Marketing processes are increasingly becoming automated, from segmentation and targeting to service provision, advertising, distribution, retailing, and pricing. The ability to track individuals’ behavior online and to merge multiple data sources into “big data” sets increasingly allows marketers to target consumers individually. Machine learning-based algorithms can tailor product offers, advertisements, and prices to individuals in real time: Utopia has become real for marketers. Such personalization boosts companies’ profitability from more accurate price discrimination, and consumers enjoy convenience and offers tailored to their needs. However, automating and personalizing interactions may also have less positive economic and psychological consequences for consumers, among them higher individual prices and threats to their perceived autonomy. The presentation will feature our ongoing experimental research into some of the more dystopian costs, which automation poses to consumers. Our experiments reveal systematic mistakes in how consumers value their privacy, suboptimal consumer choices in response to autonomy threats from prediction algorithms, and benefits for companies of providing different types of explanations to their customers for service denial decisions made by (un)explainable algorithms.
- How to Appease Your Customers After Your Algorithm Rejects Them by Klaus Wertenbroch, INSEAD Professor of Marketing, Pavel Kireyev, INSEAD Assistant Professor of Marketing, and Geoff Tomaino, INSEAD PhD Student, November 3, 2020
- Autonomy in Consumer Choice by Klaus Wertenbroch, Rom Y. Schrift, Joseph W. Alba, Alixandra Barasch, Amit Bhattacharjee, Markus Giesler, Joshua Knobe, Donald R. Lehmann, Sandra Matz, Gideon Nave, Jeffrey R. Parker, Stefano Puntoni, Yanmei Zheng, and Yonat Zwebner (2020), Marketing Letters, forthcoming.
- Designing AI Systems That Customers Won’t Hate by Ziv Carmon, Rom Schrift, Klaus Wertenbroch, and Haiyang Yang (2019), “MIT Sloan Management Review, Reprint #61315.
- Consumer Choice and Autonomy in the Age of Artificial Intelligence and Big Data by André Quentin, Ziv Carmon, Klaus Wertenbroch, Alia Crum, Douglas H. Frank, William Goldstein, Joel C. Huber, Leaf van Boven, Bernd Weber, and Haiyang Yang (2018), Customer Needs and Solutions, 5 (1-2), 28-37.