Predicting New Product Success with Prediction Markets in Online Communities

The prediction of new product success is still a challenging task. Traditional market research tools are expensive, time consuming, and error prone. Prediction markets have been introduced as a viable alternative. Utilizing inputs from various participants in game‐like environments, they have been shown to produce accurate results by combining dispersed knowledge via market‐based aggregation mechanisms. While most previous studies use employees or experts as a sample, we test whether online consumer communities can be used to predict the sale of new skis via prediction markets. Sixty‐two users took part in the study. The prediction market was open for 12 days before the main skiing season 2010/2011 began. The outcomes of the prediction markets were compared with the actual sales numbers provided by the ski producers. The mean average errors were between 2.74% and 9.09% in the four markets. Overall, it can be concluded that the prediction markets based on consumer communities produce accurate results.

[1]  Gerard Gaynor,et al.  From idea to innovation , 2012, IEEE Engineering Management Review.

[2]  Johann Füller,et al.  Virtual product experience and customer participation—A chance for customer-centred, really new products , 2007 .

[3]  David M. Pennock,et al.  Prediction Markets: Does Money Matter? , 2004, Electron. Mark..

[4]  Thomas A. Rietz,et al.  Wishes, expectations and actions: a survey on price formation in election stock markets , 1999 .

[5]  J. Füller,et al.  Brand Community Members as a Source of Innovation , 2008 .

[6]  Johann Füller,et al.  Consumer Empowerment Through Internet-Based Co-creation , 2009, J. Manag. Inf. Syst..

[7]  R. Kozinets.  The Field behind the Screen: Using Netnography for Marketing Research in Online Communities , 2002 .

[8]  J. Füller,et al.  Why Co‐Creation Experience Matters? Creative Experience and its Impact on the Quantity and Quality of Creative Contributions , 2011 .

[9]  Koleman Strumpf,et al.  Historical presidential betting markets , 2004 .

[10]  Martin Spann,et al.  New Product Development 2.0: Preference Markets—How Scalable Securities Markets Identify Winning Product Concepts and Attributes* , 2010 .

[11]  B. Skiera,et al.  Sourcing, Filtering, and Evaluating New Product Ideas: An Empirical Exploration of the Performance of Idea Markets , 2012 .

[12]  Johann Füller,et al.  Co-Creation in Virtual Worlds: The Design of the User Experience , 2011, MIS Q..

[13]  Georg von Krogh,et al.  Open Source Software and the "Private-Collective" Innovation Model: Issues for Organization Science , 2003, Organ. Sci..

[14]  R. Kozinets.  E-tribalized Marketing?: The Strategic Implications of Virtual Communities of Consumption , 1999 .

[15]  Ananth N. Madhavan,et al.  Trading Mechanisms in Securities Markets , 1992 .

[16]  R. Roll.  Orange Juice and Weather , 1984 .

[17]  C. Herstatt,et al.  Innovation communities: Motivation and incentives for community members to contribute , 2008, 2008 4th IEEE International Conference on Management of Innovation and Technology.

[18]  Kay-Yut Chen,et al.  New Product Blockbusters: The Magic and Science of Prediction Markets , 2007 .

[19]  Johann Füller,et al.  Avatar-based innovation: Using virtual worlds for real-world innovation , 2009 .

[20]  Thomas A. Rietz,et al.  Prediction market accuracy in the long run , 2008 .

[21]  J. McAlexander,et al.  Building Brand Community , 2002 .

[22]  Dominik Walcher,et al.  Toolkits for Idea Competitions: A Novel Method to Integrate Users in New Product Development , 2006 .

[23]  Johann Füller,et al.  Community based innovation: How to integrate members of virtual communities into new product development , 2006, Electron. Commer. Res..

[24]  Robert Forsythe,et al.  Anatomy of an Experimental Political Stock Market , 1992 .

[25]  Martin Spann,et al.  Internet-Based Virtual Stock Markets for Business Forecasting , 2003, Manag. Sci..

[26]  C. Sunstein.  Infotopia: How Many Minds Produce Knowledge , 2006 .

[27]  Barry L. Bayus,et al.  High-definition television: assessing demand forecasts for a next generation consumer durable , 1993 .

[28]  Stephen J. Hoch,et al.  Who Do We Know: Predicting the Interests and Opinions of the American Consumer , 1988 .

[29]  Charles R. Plott,et al.  Information Aggregation Mechanisms: Concept, Design and Implementation for a Sales Forecasting Problem , 2002 .

[30]  J. Füller,et al.  Innovation creation in online consumer groups , 2009 .

[31]  Thomas S. Gruca,et al.  The Effect of Electronic Markets on Forecasts of New Product Success , 2003, Inf. Syst. Frontiers.

[32]  Paul E. Green,et al.  Conjoint Analysis in Marketing: New Developments with Implications for Research and Practice , 1990 .

[33]  Paul C. Tetlock,et al.  Using Information Markets to Improve Public Decision Making , 2005 .

[34]  J. Füller.  Refining Virtual Co-Creation from a Consumer Perspective , 2010 .

[35]  J. Hauser,et al.  The virtual customer , 2002 .

[36]  Hui-Chun Chan,et al.  Community based innovation: its antecedents and its impact on innovation success , 2013, Internet Res..

[37]  G. Urban,et al.  Pre-Test-Market Evaluation of New Packaged Goods: A Model and Measurement Methodology , 1978 .

[38]  Sayan Chatterjee,et al.  Democratizing Strategy: How Crowdsourcing Can Be Used for Strategy Dialogues , 2012 .

[39]  Paul Benjamin Lowry,et al.  Profiling the Research Productivity of Tenured Information Systems Faculty at U.S. Institutions , 2011, MIS Q..

[40]  Gilbert A. Churchill,et al.  Marketing Research: Methodological Foundations , 1976 .

[41]  Olivier Toubia.  Idea Generation, Creativity, and Incentives , 2006 .

[42]  Ekaterina V. Karniouchina.  Are Virtual Markets Efficient Predictors of New Product Success? The Case of the Hollywood Stock Exchange* , 2011 .

[43]  H. Ernst,et al.  Identification of Lead Users for Consumer Products via Virtual Stock Markets , 2009 .

[44]  Edmund A. Mennis.  The Wisdom of Crowds: Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations , 2006 .

[45]  Thomas C. O'Guinn,et al.  brand community , 2022, The Fairchild Books Dictionary of Fashion.

[46]  J. Füller,et al.  Innovation creation by online basketball communities , 2007 .

[47]  J. Füller,et al.  Triggers for virtual customer integration in the development of medical equipment — From a manufacturer and a user's perspective , 2010 .

[48]  Steven Ostrover.  Employing Information Markets to Achieve Truly Collaborative Sales Forecasting , 2005 .

[49]  M. Sawhney,et al.  Communities of Creation: Managing Distributed Innovation in Turbulent Markets , 2000 .

[50]  V. Smith.  Microeconomic Systems as an Experimental Science , 1982 .

[51]  D. MacKenzie,et al.  The use of knowledge about society , 2008 .

[52]  S. Sunder.  Experimental Asset Markets: A Survey , 1992 .

[53]  E. Fama.  EFFICIENT CAPITAL MARKETS: A REVIEW OF THEORY AND EMPIRICAL WORK* , 1970 .