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How Game Theory is Taking Marketing to the Next Level

Feature Article | May 26, 2017 by Adam Winfield

Marketing tactics tend to stick to a tried-and-tested principle: If you’re marketing something consumers don’t need to survive, target their emotions, rather than their logic. The closer you can get to their inner chimp making the buying decision, the better.

This started in the 20th century, an era that saw dramatic change in how politicians and businesses communicated with the public. Inspired by the thinking of Sigmund Freud and put into practice by Edward Bernays, the father of public relations, what had once been a process to engage people’s rational, conscious minds gradually became an appeal to their primitive impulses and desires.

While marketers have come a long way in refining their understanding of what drives an emotional purchase, they still rely heavily on a scattergun approach that sees their message spread wide but gives them little knowledge of what’s worked and what hasn’t. As marketing pioneer John Wanamaker once stated: “Half the money I spend on advertising is wasted. The trouble is I don’t know which half.” More than a century later, it’s often much more than half.

How the Internet Helps – And Hurts

Wanamaker, who lived from 1838 to 1922, could not have imagined the technology at our fingertips today. The Internet has introduced countless new ways to reach consumers with feel-good, aspirational marketing, which is good for marketers. But those countless new ways have also made it even harder to figure out where best to spend the marketing budget.

Wanamaker couldn’t help wasting half his budget, but today’s marketers remain dogged in their search for accurate methods of measuring the success of specific campaigns and placements. While the rise of digital tools has added a lot more data to proceedings, the unpredictability of emotional human behaviour still renders raw marketing data essentially worthless.

Early methods for analyzing Internet marketing data were too simplistic to factor in the customer’s emotional journey. Whether it was the first-click attribution model, which says the first interaction on the buying journey is the most critical, or the last-click attribution model, which gives credit to the last click, it didn’t give marketers the guidance they sought. The reality, much like the Internet-based marketing campaigns of today, is much more nuanced.

Searching for the Holy Grail of Marketing Measurement

Realizing this, some corporations have invested in scientists and academic partnerships in attempts to apply the principles of neuroscience to marketing research. They hope this will give them a better understanding of why consumers make the decisions they do, and which parts of the brain are responsible.

It’s possible that this research could one day lead to marketers having a scientific comprehension of exactly how the human brain drives irrational consumerism, but the neuromarketing services sold today have largely been labelled as pseudo-science and dismissed as hype.

In the meantime, marketers will keep searching for new measurement methods that give them the best picture possible of which activities are paying off. One approach gaining traction is the game theory attribution model (patented by marketing metrics software provider – and recent SAP acquisition – Abakus). First defined in 1944, game theory is the mathematical study of how and why people make decisions.

What’s Special About Game Theory Marketing?

Game theory attribution is the application of game theory to marketing – and it could bring tremendous value to the discipline. Instead of using rudimentary measurement models like last-click attribution to inform marketing decisions, game theory attribution can distribute credit for a sale across several points of the customer’s buying journey. This allows marketers to paint a clearer picture of what they should do more of, and where they’d be better off saving their money.

The explosion of big data makes game theory attribution feasible today because it’s a system that theoretically becomes more accurate each time it collects data on a customer’s buying journey. It doesn’t claim to be the ultimate solution for marketing measurement (game theory’s biggest incompatibility with marketing is that it studies “rational” decision makers), but its potential goes a lot further than what came before it.

Despite some challenges, such as the need for data science expertise and shrewd observational skills, proponents of the game theory attribution model are putting forward a strong case for why it’s the most effective method we have for using data to understand emotionally driven customer behaviour. Until marketers can use neuroscience to read our minds, they might just be right.

This story originally appeared on Business Trends on the SAP Community.

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