The marketing black swan

The Black Swan Approach: A Paradigm Shift in Marketing Strategy

The Black Swan Approach: A Paradigm Shift in Marketing Strategy

For decades, the idiom of a ‘black swan’ was a placeholder for the impossible or nonexistent.

, in his groundbreaking book , breathed new life into this phrase, redefining it as an event that is an outlier, has an extreme impact, and is retrospectively (and often erroneously) explained as predictable.

Taleb’s definition of a ‘black swan’, an event impossible to predict due to its extreme rarity, yet with momentous consequences, has had profound implications across various fields.

‘Black swans’ as defined by Nassim Nicholas Taleb

  • Beyond the realm of regular expectations: They are outliers and nothing in the past can convincingly point to their occurrence.
  • Extreme in their impact: Their effect is profound and transformative.
  • Explained retrospectively as if they were predictable: After their occurrence, a narrative is constructed that makes it seem as though the event could have been expected.

The term comes from the old belief in the Western world that all swans were white because all known records of swans reported that they had white feathers.

In that context, a black swan was a metaphor for something impossible or nonexistent.

However, when black swans were discovered in Australia, the term came to signify the idea that a perceived impossibility might later be disproven.

‘Black swans’ in marketing

Much like its avian namesake, a ‘black swan’ event in the marketing sphere is an outlier. It’s a strategy that delivers unexpectedly transformative results, far beyond the realm of regular expectations. And these disruptive, innovative methods are becoming essential tools for those navigating the increasingly complex digital marketing landscape.

First we explore the traditional A/B test

In marketing testing, it is common practice to “work harder, not smarter.” An approach epitomized by the practice of running straight-forward A/B tests - creating two versions of a marketing element and testing to see which performs better. This is an iterative process, repeated in pursuit of minor, for example 1%, improvement in conversion rates.

The compounding power of 1% improvements

Over time, this adds up. Let’s consider a scenario:

Run consecutive A/B tests and see a 1% improvement every day for 70 days and, thanks to the power of compounding, you double your conversion rate.

We can use the formula for calculating compounding interest, modified for our marketing purposes.

A = C * (1 + r)^n

A: The the final conversion rate
C: The principal conversion rate
r: The rate of increase (1% = .01)
n: The number of periods

So we solve for n number of days
E.g. How many tests are needed to go from .5% to 1%

1% = 0.5% (1 + 0.01)^n
2 = (1 + 0.01)^n
ln(2) = ln((1 + 0.01)^n)
ln(2) = n * ln(1 + 0.01)
n = ln(2) / ln(1 + 0.01) = 69.66

It would take 69.66 tests to reach 100% improvement

This is the essence of grit, perseverance, and resilience. But could there be a more efficient, more intelligent way to reach the same, or perhaps even better, results?

Unleashing the exponential power of the improbable: transforming marketing success with the ‘black swan’ approach

In this paradigm, the traditional A/B test is run concurrently with a ‘black swan’ test. Now, we’re running an A/B/C “multivariate” test. In the latter, we don’t just test minor changes but dive into the world of the improbable, the creative, the completely untested. It might mean using wildly different copy, a radically new landing page design, or an entirely new concept.

The ‘black swan’ test leaves room for an unexpected breakthrough, for an improbably large improvement. Yes, it carries a higher degree of uncertainty, but when it pays off, the results can be staggering.

The compounding power of ‘black swan’ improvements

Let’s consider a scenario where we are doing ‘black swan’ testing:

We run 70 consecutive A/B/C tests, with each test yielding a 1% improvement. But, interspersed on the 10th, 20th, 30th, and 40th days, we see ‘black swan’ improvements of 10% and even a 30% on the 40th day. By the end of the 70-day cycle, our calculations show that we have not just doubled, but more than tripled the conversion rate, to a staggering 233% improvement.

((1.01^9) * 1.10 * (1.01^9) * 1.10 * (1.01^9) * 1.10 * (1.01^9) * 1.30 * (1.01^30)) = 3.33

In this scenario the improvement is 333% from the 70 tests.

The ‘black swan’ approach underlines the power of working smarter and the potential of creative, out-of-the-box thinking. It’s not about abandoning the grind of the 1% improvements, but about supplementing them with an opportunity for an improbable success.

Even though it might seem like looking for a needle in a haystack, when you do find that needle, it is golden.

It’s not about tossing the rulebook out of the window, but about acknowledging that sometimes the rulebook might not have all the answers. After all, marketing is as much an art as it is a science.

The courage to take the path less trodden might just lead to a ‘black swan’ waiting to revolutionize your marketing strategy. As we continue to push the boundaries of what’s possible in the world of digital marketing, the wisdom of the ‘black swan’ might be just the disruption we need.

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