Do Not Use Averages

Do Not Use Averages

An average is just one way to describe the data. It is one perspective and that perspective can be completely misleading. Let’s say you have 10 sales. Nine of them are for $1 and the tenth is for $11. Your average sales is $10. If you based your decision that your customers are buying $10 worth of goods your strategies may not work. You might even risk losing the customers that you have because the $1 customers might not be interested in what you do for a $10 average sale customer.

When dealing with averages a lot of very important statistics will be missing in your data. You need to look at the mean, mode and standard deviation to get a better idea of what your data means before making expensive business decisions. Data can be anything from your sales, revenues or customer demographics. How you understand what the data means is critical.

Let’s use an example of how using averages can hurt the business.

A casino wanted to have bands perform on their gaming floor to keep the players entertained. As the bands played the casino played the songs across the gaming floor. A lot of customers complained that the music was too loud so the casino did some customer research and found that on average customers confirmed that the music was loud and so they were going to cancel having bands on the gaming floor.

But here is an example of why that was a bad strategy using averages.

  • Let’s say it is 9 am and a 20 year old and an 80 year old walk onto the gaming floor.
    The average age is 50.
  • One hour later at 10 am a 30 year old and a 70 year old walk onto the gaming floor.
    The average age is still 50.
  • At 11 am a 40 year old and a 60 year old walk onto the gaming floor and the average age is still 50 but nobody is 50.
  • Then at noon two 50 year old customers walk onto the gaming floor.
    The average age is 50 but only 25% of the customers are 50.

Why was it a bad strategy to cancel the music?

Everyone has different musical taste and a difference of 10 years will span a generation. The casino was basing the musical choices on their customer’s average age which was 50 years old. But anyone who knows demographics knows ages will always average out to 50 years old because younger customers are averaged out against older customers.

So what can a casino do to play music on the gaming floor with live bands?

Marketing Constructs came up with a strategy

It wasn’t that the music was too loud. It was that only a small portion of customers were actually 50 year olds and the choice of music was not liked by those younger than 50 and those older than 50.

What the customers were really saying was that they did not like the music and did not want to hear it and so anything that was playing was too loud.

Marketing Constructs suggested to change the choice of bands to popular tribute bands such as Elton John, Elvis, Tina Turner and others. These artists all had top hits and appealed to wide range of customers from 35 to 65 year olds which made up over 80% of the casinos customers.

Having the tribute bands look like, dress like and sing like the actual artist created a very entertaining experience. The tribute bands were to play for 45 minutes, take a break and come back 45 minutes later and do this for 4 sets.

This had customers staying around for the next set and while waiting they played the slots making the casino more money.

In addition, since the customers liked the bands, they would come back the next night with friends. The local bands always had a fan following so wherever the band played the fans would go. Some bands had over 600 followers.

Don’t let averages work against you. Marketing Constructs can help you understand your data so that you can make the right business decisions and strategies or prevent bad ones from happening

 

Make more money for your business

Written by Marketing Constructs Inc.
www.marketingconstructs.com

(416) 986-1735

 

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