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

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.