Increasing click-through rates with ad morphing — Glen Urban and John Hauser

MIT Sloan Professor Glen Urban

MIT Sloan Professor Glen Urban

MIT Sloan Professor John Hauser

MIT Sloan Professor John Hauser

From Fortune China

Everyone is trying to make their banner ads and new media more effective. In the banner area, 90% of the effort is spent on targeting. If you click on a link, you’ll get a particular ad. A whole industry has emerged focused on collecting click stream data and making recommendations.

But that is only half the picture. Equally important is the question of how you should talk to consumers once they are targeted. This is what ad morphing is all about.

For example, a car company may target a consumer whose click history indicates he is interested in buying a car. However, instead of just randomly sending him car ads, it can track the consumer’s online behavior to determine his preferred communication style. We also call this his cognitive or thinking style. Does the consumer want a picture of the car at a NASCAR race? Or would the consumer prefer to look at the technical aspects of the engine? Or does the consumer want a fashion shot of a driver pulling up to a country club? What will the consumer best respond to?

This is a multi-arm bandit problem because it’s like a slot machine with many arms. The advertiser needs to choose the ideal lever to pull to match the ad to the consumer’s thinking style. However, it’s more difficult with ads because there is uncertainty as to the consumer’s thinking style.

Our algorithm addresses this issue by monitoring click stream data to determine how a consumer makes decisions on the web. After enough information is gathered, the algorithm determines the consumer’s likely thinking styles and matches the optimal ad to our estimates of thinking styles – all in real time.

Partnering with companies like General Motors to test our algorithm, we found that morphing has tremendous potential to increase banner ads’ productivity. Companies work hard just to get a 1-2% improvement in click-throughs, but we found that morphing ads based on thinking styles can improve that rate up to 83%. We also found that morphing can lead to 30% better brand recognition. These are very significant effects.

While our algorithms (see our paper for the algorithms) can be implemented by any good programmer skilled in the art, morphing can challenge the budget. To use this tool, companies have to design more ads – ads that appeal to each of the various thinking styles of customers. There also may be cross-organizational issues, as the people who create those ads must coordinate with the analysts doing the targeting.

However, this is the only algorithm that we’re aware of that integrates thinking styles and morphing in real time. It’s very cutting edge, but it can help move the market to the next wave of action in banner advertising.

Also see the post in Chinese at Fortune China.

Glen Urban is the David Austin Professor in Management, Emeritus, Professor of Marketing, Emeritus, Dean Emeritus, and Chair of the MIT Center for Digital Business at the MIT Sloan School of Management. 

John Hauser is the Kirin Professor of Marketing and a Professor of Marketing at the MIT Sloan School of Management. 

3 steps for harnessing failure the right way — Anjali Sastry and Kara Penn

MIT Sloan Sr. Lecturer Anjali Sastry

From Fast Company

Think back to your last project. Was it set up to maximize learning? Did you uncover valuable insights along the way? Did you deliver what you set out to? And once it was over, did your team reflect, or did you move straight to the next thing?

A systematic method for managing your projects can set up your team for useful epiphanies at every step. In the end, it can help you to create better deliverables with more lasting and further-reaching impact.

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The roadblock to commercialisation — Thomas Allen and Rory O’Shea

MIT Sloan Professor Thomas Allen

From Financial Times

Knowledge and innovation generated at universities can lead to the creation of high-impact spin-off businesses. Whether it is through the licensing of intellectual property, partnerships or other informal arrangements, the tech transfer process can play a critical role in shaping new industries and regional economic development.

Research by Eesley and Miller and Eesley and Roberts has demonstrated the role Stanford University has played in shaping the development of Silicon Valley and MIT’s contribution to building a world-class innovation hub in the Kendall Square district of Cambridge, Massachusetts.

What the Market Basket struggle means for Labor — Thomas Kochan

MIT Sloan Professor Thomas Kochan

MIT Sloan Professor Thomas Kochan

From Boston.com

Labor Day traditions call for celebrating worker struggles of the past that helped produce better working conditions for all. This year we have a bona fide case in our backyard that may just usher in a new era of workplace dynamics that future labor commentators will herald.

Arthur T. Demoulas captured the essence of this modern day struggle in his triumphant speech to his employees when he noted that they view their “workplace as more than just a job.”

Today’s workforce, young and old, executive and front line employees alike, want to identify with the mission of their workplace—whether it is serving customers well and providing value for scarce dollars, improving the quality of care to vulnerable patients, inspiring and educating children to reach their full potential, or creating and producing goods that help sustain the planet. When united in a cause people believe in and experience the pride and material benefits of a job well done, a deep culture of shared ownership inevitably develops. When combined with leaders who reinforce by word and actions the importance of teamwork, compassion when personal or family misfortunes arise, and a willingness to respond to community needs, the power of talented, motivated individuals multiplies into social capital no traditional competitor can match.

Read the full post at Boston.com

Thomas Kochan is the George Maverick Bunker Professor of Management, a Professor of Work and Employment Research and Engineering Systems, and the Co-Director of the MIT Sloan Institute for Work and Employment Research at the MIT Sloan School of Management.

Here’s proof that Wall Street regulators listen to you — Andrei Kirilenko

MIT Sloan Professor Andrei Kirilenko

MIT Sloan Professor Andrei Kirilenko

From MarketWatch

Especially concerning business regulations, critics argue, an inside the Beltway mentality prevails. Only the lobbyists and industry insiders are heard.

I am sensitive to this criticism. Five and half years ago, the United States experienced the worst financial crisis since the Great Depression. In response to the crisis, Congress passed the Dodd Frank Wall Street Reform and Consumer Protection Act. One part of the legislation instructed a financial regulatory agency called the Commodity Futures Trading Commission (CFTC) to write rules that regulate “swaps” — the same derivatives that had been implicated in the financial crisis. As the Chief Economist of the CFTC during 2010-2012, I helped with the rulemaking process.

After leaving the federal government in December 2012 to join MIT Sloan School of Management as a finance professor, I set out to study the work that I and other staff members had done on designing new Wall Street regulations.

My goal was to create a scientific tool to evaluate whether thousands of public comments that were delivered in response to the rules proposed by the CFTC were meaningfully taken into account. I wanted to study how responsive the government is to its constituents. Is the government really for the people?

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