Influencing consumer behavior

Algorithms targeted to specific audiences affect spending decisions

Influencing consumer behavior

Juliana Blazek and Shreya Vijay

Seven in 10 Americans use social media and it has become increasingly interconnected with businesses as a way of marketing and buying, according to Forbes. Social media companies have updated their platforms to allow consumers to view and directly buy products.

In 2014, Facebook established a “buy” button on posts, through which users can buy a product without having to leave the app. Then, in 2020, Instagram released its “Shop” tab and in 2021, TikTok announced “TikTok Shop,” which gives consumers and businesses an easier and more direct way of connecting, according to Forbes.

Insider Intelligence projects that by the end of 2023, 35% of Instagram users will purchase a product via their platform, and 37% of Facebook and TikTok users will do the same.

“I think the ability to purchase products through social media will greatly help consumers\ get exposed to a wide range of business,” said senior Josie Sinwell, president of Investment Club. “It will be especially useful for small businesses to get in touch with new customers.”

TikTok’s website reported that since the launch of “TikTok Shop,” businesses have seen an increase in sales by using the platform to host live videos that allow customers to directly buy products from the videos. Small business PerfumeBoss, for example, saw a 369% increase in orders within two months and aims to conduct five live videos weekly.

According to Business Journals, social media influences 47% of millennials’ purchases. Further, 80% of consumers make purchasing decisions based on their friends’ posts.

One method of social media marketing is for businesses to partner with influencers and have them use and advertise products on their pages. In 2021, businesses spent $3.7 billion on influence marketing in the United States, as customers are more likely to buy a product if a person they follow and trust is recommending it, according to Forbes.

“When I see a product that has many good reviews, it makes me more inclined to look into the product,” senior Brie Johnson said. “Watching other people test out products on social media platforms is really useful when trying to see what the product is like.”

Algorithms in social media also contribute to  what consumers see in their feeds. According to The Conversation, companies gain access to large amounts of data that include the browsing histories of shoppers. The companies then use an algorithm to predict what the person would potentially buy based upon their history and the buying habits of others with similar histories.

“It is useful when algorithms are able to prioritize certain posts over others because it helps users to more easily find things that they like,” Sinwell said.

According to the Digital Marketing Institute, each social media platform has a different way of implementing an algorithm on its site. For example, the TikTok algorithm takes into account factors such as user interaction, account
settings and captions on videos when sorting the videos that are put on someone’s “For You” page. However, Instagram’s algorithm considers even more factors to prioritize posts, including user session time and the relationship with the user.

Businesses often use social media algorithms in their marketing strategy into reach a broad yet relevant audience, according to Forbes. This includes businesses creating high-quality and eye-appealing posts, which algorithms favor, that they upload to their pages frequently and link to their websites. According to Forbes, the goal for businesses is to build interaction with consumers so the algorithms will start prioritizing the businesses’ posts.

“Oftentimes I enjoy having the posts in my feed organized according to my preferences,” Johnson said. “I can find new products that are similar to those that I have already purchased.”

These algorithms can be viewed as an invasion of privacy, for they are developed based upon large amounts of data on an individual, according to The Conversation. However, the algorithms are useful for consumers when they receive ads displaying discounts for certain products.