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New Product Development 2.0: Preference Markets—How Scalable Securities Markets Identify Winning Product Concepts and Attributes

Authors


  • *The authors thank Martin Bernhardt, Barnaby Feder, Craig Fox, Mark Garmaise, John Hauser, Oliver Hinz, Rich Johnson, Adlar Kim, Andrew Lo, Donald Morrison, Tomaso Poggio, Ricardo dos Santos, Hyun Shin, Bernd Skiera, Vicky Smith, Sven Theysohn, Agnieszka Wolk, and EMAC 2006, Marketing Science 2005, Sawtooth Software 2006, and the Product Development & Management Association (PDMA) 2007 Research Conference attendees and judges for their valuable feedback.

  • This paper won the best paper award at the Annual PDMA Research Conference in 2007.

Address correspondence to: Ely Dahan, UCLA Medical School, 2542 Cardigan Court, Los Angeles, CA 90077. Tel.: (310) 985-9703. E-mail: elydahan@gmail.com.

Abstract

Preference markets address the need for scalable, fast, and engaging market research in new product development. The Web 2.0 paradigm, in which users contribute numerous ideas that may lead to new products, requires new methods of screening those ideas for their marketability, and preference markets offer just such a mechanism. For faster new product development decisions, a flexible prioritization methodology is implemented for product features and concepts, one that scales up in the number of testable alternatives, limited only by the number of participants. New product preferences for concepts, attributes, and attribute levels are measured by trading stocks whose prices are based upon share of choice of new products and features. A conceptual model of scalable preference markets is developed and tested experimentally. Benefits of the methodology are found to include speed (less than one hour per trading experiment), scalability (question capacity grows linearly in the number of traders),  flexibility (features and concepts can be tested simultaneously), and respondent enthusiasm for the method.

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