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The Many Outsmarting the Few

Posted on  19 March 10  by 

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manyGamblers of the world, unite!  Did you know you can place bets on the outcomes of almost any reasonably well-known event?  There are what’s called “prediction markets” for everything under the sun – a quick search on Google for “Prediction Markets” gives nearly 1,030,000 results, with companies offering contracts on sports, financial markets, politics, and what not.

Browsing through Intrade, one of the many online prediction market companies out there shows what issues are making news and the likelihood of these events playing out in the future:

1)   ‘Obamacare’ health care reform to become law before midnight ET 30 Jun 2010 — Last Price = 52.0*

2)   Tiger Woods to play in PGA Tour event before 30 Apr 2010 — Last Price = 60.1*

3)   Crystal Bowersox to win American Idol (Season 9) — Last Price = 20.0*

4)   Dow Jones to close on or above 9,500 on 31 Dec 2010 — Last Price = 65.0*

 * A price of say 52.0 means the market predicts there is a 52.0% chance of that event taking place.  Participants who think it is more likely than 52.0% should opt to Buy, while participants who think that it is less likely to happen should opt to Sell.  All markets on Intrade operate between 0 ($0.0) and 100 ($10.0).  So, a price of 52.0 is equal to $5.20.

Of course, one may wonder if these predictions will ever come true.  But they show the power of the wisdom of crowds’  – that many people collectively are much smarter than any individual.  For proof, look no further than the Iowa Electronic Markets, which has correctly predicted the outcome of every single U.S. presidential election since its inception in 1988.

Prediction markets need not be public; indeed, they have clear applicability to sales, where forecasting quarterly or annual results is crucial to the business and reps collectively have the best insight into the company’s future. 

Companies like HP, Best Buy, Google, Microsoft, and British Petroleum have all found tremendous value in running corporate prediction markets.  Early results from HP showed that the market beat the official sales forecast 6 out of 8 times, while Google has seen the highest-priced stock bear out 70% of the time.

The last several months have shown the value of prediction markets even more: Sales projections have fallen flat, key accounts have vanished in thin air, customers have deflected, and competitors have stolen market share.

What we wouldn’t give to really know what reps thought would happen.  Now there’s a chance to find out.

Interested in learning more about prediction markets?  Join us on 23 March 2010 for a webinar on how leading organizations use prediction markets to tap into the collective intelligence of their sales force to make better deal-level and business-level decisions.  (Click here to register for this event)

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