We call them contextual apps, but they’re much more. They’re the first iteration of the future, here today, of programmatic consumption in which algorithms will automate consumers’ decision-making.
Instead of buying on the basis of their own evaluations and heuristics, consumers are using technology to do that for them. This offloads the costs of time and attention while providing the benefits of relevance and timeliness. Consumers are relying on predictive contextual apps for assessing alternatives, and soon enough, for placing orders, too. These algorithms are nothing but programs, just like those used with increasing frequency by marketers. Programmatic marketing is being matched head-on by programmatic consumption. With gathering speed, the marketplace is moving from marketer-to-consumer relationships to algorithm-to-algorithm interactions.
This is a shift from a “meet-demand” marketplace of old, which was centered on planning, to an “on-demand” marketplace of today, which is centered on responding, and ultimately leading to a “know-demand” marketplace of tomorrow, which will be centered on predicting. Prediction has always been critical to marketing planning and responsiveness, but this was done by marketers to anticipate what consumers would buy. In the future, consumers will be using predictive tools that will decide what to buy for them.
Already, consumers are using predictive tools in the form of apps that push notifications and nudges, and these sorts of pushes are becoming smarter. The next phase, clearly visible on the horizon, are predictions that translate immediately into decisions.
The key element in this shift is “the pivot to passive.” Sensors are replacing screens as the primary way in which consumers engage with digital technologies—and this is more than sensors in handheld devices. This is the Internet of Things in which every object, human and non-human, will be embedded with a digital interface that interacts with every other object. These data streams, collected passively, without consumers actively inputting information, will be monitored and routed into algorithms that will analyze these data in real time, triggering immediate responses.
In effect, these algorithms will operate as personal assistants for consumers, matching what’s available in the context of the situation against profiles that consumers have previously set up with their personal preferences. The decision on any particular occasion will not be a weighing of competing choices, but an algorithmic matching of real-time options against a profile.
For example, WiFi-enabled smart coffee makers, printers or washing machines will automatically reorder supplies when they’re running low. A preference already will have been added to a profile, so the device will order that item over and over. In a similar way, decisions in every category will be automated.
As a result, consideration sets are less and less useful as a marketing metric. When an algorithm picks one brand repeatedly based on a match against a profile, there is no set of items under consideration on a given purchase occasion. Trying to get a brand into consumers’ consideration sets is not the right objective. Rather, the objective must be to get a brand into consumers’ preference profiles, a very different marketing task.
The most fundamental change, though, is in the domain of consumer experience available to marketers. McKinsey & Co.’s Customer Decision Journey is a good way to conceptualize this change. Introduced as the 21st-century update to the old-time, linear purchase funnel with a fixed endpoint, it depicts consumer decision-making as continuously recirculating. When demand is triggered, a consideration set is evaluated and a choice is made. This is the pre-purchase experience. Following purchase, consumers use the product and, on the basis of that post-purchase experience, either repurchase it in a loyalty loop, or go back to their consideration sets to decide again.
McKinsey articulated this model of the contemporary decision journey before the rise of passive digital and the explosion of predictive contextual apps, so it provides a clear framework for understanding what has changed. Programmatic consumption is taking over the pre-purchase experience—and thus, in broad strokes, taking it out of play for marketers.
In the future, algorithms, not consumers themselves, will do all of this, but algorithms can’t take over the post-purchase experience. People, not algorithms, use the product or service, so going forward, this is the domain of consumer experience where marketers will have the most unmediated access to consumers.
The bad news is that this is the domain in which marketers have the least experience. The good news is that this can become a powerful platform of innovation that consumers will find fresh, worthwhile and motivating in a future driven by the new dynamic of programmatic consumption.
J. Walker Smith is executive chairman of The Futures Co., part of the Kantar Group of WPP, and co-author of four books, including Rocking the Ages. Follow him on Twitter at @jwalkersmith.
This article was originally published in the September 2015 issue of Marketing News.