Securities Trading of Concepts (STOC)
Ely Dahan et al., Journal of Marketing Research, forthcoming
Abstract: Identifying winning new product concepts can be a challenging process that requires insight into private consumer preferences. In order to measure consumer preferences for new product concepts, we apply a securities-trading approach where new product concepts are traded as financial securities: Securities Trading of Concepts (STOC). We apply this method because market prices are well known to efficiently collect and aggregate private information regarding the economic value of goods, services, and firms, particularly when trading financial securities. Our research includes the first application of securities markets to test potential new product concepts, and is the first to compare such an approach against stated-choice, conjoint, constantsum and longitudinal revealed preference data. In our research, we place STOC in the context of existing methodologies, as well as prior research on prediction markets and experimental economics. We conduct a series of experiments in multiple product categories to test whether STOC: 1) is more cost-efficient than other methods; 2) passes validity tests; 3) measures expectations of others; and 4) reveals individual preferences, not just those of the crowd. All results are confirmed, with the notable exception that STOC, as tested, does not accurately predict actual product market shares and price sensitivity. Our results also show that traders exhibit bias based on self- preferences when trading. Ultimately, STOC offers two key advantages to traditional market research methods — cost efficiency and scalability. For new product development (NPD) teams deciding where to invest resources, this scalability may be especially important in the Web 2.0 world where customers are constantly interacting with firms and with each other in suggesting numerous product design possibilities that need to be screened.
Nod to Kevin Lewis
No comments:
Post a Comment