’t look at all like we expected.” [“Artificial Intelligence Comes to Your Inbox,” The Wall Street Journal, 25 August 2014] What Mims describes next is not the appearance but the behavior of intelligent machines. He writes:

“Forget what you’ve seen in movies; this is no HAL from ‘2001: A Space Odyssey,’ and it’s certainly not Scarlett Johansson’s disembodied voice in ‘Her.’ It’s more akin to what happens when insects, or even fungi, do when they ‘think.’ (What, you didn’t know that slime molds can solve mazes?) Artificial intelligence has lately been transformed from an academic curiosity to something that has measurable impact on our lives. Google Inc. used it to increase the accuracy of voice recognition in Android by 25%. The Associated Press is printing business stories written by it. Facebook Inc. is toying with it as a way to improve the relevance of the posts it shows you. What is especially interesting about this point in the history of AI is that it’s no longer just for technology companies. Startups are beginning to adapt it to problems where, at least to me, its applicability is genuinely surprising.”

Mims first surprising example involves a company called Persado, which uses artificial intelligence to write the text for “advertising emails and ‘landing pages’ (where you end up if you click on a link in one of those emails, or an ad).” I doubt that an AMC television series 50 years from now called “Mad Machines” will capture the same level of viewer attention as the channel’s current “Mad Men” series about advertising agencies in the 1950s and 1960s. Nevertheless, the transformation of the advertising industry is being disrupted by Big Data and artificial intelligence (AI) as much (or more) than it was by television in the 1950s. Mims explains how Persado’s system works:

“Persado’s engine is being used across all of the types of emails a top U.S. wireless carrier sends out when it wants to convince its customers to renew their contracts, upgrade to a better plan or otherwise spend money. Traditionally, an advertising copywriter would pen these emails; perhaps the company would test a few variants on a subset of its customers, to see which is best. But Persado’s software deconstructs advertisements into five components, including emotion words, characteristics of the product, the ‘call to action’ and even the position of text and the images accompanying it. By recombining them in millions of ways and then distilling their essential characteristics into eight or more test emails that are sent to some customers, Persado says it can effectively determine the best possible come-on.”

Lawrence Whittle, head of sales at Persado, told Mims, “A creative person is good but random. We’ve taken the randomness out by building an ontology of language.” Copy writers, especially different copy writers working on the same ad campaign, might be inconsistent in their use of language or messaging, but I’m not sure that I would call that inconsistency randomness. Nevertheless, since my company, Enterra Solutions®, uses both artificial intelligence and the world’s largest common sense ontology in most of our product offerings, I have a great appreciation for how valuable ontologies can be. An ontology can help discover relationships as well as promote understanding. Persado obviously uses its ontology to combine words in ways that have a proven ability to attract, inform, and motivate people. As Mims notes, however, the process is not simple. Persado’s system tries millions of combinations to come up with a few choice examples. Testing that many combinations is simply impossible for a human (or a team of humans) to do in a reasonable amount of time. That’s the value of enlisting a smart and fast machine to help with the work. Mims writes, “The results speak for themselves: In the case of emails intended to convince mobile subscribers to renew their plans, initial trials with Persado increased click-through rates by 195%, the company says.”

 

The primary reason that companies advertise is to make a sale or to close a deal. The last thing that marketers want is for their messages to fall on deaf ears. The best way to do that is to ensure that the right person gets the right offer via the right medium at the right time — that is, targeted marketing. Lisa Russell (@lisaarussell), Director of Marketing at PointDrive, writes, “In a day where marketers need to work twice as smart to reach their target audience, there emerges a wave of new methods for targeting specific audiences. … As we approach 2015, things are a little bit different than they were in the early 2000s. People are unique and advertisers know that they have to maximize their brief opportunity to catch your eye. Online advertisements you see today are often specifically targeted to you based on your interests and activity online. Behavioral targeted advertising has proven to be highly effective.” [“Targeted Marketing: Creating Personalized Experiences that Close,” Business 2 Community (B2C), 11 September 2014] Most of the magic behind targeted marketing relies on Big Data analytics and some form of limited artificial intelligence that can make decisions in split seconds. Russell continues:

“In a 2010 report conducted by the NAI, economist Howard Beales asserts:

Based on proprietary data provided by twelve major advertising networks, the study found that in 2009, behaviorally-targeted advertising secured an average of 2.68 times as much revenue per ad as non-targeted “run of network” advertising. The study also found that behaviorally-targeted advertising is more than twice as effective at converting users who click on the ads into buyers (6.8% conversion vs. 2.8% for run-of-network ads), and that behavioral advertising accounted for approximately 18% of advertising revenue.’

In the consumer market industry, these numbers are significant and directly translate to massive ROIs for producers.”

Paul Roetzer (@paulroetzer), founder and CEO of PR 20/20, agrees that automated marketing and artificial intelligence are going to disrupt the advertising industry forever. He asserts, “Marketing automation has the ability to expand the value and impact of your content, capture lead intelligence, improve lead-to-sale conversion rates, drive repeat purchasing, and, most important, enhance the overall customer experience throughout the journey. Generally speaking, marketing automation takes traditionally manual tasks and automates them. Activities such as contact management, list segmentation, lead scoring and nurturing, A/B testing of website pages and offers, email marketing, and performance measurement and reporting can all be done more efficiently through automation.” [“Marketing Automation is Only The Beginning: How Algorithms and Artificial Intelligence Will Disrupt Marketing Forever,” PR 20/20, 18 August 2014] He adds, “In practice, advanced algorithms can disrupt entire industries overnight. … Algorithms are getting smarter and infinitely more powerful, while automating cognitive tasks in ways never thought possible before. Massive transformation is on the horizon. Jobs, companies, and entire industries will be reimagined.” I couldn’t agree more.

 

Russell offers three tips that will help you use new technologies to better target your desired customer. First, know your target audience. It’s simply impossible to do this if you don’t use Big Data analytics. Second, decide which metrics are important to you. You need to know how well your campaign succeeded and you can only to that if you identify the data that will provide you with that information. Finally, treat each potential customer like gold. I’m assuming that Russell means once you have identified the customer you want to target, you need to treat them like gold. Not all “potential” customers have the same value. For more on that subject, read my article entitled “All Customers are not Created Equal.” Russell concludes, “If you know your audience well, prove to be useful in their time of need and you closely monitor your ability to attract and convert them, your business will be able to successfully compete against sizable behavioral marketing techniques.” To do that, you will need to embrace both Big Data and artificial intelligence.