Trend spotting: Using text analysis to model market dynamics

Abstract

As marketers, we are confronted by an increasingly complex world—one characterized by markets that emerge and evolve at an unprecedented rate. This has led to an increased need for methods that can help researchers translate this complexity and dynamism into actionable intelligence. In the current work, I introduce one such method, and show how it can be applied to the emergence and evolution of the biotechnology industry during the 1990s and early 2000s. I conclude with a discussion of how this method can be applied more broadly to areas like content marketing, trend spotting, and the interface between qualitative and quantitative market research.

Language Consistency and Stock Market Trading Volume

“…The relationship between this measure and trading volume is then modeled over the period during which biotechnology transitioned out of university laboratories and into the mainstream industry that exists today. Consistent with contemporary descriptions of the legitimation process (Colyvas, 2007;Watts, 2018;Zuckerman, 1999), I find that legitimacy and trading volume have a joint (positive) influence on each other over the long term. However, I also find that sharp drops in legitimacy are predictive of temporary spikes in trading volume.…”

“…This type of virtuous cycle generates a vocabulary that stabilizes in time. Media outlets, advertisers, and consumers vary in how they describe a relatively new market, but these descriptions tend to converge as the market matures (Watts, 2018). This occurs because market participants collectively agree that certain descriptive words are more or less appropriate and because detailed explanations are no longer necessary.…”

“…Drawing on research in sociology, management, and marketing, I argue for the existence of a longer term relationship between this particular type of information and trading volume. The theory which supports this argument is based on the construct of legitimacy and its realization in written language (Green et al, 2009;Watts, 2018). Legitimacy is a property assigned to objects or behavior deemed "appropriate and desirable within a widespread, taken-for-granted system of norms or social codes" (Cattani et al, 2008, p. 147).…”

Capturing Marketing Information to Fuel Growth

“…Beyond natively digital sources such as search and social media, other sources of text can prove useful for trendspotting. Researchers can take advantage of digitized texts that have appeared in books, periodicals, patents, and other publications (e.g., Watts 2018). For example, researchers can now easily access a corpus of digitized texts containing 4% of all books ever printed (https://books.google.com/ngrams).…”

Perspectives

“…Text mining is increasingly widely used to explore contextual relationships in documents. The author (Watts, 2018) has developed an interesting view on market dynamics for high-technology opportunities. Using textual data from 13 years of trade journal articles in biotechnology he has constructed a measure which he refers to as ‘language consistency’ and tracks its evolution over the formative years of the biotechnology industry.…”