Explainable AI in Marketing

This chapter examines the role of explainable AI (XAI) in marketing, highlighting its ability to enhance transparency, build trust, and improve consumer engagement. As AI increasingly influences consumer behavior and decision-making, XAI provides clarity by offering understandable explanations behind AI-driven actions and recommendations. The chapter explores the application of XAI in areas such as personalized recommendations, targeted advertising, and customer segmentation while discussing various approaches, including intrinsic interpretability and post hoc explanations, and the levels of explanation from perception to projection. Additionally, it addresses the benefits of XAI, including improved trust, personalization, and ethical marketing practices, along with challenges related to complexity, technical expertise, and consumer skepticism. A conceptual framework is introduced to outline the key drivers and outcomes of XAI adoption in marketing, incorporating control variables that may influence its effectiveness. The chapter concludes by exploring the managerial and societal implications of XAI, emphasizing its crucial role in ensuring ethical, transparent, and consumer-centric marketing practices.