July 2015

Utilizing the Wisdom of Crowds in Predicting Future Revenue

"Of course you want more revenue, but what good is it if it isn’t predictable

        - Aaron Ross, author of Predictable Revenue

As marketers and salespeople, we have become obsessed with data that will help predict the future, especially as it relates to revenue and The Customer (as in, who will become one and who will not). The rapid onset and rise of “Big Data” over the last several years and the numerous tools that have been built utilizing it has helped us understand buying behaviors, tendencies and/or trends customers and prospects have displayed. But all of these great analytic tools, platforms and apps focus almost exclusively on historical data, looking back and extrapolating and not looking at current patterns or items that have recently changed or altered previous habits. As much as we want to automate and have machines do much the work for us (hello robot cars!), the human element still plays a big part in forecasting the future as it relates to buyers and closing a sale.

So how does an organization get to an even deeper level of knowing what the future brings for sales, a project delivery milestone, or a product shipment date? Another option that has recently come to light is the building and creation of an internal prediction market. Prediction markets can allow you to identify business-critical events, anticipate most likely outcomes and mitigate market and operational risks through the “wisdom of the crowd”. The wisdom of the crowd. That has a nice ring to it, but what does that actually mean? Let’s start with a famous example of this.

In 1907, Sir Francis Galton asked 787 villagers to guess the weight of an ox. None of them got the right answer, but when Galton averaged their guesses, he arrived at a near perfect estimate. This is a classic demonstration of the “wisdom of the crowds”, where groups of people pool their abilities to show collective intelligence.

A Prediction Market collects and generates this information that is not available anywhere by using collective social intelligence. “The crowd” is made up of invited individuals who have a wide-ranging knowledge of your business (employees, suppliers, partners, retailers, etc.) engage in your prediction market to anticipate most likely outcomes of business events, and receive prizes depending on their prediction accuracy. These prizes ensure that the individuals are engaged and are providing their best “bets” on what will occur so that they can potentially win something of value. Both sides win in this case; management gets real-time input on critical future events and participants have a vested interest in being correct.

We all know there is no guaranteed way to 100% accurately predict your quarterly or annual revenue, your growth, how a new product, new service or introduction into a new market will fare. But getting engaged feedback from a targeted crowd can get you significant results to accurately assessing an outcome or event.

So how does a prediction market actually work? Let’s take a scenario where you, as the CEO or Chief Revenue Officer, want to know if you’re going to achieve 2015 revenue goals. The year is half over, so of course you have six months of real revenue data, and forecasts from your CRM tool and potentially other platforms will give you the rest of the year. What we don’t have is input from people “in the know” adding their prediction on how the year will finish. So, you set up a prediction market with a vendor who can provide a private market for your enterprise. You would then create the critical event question (“What will 2015 revenue be?” or something of that nature), create your prize pool for those that get the most “points” (Maybe every invited individual starts with 1,000 points and can make multiple wagers during the contest opening) once the year is completed and all payouts are calculated (the prediction market has a built in algorithm that automatically adjust payouts based on real-time bets). You may have a follow-on question as to why they chose that particular revenue range to give you deeper insight. You then invite your guests, done through the platform, and have access to a real-time dashboard where you can see the (anonymous) votes and how things are trending. You can identify signals or outliers from different participants, and see where the overall number is trending. Similar to the phenomena of the Sir Francis Galton example, you most likely will get a very true indicator of your final number.


Analysts are also understanding the true value of prediction markets. In a recent article, an analyst from Forrester Research stated “Market insights professionals are repeatedly tasked with delivering quick insights that will accurately predict what consumers will do or buy in the future. Traditional research methods do not always help market insights professionals meet those demands. Prediction markets reduce the level of uncertainty surrounding predictions of future consumer behavior and provide quick, cost-effective results. Therefore, Forrester recommends the use of prediction markets and believes they will serve a niche but critical role during the innovation process”.

Think about the power of that forward-looking knowledge. By anticipating key performance indicators (KPIs) prior to deadlines or milestone dates (end of quarter, year, etc.) organizations could undertake necessary steps to mitigate any adverse outcomes and the associated risks that entail on the fly. How many hundreds of thousands or even millions of dollars could be saved by having that vision into the future? Maybe prediction markets make sense for your business.


Matt Filios is the CEO of Predictful (predictful.com), a global software company focused on sales and marketing analytics.  Matt is a veteran of 9 startups, 5 as Founder/co-Founder and 7 as President/CEO. Prior to PREDICTFUL, Matt was the President of Net-Results, a leading marketing automation software company. 

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LEVERAGE THE WISDOM FOF THE CROWD. Predictful can help shape your future.   

LEVERAGE THE WISDOM FOF THE CROWD. Predictful can help shape your future.