unleashing the power of prediction markets€¦ · unleashing the power of prediction markets...
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Unleashing the Power of Prediction Markets
Presented by:
Julie Wi)es Schlack SVP, Innova7on Communispace Corpora7on [email protected] @jwschlack
May 9, 2014
Linda Rebrovick CEO, Consensus Point [email protected]
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So You Think You’re Smarter than a CIA agent
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What is a Prediction Market?
A Prediction Market captures the wisdom of the community to uncover forward-looking
outcomes for better business decisions.
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A Prediction Market History
Dr. Robin Hanson invented the Prediction Market algorithm 1992 – Xanadu 1994 – Foresight exchange launched by Consensus Point founder First internet-based public prediction market
Wisdom of Crowds James Surowiecki Tipping point for prediction markets as a research app
Prediction Market Research for Consumer Products & Services -Product Testing -Screening -Validation
Iowa Exchange Market Intrade Prediction Markets study Political and Current Events
1602 1992-1994 2001-2004 2006-Today
Consensus Point Prediction Markets launched for corporate and employee research -GE -Motorola
Modern Stock Market begins -Dutch East India Company -Bets on outcomes -General pop predicts company value
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Though built on a Stock Market concept, Prediction Markets needed to be customized
for consumer collaboration for research
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Engaging Experience for Consumers
Enter ‘Tokens’ for response strength
‘Gamified Experience’
Solicit verbatims for diagnostics
95
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71% likelihood
Personal Care Products: Concept B
Results Breakout
Likelihood % Probability
Commentary
Segment Breakout
Which of these concepts will be perceived as MOST unique by women as compared to current products on the market?
Strength Meter How strongly respondents felt about their answers
% of People Response Mix
Reasons for YES • “Argan oil is the latest thing.” • “Everyone I know uses argan oil.” • “This could be the best thing I’ve ever put in my
hair.”
Top Themes Frequency trending 37% popularity 19% awareness 14% effecMveness 9%
How likely each segment felt the outcome would be
Reasons for NO • “What is that? Never heard of it” • “I don’t know if I want oil in my hair.”
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Discover Breakthrough Insight
Question: Which concept will be perceived as most unique by women compared to current products on the market?
Traditional Ranking Format Spread Analysis
Concept Likelihood Concept A 86% Concept B 71% Concept C 65% Concept D 37%
“No” “Yes”
• Identify the most motivating concept • Concept B represents a breakthrough idea in a potentially high value segment • Presents a tangible opportunity for an added benefit for the consumer and company
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Results: • Clear diferentiation between ideas • Elimination of overstated purchase intent • Reinforcement of key driving attributes • Opportunities for product enhancement
Features: • Self-selection • Non-mutually exclusive choices • Group Judgments • Outcome - “Idea has 80% probability of success”
Predic7on Markets
Consumer Collaboration: From Respondents to Partners
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88% of CEOs believe getting closer to the customer is the top business strategy
over the next five years. IBM Global CEO study, May 2010
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You need customers to help you solve today’s challenges
HOW DO YOU…
DEVELOP NEW PRODUCTS & services?
INCREASE THE EFFECTIVENESS of your marketing?
OPTIMIZE your CHANNEL RELATIONSHIPS
ENHANCE the customer experience?
ACQUIRE new customers?
CREATE a more RESONANT BRAND
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Traditional methods tend to involve customers at the beginning and end of the product lifecycle, but they – and prediction markets --
have a crucial role to play throughout.
New products, Services, flavors
exploration
development prototyping,
testing
make, market,
sell ideation
Names, logos, advertisements
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Collaboration is Always “On” and Prediction Markets can be too
• Understand trends
• Surface unmet needs
• Generate insights that inform opportunity areas
• Ideate products • Build concepts • Test and refine
them • Narrow the
funnel
Activation Develop messaging Design and refine packaging
• Packaging testing
• Messaging testing
• In-home usage testing
• Ad testing • Track brand
encounters
• Shopper insights • Understand
why’s behind usage
• Refine promotions and merchandizing
Discovery
Post-launch
Ideation and Concept Development
Commercialization
Prototyping and Manufacturing
Launch
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From Discovery through Launch
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We began with observation and exploration
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… acquired the insights that informed our client’s platform development…
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…tested the emotional resonance of each platform…
Working closely with the creative agency, we created product concepts that were tested using a proprietary technique called Emotion Centric, to yield insight into the unmet emotional needs and opportunities around messaging, packaging and positioning.
Prod A Prod B Prod C
“I feel upbeat and ready to take on the world” “When I see this product I feel hopeful thinking about my future” “Makes me aspire to find love”
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…then tested three new concepts against a fourth control item via a Prediction Market
products Product A Product B Product C Product D
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And here was the outcome…
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Who else has used Prediction Markets
Client Purpose
Global food Identify most promising new food product idea from 11 concepts generated through co-creation work in community
Global hospitality Prioritize 32 new hotel amenities and services
Global financial services
Determine which offer and price point would drive the most new business among different segments
Global heath, beauty, and personal care
Identify which of four new product ideas would be most likely to attract a specific demographic and drive trial of variants
US Insurance company Evaluate multiple aspects of new service offering
Global media company Forecast which product would outsell the other in five direct competitions; determine whose read (employees or consumers) is most accurate and why
US Internet and Telecomm Determine which of 12 offers will drive upsells and new business
British Airways Determine which loyalty program would drive increased business among which traveler segments
Communispace Prioritize ideas and initiatives emerging from annual Hackathon
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How do they compare to other forms of research?
Client Prediction market Comparative method Outcome
Global food 287 people not screened to be representative
Survey of over 3,700 people screened to be
representative of target market
95% alignment on top products; Winning product is in development
Global hospitality 131 community members MaxDiff study with 3,192
respondents
Results almost identical; differences explained by narrower,
more skewed Max Diff sample
Global financial services 421 community members MaxDiff study with 611
Respondents Identical results
Global heath, beauty, and
personal care 165 community members Survey to 205 community
members Winning product is in
development
Global media company
243 people (consumers, employees, agency
consultants)
Comparison to real-world sales
Consumer market predictions correct in 3 out of 5 cases (with
the other 2 too close to call); employee market correct in 5 out
of 5
US Internet and Telecomm 133 community members MaxDiff study with 490
participants Winning offer is going to market
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Member Feedback Engaging, fun, thought-provoking • “It was confusing at first, but then I loved it. Competitive
and made me feel like I was playing the stock market without any real risk – a lot of fun.”
• “I thought it was kind of fun and kind of silly, and kind of interesting too!”
• “I really enjoy it! It makes me think about myself and others from an objective viewpoint.”
• “It is definitely different. The predictions make the survey a little more fun to do.”
Would you be interested in participating in
Prediction Place again? (N=271)
YES - 90%
Confusing, not “pure” • “Not that great but okay. I am still a little puzzled by its
design and mechanism. Hope I could become used to it in the future.”
• “It is interesting to see other people’s opinions about such things, but sometimes I feel swayed by the ‘popular’ answer.”
• I’m still not entirely sure I understand what causes me to get points/increase rank.”
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Benefits of Prediction Markets • As, if not more, accurate than traditional survey-based methods
• Gamification attributes make participants more attentive and invested
• Member experience is much more engaging than surveys, more consistent with Communispace experience
• Prediction Markets can uniquely leverage the long-term nature of communities, letting us see who the best predictors are over time
• Don’t need large sample sizes; 150 participants is sufficient (though more is absolutely fine)
• Don’t need “representative” sample sizes (though knowledge of/passion for the category is, in some cases, helpful)
• Lets us understand why, not just what
• Lets us slice/dice based on member profile attributes
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Future Potential for Prediction Markets
Prediction Markets
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Baseline Forecast: The Four Evolutionary Eras of Insight
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Unleash the Power of Prediction Markets!
“Past performance is never a predictor of future success –
they may have just been lucky!
….Markets are the oldest and in many ways still the best mechanism for aggregation”
- James Surowiecki, The Wisdom of Crowds .
