Wired Pursuits

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Instead of turning to paid analysts, or internal experts some companies are using the crowd to help improve the accuracy of demand forecasts as well as better manage inventory and manufacturing capacity.

Predictive markets, often also referred to as information markets, aggregate the knowledge of the crowd to make predictions regarding unknown future events. By aggregating distributed knowledge the predictions of the crowd are often more accurate than when companies rely on only a handful of experts.

How do they work?

In prediction markets, individuals buy and sell “futures” or “shares” based on their beliefs regarding the probability of the event taking place. If they are correct, they are rewarded for their efforts. Because of U.S. laws related to online gambling, rewards often take the form of play money, gift certificates, or recognition within the market.

What is interesting about prediction markets is their structure creates incentives for individuals to act on their closely held information. Because rewards are tied to correct predictions, individuals in the crowd who have access to more information, which may aid in their understanding of the market, tend to buy more shares than those who are just guessing.

For example, Google uses over 300 internal prediction markets to assess events such as customer demand for new products (“How many Gmail users will there be on January 1, 2009?”), company and product performance (“When will the first Android phone hit the market?”), and competitor performance (“How many iPhones will Apple sell in the first year?”). In addition to new sources of predictions, Google has used these prediction markets to better understand and improve the flow of information within their company.

Do predictive markets work?

As with many new uses of the crowd, we have only scant evidence regarding the effectiveness of prediction markets. Best Buy reports internal prediction markets designed to predict holiday sales of gift cards were 99.5% accurate compared to a 95% accuracy rate from external consultants. Intel also reports success with their internal “forecasting markets.”

Faced with the difficult task of predicting demand of products requiring lead times of months or even quarters, Intel found their internal markets were at least as accurate as official figures and in some cases more accurate by 20% (i.e., 20% less error).

There is, however, evidence that outside factors can impact results of these markets. Some data suggests employees may be overly optimistic regarding company performance tending to artificially inflate positive results. For publically traded companies, stock performance can influence predictions upward or downward in line with the latest market swings. And finally, there are also numerous issues related to providing the right incentives for participation as well as obtaining executive buy-in for such initiatives.

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duck“Aflac!” We’ve all heard it and we all know it’s the Aflac duck. As a brand symbol, the Aflac duck has been one of the most successful in terms of recognition. Not so good in terms of people knowing what the company does, but certainly an excellent tool for building initial awareness. Well now the duck has turned to social media and is doing a pretty good job.

Duck, duck, Facebook.

The Aflac duck is now on Facebook. But what the duck is doing right that other aren’t is this…

  1. He, I’m assuming it’s a he, doesn’t just talk about himself and his company. He brings humor and personality to his posts with a lot of duck references and photos of his workplace.
  2. He shows a softer, more personal side of the company by uses his page to raise money for the Aflac Cancer Center charity. (They raised over $1M). He posts videos of the children who receive these donations.
  3. He uses contest to draw people into participation.
  4. He’s current – linking to popular videos on YouTube and icanhascheezburger.com.

As of this post he has over 160,000 fans. But we all know that just having fans doesn’t mean engagement. According to Alfac, their fan page receives more interaction per fan than any of the other top 10 fan pages (iMedia). Just check out his photo page and you can see all the people uploading photos of ducks and commenting on them.

A duck that quacks and tweets.

Aflac is also using Twitter to reach out to customers and extend their brand awareness. As with Facebook, they are talking about more than just themselves. From a Twitter perspective they are also doing some things right:

  • The writing is light and witty.
  • They cross-promote their charities (and fun videos) here as well as on Facebook.
  • They have a combination of just simple tweets, RTs, and links to other sites. Mimics what real “tweeple” do.
  • And again humor, personality, and references to current events abound. Just cracked some Skittles, then Kanye came out of nowhere and grabbed them. I guess Beyonce deserved them more.” How do you not smile?

The duck is also active on Twibe for popular shows like LOST and The Office, and uses twitpic.

Extending the Aflac brand.

Alfac is a great example of how to extend your brand using social media. The company also seems to be just trying things out and feeling their way through – another great lesson.  They understand that it doesn’t have to be all or nothing. They can walk before they run. (OK, I’m down with the cheesy clichés.)

Will it create more business? We’ll have to wait and see But awareness and connection to the brand is the first step to getting new customers. The duck connects you to the company and that trickles down for many into a feeling that the company is more than just a corporate entity, that it’s personal.  Exactly what you’d want in an insurance company.

Kudos to Alfac.


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