Webinars
MSI Webinar: Denied by an (Unexplainable) Algorithm: Teleological Explanations for Algorithmic Decisions Enhance Customer Satisfaction
What can firms do to make automated service denial decisions by their algorithms more palatable to their customers? Exacerbating negative customer reactions, firms do not always explain these service denial decisions to their customers, either because they do not want to reveal information about how their algorithms work or because, increasingly, they deploy unexplainable algorithms. Building on different categories of explanations in cognitive science and philosophy, we show that firms can offer teleological explanations (what purpose is the algorithm designed to achieve) when they cannot provide mechanistic explanations (how does the algorithm work) to limit negative customer responses. A series of lab experiments demonstrates that consumer acceptance of teleological explanations is as high as that of mechanistic explanations when mechanistic explanations cannot be used to reverse a service denial. Moreover, teleological explanations are more effective than vacuous “placebic” explanations or no explanation in protecting customer satisfaction. Finally, in a large-scale field experiment with a financial service provider, providing a teleological explanation significantly reduced the volume of customer service calls compared to providing the company’s default placebic explanation.
speaker
Klaus Wertenbroch is the Novartis Chaired Professor of Management and the Environment and Professor of Marketing at INSEAD, where he directs the INSEAD Strategic Marketing Programme. Trained at the University of Chicago’s Center for Decision Research, Dr. Wertenbroch is an expert in behavioral economics and consumer decision-making, strategic brand management, and pricing. He has taught these topics in undergraduate, MBA, Ph.D., and executive education programmes in the U.S., Europe, and Asia and has worked with clients including Allianz, Booz Allen Hamilton, Cemex, Citigroup, ExxonMobil, Ferrero, GfK, IBM, Indian Railways, Lafarge, LG, L'Oreal, Mediamarkt/Saturn, Metro, Nissan, Petronas, Starwood Hotels, and Unilever. Klaus is currently investigating how consumers respond to artificial intelligence (AI) and marketing automation (e.g., in the areas of data privacy, explainability of algorithms, and consumer autonomy). His work has appeared in leading scientific journals such as the Journal of Consumer Research, Journal of Marketing Research, Marketing Science, Organizational Behavior and Human Decision Processes, and Psychological Science. Among other awards, his research won the 2005 AMA O’Dell Award for the Journal of Marketing Research article that has made the most significant long-term contribution to marketing over the previous five years. He was one of the inaugural Marketing Science Institute Young Scholars in 2001 and was elected a Fellow of the European Marketing Academy (EMAC) in 2022. Klaus is an Associate Editor for the Journal of Consumer Research and the Journal of Public Policy and Marketing. He has served as the launching editor-in-chief of the Journal of Marketing Behavior, as an Associate Editor of the Journal of Consumer Psychology, and as a member of the editorial boards of the Journal of Consumer Research and the Journal of Marketing Research, among others, for many years. He holds a Ph.D. and an MBA from the University of Chicago and an M.Sc. (Diploma) in Psychology from the Darmstadt University of Technology in his native Germany. Before joining INSEAD, he was a faculty member at Duke University and then at Yale University. Klaus also held appointments as Visiting Professor of Marketing at the University of California, Berkeley, and at The Wharton School of the University of Pennsylvania.