Inadequacies of Game Theory in Marketing
Article: http://www.marketingmagazine.co.uk/article/1309753/playing-game-theory-marketing-tool
There is an inherent “gamey-ness” to the production and consumption cycle. Producers put forth products, and consumers analyze propositions and ultimately choose to buy or pass. The producer wins if the consumer buys, and the consumer wins or loses based on the quality of the experience with the product. The problem of marketing products sounds ideal for a game theorist. If one could lead a consumer to a choice and then predicatively convince them that the choice to buy a product yields a better outcome than not buying, then marketing could be solved almost mathematically. For many years, marketers have been trying to map game theory tactics to their marketing campaigns, and the results have been surprisingly ineffective. The predictive methods of game theory, while useful in theory, simply leave too much out of the marketing equation, namely: the emotive aspect of consuming.
Generally, game theory assumes that the particicipants, in this case the consumer and marketer, are rational, and thusly predictive. Marketers try to lead the consumer to a junction at which they weigh the benefits of buying a product. However, the article claims that, in practice, people don’t actually weigh the “tangible costs and benefits” of their purchase. Instead, they make decisions based on branding, sentimentality, emotions, etc. These elements of the decision making process are nearly impossible to quantify.
The more empirical elements of the product design and marketing process use game theory to great effect. They can be tested, modeled, and refined over time. Some of the more logistical and basic consumer habits simply don’t change that much. The emotional element is a more nuanced process. According to the author, Nick Chowdrey, “The trick is to [rationalize] the consumers’ decision as much as possible”. Guiding consumers to a product through a controlled route is the most desirable method of doing this. The key is to be able to put the consumer into a situation where their responses can be easily predicted. Being in a position where responses can be readily known, and their concerns subsequently addressed, provides a better chance for success in selling the product. Providing a controlled, enticing “journey” for consumers to follow on the way to buying a product, however, is tricky to accomplish in practice. This methodology is more appropriate for very specific, well-defined markets, as behaviors can be predicted with more specificity and repeatability.
As discussed in class, predictability is essential for game theory. When playing a game, opponents have to analyze the potential for each outcome. The probability of each outcome is largely based around the rationality of a choice and the personality of the player. For marketers, this proves extraordinarily difficult. Characterizing a market is complicated, and predicting the responsiveness of an irrational market is next to impossible. Ultimately, two things make the application of game theory to marketing more useful: market specificity, and a rationalized decision making scenario.