Predictive Pre-Testing: A New Model for Ad Pre-Testing Based on Prediction Markets

Abstract

In the advertising industry, there's widespread agreement that ad pre-testing (or copy testing) is a creativity killer. Current research methodologies using focus groups to test innovative ideas and products have poor predictive ability, often throwing up lazy groupthink, post-rationalisations and risk-averse generalisations. This paper argues for a revamped model of ad pre-testing that harnesses collective intelligence to improve forecasts of real world response by a significant factor. Drawing insights from a range of business implementations of 'wisdom of crowds', the paper presents prediction markets as a tool to effectively aggregate the responses of a research group that is characterised by diversity of opinion, independent thinking and decentralisation. The updated model takes care to align the interests of research respondents with those commissioning it by incorporating gamification techniques to draw out deeply-held private information about their cohorts and the world they inhabit. The paper also suggests additional areas of exploration and improvement while implementing the concept into research practice.

Keywords: advertising effectivess, marketing research, innovation, product development, concept testing, consumer response, prediction model, cognitive measures, rational measures, forecasting

JEL Classification: M37