The consumer is becoming an algorithm: is this a good thing?

Applying big data and predictive analytics to pricing on all goods means even more power is shifting to consumers.
Written by Joe McKendrick, Contributing Writer

For most of my life, I have heard how we as consumers or citizens have been reduced to "numbers," thanks to technology in a mass-consumer society. Now, take that a step further, and it may be more appropriate to lament that we all have become "algorithms."

Big Data analytics puts the consumer in charge. Photo by Joe McKendrick.

But there's a silver lining to all this. In a recent LinkedIn post, Don Pepper explains that predictive analytics, applied against Big Data, can deliver more power to consumers. It's long been said that information is power, and an informed consumer can hold a lot of sway in the marketplace. That's exactly what's happening, Pepper observes:

"Many of us don’t appreciate just how empowering big data will soon be for ordinary people.... Today’s big-company analytics programs are tomorrow’s smartphone apps. What will happen within a few years, almost inevitably, is that business algorithms will be making the offers, while consumer algorithms will be making the buying decisions."

Witness the rise of services that can track and find the best travel deals. Or online services such as Decide.com, which gathers up data on a whole range of consumer products, from computers to couches, and looks at historical trends. The service applies pattern-matching against current price trends to predict whether a price is likely to rise or fall in the near future:

"If you’re considering whether to buy an Apple iPad, Decide.com predicts that the $499 current price for the iPad Gen 4 will likely drop by $53 within the next two weeks (82% confidence). So you might want to wait a few days before you buy."

More than a decade ago, the Internet began tilting power in favor of the consumer in a very dramatic way, forcing greater competition and transparency in pricing. Now, putting such big data and analytic power in the hands of consumers -- literally in their hands, via a mobile app -- will complete the shift.

This post was originally published on Smartplanet.com

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