In recent years, predictive research methodologies, specifically prediction markets, have gained traction as one of the most accurate and exciting ways to predict future trends, events, and successful ideas. By harnessing collective judgment, asking participants to place bets using virtual currency, and then defending the bets placed with qualitative rationale, prediction markets marry the best features of both qualitative and quantitative research, and in so doing mitigate the biases that compromise the efficacy of more traditional survey methods, leading to more accurate future casting.
“It’s roughly true that in every domain in which we’ve been able to compare data from a prediction market to alternative forecast mechanisms, the market has done better,“ Justin Wolfers, professor of public policy and economics at the University of Michigan, told the New York Times. Prediction markets have become so popular that they’ve spawned what can only be described as a cultural movement in Silicon Valley.
So, what makes predictive market research so effective? And how can it be leveraged to inform powerful decision-making, from early-stage ideas to product launches?
Predictive market research is a type of research that aims to evaluate new ideas, events, trends, or products to predict the size, scope, and timing of their potential future impact or success within a particular market. As a highly effective behavior-based market research methodology, predictive research is used to predict micro and macro trends, screen and validate new ideas or product and service offerings, and prioritize product features, amongst other applications.
Predictive market research usually involves the use of an online prediction market, in which research participants are asked to make predictions and bet virtual currency based on their confidence in those predictions. A prediction market incorporates both qualitative and quantitative methodological aspects, allowing for insights into not only what participants predict is going to happen, but why they predict it will happen.
Predictive market research of this type allows for the measurement of important metrics like judgment, emotion, confidence, and motivation. This results in higher levels of in-market accuracy, deeper insights into consumer behavior, and more accurate foresight into future trends.
Predictive market research has powerful applications for decision-makers looking to optimize their offerings, test new products or services, or capitalize on future trends.
Predictive market research allows decision-makers to test ideas against metrics such as “purchase”, “advantage”, “solves problem”, “meets a need”, “occasion”, and “volume potential”, amongst others, to identify which have the greatest likelihood of success within a particular target market. Through this process, companies can mitigate risk, direct resources to progress and develop ideas that are most likely to work, and maximize ROI.
Predictive market research can also be used to optimize products or services by identifying the mix of features and benefits that will most strongly appeal to consumers in order to maximize sales.
Predictive market research is a powerful methodology to accurately predict the size, timing, and scope of consumer or category trends, predicting outcomes such as:
Will a category grow or decline?
Which segments will lead trial?
If, and when, will a trend reach mass?
How fast will sales grow?
With this kind of foresight, companies can capitalize on future trends and gain a significant strategic advantage.