How Businesses Should Use Crowdvoting

New product launches are fraught with danger. Aside from facing potential manufacturing, logistics, and marketing flops, companies risk losing millions of dollars if what is expected to be a hit disappoints.

In recent years, businesses have been tapping the internet to cheaply and simply survey a large base of potential customers. This “crowdvoting”—a spin on crowdfunding and crowdsourcing—allows companies to ask self-selected website visitors to vote on which prospective new products they would buy.

But while asking your customers’ opinions might seem simple and straightforward, crowdvoting requires astute decision making by market researchers, according to Victor Araman of the American University of Beirut and Chicago Booth’s René Caldentey. Among other things, the voting process can take time, a consideration companies have to weigh against the appeal of getting quickly to market.

Araman and Caldentey developed a model to help businesses choose when to end a crowdvoting campaign. For many companies, this means closing the polls either by a certain date or at a set number of votes. But the model—which takes into account that some crowdvoting systems get into crowdfunding territory, allowing voters to essentially vote by preordering products—suggests that a rolling target based on a variety of factors can help some businesses pinpoint the optimal time to launch, or abandon, a product.

Some companies may already have a strong sense of how many people might buy a new product, or may be looking for confirmation of what they think they know. Others may be accepting preorders, to raise cash to fund the product launch. The researchers conclude that these are the companies that would do well to end a voting period after receiving a set number of votes (or orders).