Improved Market Research: New Insights from Prediction Markets

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From the Obama campaign’s successful use of Facebook and social media to scale his campaign and support his win in the 2008 election to the advent of the Arab Spring, the way that humans interact has been fundamentally changed by the internet and the rise of social networking. The market research industry has begun to reflect these changes.

Focus groups and surveys have been online for years, but companies have been slow to shift their focus from what researchers are calling “Me” research to “We” research that uses the wisdom of the crowd to gain valuable insights into consumer groups.

At Consensus Point, we see the value that Prediction Markets add to the research process as a way to gain access to collective insights. They represent the next wave of market research innovation focusing on the “We”, but they rely on methods that are vastly different from traditional market research and can be quite a leap initially.

The good news is that Prediction Markets have been proven time and again to be as accurate or even more accurate than traditional research techniques including polls, surveys or monadic concept tests. This is because they rely on people’s judgments of others rather than on people’s understanding of themselves. Academic research has shown that humans, as a rule, are quite brilliant at noticing what others are doing and predicting their behaviors but tend to have blinders on when it comes to understanding their own motivations. Prediction markets harness our innate observational talents by asking respondents not “what they would want or would do”, but by asking them to make a prediction about “what others would want or would do”. This a simple but powerful difference between prediction markets and traditional market research methods and explains how prediction markets can be so accurate with a smaller sample and less target market representation.

The 2009 paper, “Me-to-We Research”*, proves that Prediction Markets are:
1. As accurate as Monadic testing with a correlation of 0.91 versus top quartile Monadic testing
2. More discriminating than Monadic testing with the ability to separate good from average ideas
3. Better at identifying potential breakthrough ideas
4. Comparable across markets and categories

Prediction Markets offer numerous benefits to research because in addition to providing better data, the small sample sizes that they require provide time and cost savings to research companies and their clients. If you are interested in finding out more about how Prediction Markets can help your business, please contact us at info@consensuspoint.com.

*Kearon, John and Earls, Mark. “Me-to-We Research: From Asking Unreliable Witnesses about Themselves to Asking People What They Notice, Believe and Predict about Others.” ESOMAR (2009).



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