A marketing tool for today’s changed world
Briefly
Prediction Markets are a means of aggregating crowd in order to predict an outcome
the inherent wisdom of the
Prediction Market theory applied to consumer research is a powerful, technique that enables marketers to evaluate ideas quickly, effectively and reliably
proteanprediction Collective Wisdom Engine is a simplified, streamlined research methodology based on prediction market theory
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A marketing tool for today’s changed world
Enables marketers to harness consumer opinions once or at multiple points during the project development Talks to consumers at the speed they are used to Allows marketers to benefit from consumers’ marketing savvy Gives consumers a respite from research complexity by offering them simple ways to make their opinions known and express them in their own language
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The underlying premise
2 Simple yet profound tenets • Ask what they think other people would do, not what they personally would do • Reward them for getting it right 1 Complex and profound tenet • A l prediction Apply di ti market k t algorithm l ith tto weight i ht the th responses
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Simply what you need to know Will it work?
Why?? Wh Why not?
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Three core questions 1.
2.
If we asked 100 people like yourself whether this campaign would make them want to buy BRAND X, how many would say “YES!”
Now, how much of your $would you bet that your answer above is right? You only have $100 to bet between the two options?
3.
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You estimated that more people would be convinced to buy [Product} by watching ‘AD D’ …. Why did you think this?
Plus: tailored to the needs of every project
Questions
Demographic and behavioral screening questions
Pre-exposure brand and competitive awareness and preference
Post exposure preference
Full range of diagnostic testing
Sample
Customer lists, hand raisers, brand enthusiasts
On-line panel
Any other source
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Prediction market difference Traditional Quant Study
proteanprediction Focused on what people
think other people would say, not
Remove Bias
Subjective personal opinions
Engage respondents
Respondents rewarded for completing the survey, not honesty or accuracy
Based on respondents’ holistic thinking
Deconstructs evaluation into rational bites, eliminating “irrational� thinking
their narrow personal biases
People are better at predicting the behaviour of others than their own behaviour
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Respondents are rewarded for
thinking about the question and being right! Encourage irrational component of forming judgments and making decisions
Prediction market difference A more nuanced outcome
L ki att th Looking the results lt off this thi actual study, the deeper nuance of ProteanPrediction can be clearly seen.
Comparison ProteanPrediction vs. Average Responses
Using the average value for each statement (Red) would have lead to a conclusion that Statement D was far and away the best idea.
29.2% Statement D:
33.4% 29% 26.8%
Statement C: Statement C
Market Result
24.0% 24 0% 20% 16.7%
Statement B:
Average
14.5% 13% 14.8%
Statement E:
16.9%
Average of "favourite " concepts
13% 12.5% Statement A:
13.9% 21%
0 0% 0.0%
15 0% 15.0%
30 0% 30.0%
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Using the percentage of the sample that selected each statement as their “favorite,” (Green) dampens “D” ‘s lead, but changes the picture for the number two position – “A” is now equal to “C” In the ProteanPrediction (Blue) result, the difference between the lead and second closes significantly, indicating that the market place has very nearly as much “heart” for “C” as they do for “D”
Visual analysis of open ended question Comments about Statement A Total sample
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Scientifically Validated
Widely used
•
• •
Iowa Electronic Markets: political predictions more accurate than the most accurate polls at least 75% of the time Hollywood Markets: Predict box office receipts Used by: Google, Hewlett Packard, Wrigley (Global); Kraft; GE; Microsoft; Intercontinental Hotels Group; GM GM’ etc. etc
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Accurate predictions 1.
In a study of prediction markets versus traditional research, professors at Northwestern University found f that prediction markets were closer to the outcome off US Presidential elections 74% of the time compared to traditional polling (using 964 polls covering the period 1988 to 2004) http://www.northwestern.edu/ipr/news/predictionmarkets.pdf
2.
GM Car sales, November 2008
Forecast
Actual
Variance %
Chevy Cars
Light trucks
Chevy Cars
Light trucks
Chevy Cars
Light trucks
GM forecast GM f t (beginning of month)
150,000
250,000
95,000
152,000
36.7
39.2
Edmonds estimate of sales (end of month)
125,000
215,000
95,000
24.0
29.3
prediction markets (7 prediction markets (7 days into the month)
97,000
160,000
95,000
152,000
2.1
5.0
prediction markets (end of month)
107,000
180,000
95,000
152,000
11.2
15.6
152,000
http://www crowdclarity com/learnmore htm http://www.crowdclarity.com/learnmore.htm
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The science
These two academic papers give an interesting overview into some of the academic thinking behind the theory of prediction markets.
Additional Links http://www.youtube.com/watch?v=keVL0PkCpaQ&eurl=http%3A%2F%2Fwww%2Econsensuspoint%2Ecom%2Fpredicti p y p p p p on%2Dmarkets%2Dblog%2F&feature=player_embedded This link connects you to a video of the CEO of Best Buy talking about their use of Prediction Markets. Given their recent business collapse, I am not sure they are necessarily the best example http://www.hsx.com/ This is the link to the Hollywood Stock Exchange Exchange, which is probably the most famous prediction market site – it has become an extremely important tool for movie producers to judge the potential of their future movies before they make them. http://www.pbs.org/wgbh/nova/sciencenow/0301/04.html This is the most fun of all of them – PBS video that makes it all clear.
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For more information call Laurence Bernstein 416 967-3337 x 101
bernstein@proteanstrategies.com www.proteanstrategies.com