Companies are finding new ways to figure what a consumer wants; sampling subscriptions are one way to go
One of the fallacies of economic theory was predicting a rational consumer, people, in general, can be irrational at times.
Numerous PhDs, thousands of dissertations and millions of blogs have been written about tracking consumer preferences. What started as an economic theory with Alfred Marshall in 1890 with his book “Principles of Economics” has been revisited a million times; there have been movies on it as well. However, horrible or prejudiced it might have been “What Women Want” does show how difficult it is for advertisers to sell a brand; the protagonist, Mel Gibson, has to acquire superpowers to find the right pitch. Thankfully, two decades on, advertisers and marketers still can’t listen to your thoughts, but they are edging closer.
Earlier the only way for companies to get consumers to reveal their preferences was looking at their purchase patterns and then deducing what they would and would not like. Some would even conduct market research, but what if your product is something people haven’t ever heard about. How do you sell that? A company could appeal to aspirational aspects, but such instances were also limited.
The internet and social media age have transformed that completely. Not only companies can access more information, but consumers are also more than willing to reveal preferences online. Moreover, companies can combine different types of data and know more about you.
If a company can discover the paying capacity, they can market products that you like. For instance, Facebook learns that you like Manchester United page and follow the team. Next time there is a new collection, they can direct you their store.
This is also the reason that Facebook and Google are so eager to push for sale via their channels or offer consumer listing. The more you search and the more information they can extract, the better it is. This is also how Cambridge Analytica was able to influence voter preferences.
While earlier, there was only so much traffic and information that systems could gather at a point of time, they are becoming smarter and faster with time. That is also the reason data has become so precious.
As more mathematics is being used, advertisements are moving beyond naïve Bayesian logic. Take the difference between how you consume content on TikTok or say your advertisements on the website. While companies have gotten better at user tracking using geo-tagging and other data, there is still a lot to learn.
Google keeps pitching you the same ad on the network if you search for one thing, TikTok is smarter. As you are consuming more byte-sized content per minute, TikTok can map user interest better. A flip on dancing videos means TikTok or Instagram can skip them, replay on dog videos highlights you are a dog lover. Now, cute dog videos can populate your wall.
Marketers and advertisers are eerily moving to a similar level of surety as far as discerning user trends are concerned.
Crowdsourcing interest: The Indiegogo and Kickstarter model
Another model that has attracted consumer attention is of crowdsourcing initiative. Started in the first decade of the 21st century, Kickstarter and Indiegogo have been able to get users to reveal preferences either by donating or by purchasing first iterations of their products. Many companies and products, mostly in the tech domain, have sprung to life because of these brands.
While the model relies on the old try and test approach, the platform has changed. Earlier companies would try to place their products on shelves in a supermarket to get user interest; now they can play to a broader audience. Two, they can test concepts that earlier would have required days of research and market opportunity.
A few months, a call with a founder of an asset management fund, Roots Venture, Japan Vyas, led me to another concept for tracking consumer preferences. The sampling approach. While the word sampling creates the image of a person standing at the shop corner trying to get you to taste different sauces or those small bottles of perfume, which spell the word testing in big, bold black letters, Smytten, one of the Roots’ portfolio companies, is trying to modernise the process.
The company has been able to attract a million users within five years of existence and is expecting to triple its user base by next year.
Swagat Sarangi, the co-founder of the company, explains how the company works. “The target for Smytten he says are High Earners, Not Rich Yet (HENRY) segment,” he says. The company gets users to fill detailed forms and then gives them six points for a trial, which allows them to call in samples of six products. Once the points are exhausted, Smytten asks users to purchase a product of the website to restore the six samples. This way Smytten can address user preferences, and companies on the programme can figure out when they are losing their customers and which segment to target.
AR/VR revolution and camera presence
Technology is evolving. Companies are trying to create better profiles, and the more one uses technology, the more it becomes possible for them to efficiently track users.
Payments is the first step towards determining what the consumer purchases,c ombine it with what she wants or click at and it can create a potential to influence consumer.
There is a reason Facebook wants to release Libra and get small manufacturers to use it as a marketplace. It will be able to track interests and spends making it one of the largest aggregator of user interest.
AR/VR are also a part of this equation. One of the target market for JioGlasses , besides education, is the seller. Sellers can use the technology to position their products in a more effective manner.
So, are new machine learning algorithms. For certain products, AR can cut costs for seller and personalise the experience for the consumer. Machine learning can decipher broader market trends.
IBM already helps supermarkets to position their products better by teaching them shelf placement. If it is a rainy day, the model will ask the owner to put umbrellas first.
Then there is tracking users using cameras at supermarkets to figure out what gets added to the cart and what doesn’t. It helps if the supermarket is also owned by a company running an online marketplace. Amazon gets million of data points, combine it with Alexa requests and bingo the company hits a gold mine in understanding what teh consumer wants.
Will companies be able to read thoughts? Probably not. One of the fallacies of economic theory was predicting a rational consumer, people, in general, can be irrational at times. Companies need to discount for this irrationality as well.