Prediction Markets

Nintendo Wii was mentioned in the "New Products Blockbuster" article, and I was interested to see how it used prediction markets to overcome the problem. I found TheSimExchange which uses community intelligence to not only predict upcoming monthly sales of platforms, such as the Wii and Xbox, but also to find the top-rated corresponding video games. In regards to the different video games, it states that "prediction data is really only useful to developers before the game comes out. Currently, our trading is focused to near release and after the game comes out. From now on, we will only be listing games that are coming out at least 4 months away." Obviously TheSimExchange has already been tweaked so that it can better predict future sales, and it was shown in class that these prediction markets can often portray how the market will react in reality. It covers the five principles suggested in the article including incentives and the ability for people to share their expertise. However, I can see how problems could arise in the fact that the only people who participate are those who are knowledgeable about the website and who are interested in participating. Therefore, companies may not want to base their entire decisions on these "experts". They should really make consumers aware of these prediction markets online as well as tap into paper surveys that can reach out to other types of consumers who may not be technologically inclined. Since Nintendo's Wii targets even older consumers who may not be computer literate, this may be a good idea especially when making games that target an older market such as the yoga or cooking game.

Also, when viewing this website, there was a link on the side that caught my eye-- http://www.xpree.com/. Here, anybody can start their own prediction market for their company. What a perfect place to advertise! These can really help companies that have no direction come up with innovations, product management strategies, and demand planning. I think that all companies can really learn a lot from these especially with the increase in technology and the fast changing market. It could cut back costs so as to not overproduce as well as underproduce like the Wii and lose a good customer base. However, they could be stuck with the same problems--only attracting those who see it. So, new companies should also look into other types of surveys as well.