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How to avoid being fooled by percent changes

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Ever feel like you are being fooled by a chart showing changes in percent year over year? We use them in business all the time. Follow Jim, Joe and Larry as they try to sort through their tractor-selling dilemma.

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How to avoid being fooled by percent changes

  1. 1. A Tale of Two Districts or, how NOT to be fooled by “% change”
  2. 2. Meet Jim
  3. 3. (Jim says Hi)
  4. 4. Jim runs a company selling…tractors.
  5. 5. Sales are down 3.6% this year -3.6%
  6. 6. Jim wants answers…
  7. 7. Meet Jim’s two sales guys, Joe and Larry Joe Larry
  8. 8. Larry’s numbers are up 2.9%… Larry +2.9%
  9. 9. Joe’s numbers are…not. Joe -8.3%
  10. 10. What should Jim do?
  11. 11. (I know, I’m worried about him, too…)
  12. 12. but what if it was all just a big misunderstanding?
  13. 13. Instead of just looking at % change “Year Over Year”… -3.6%
  14. 14. … what if we plotted units sold by month?
  15. 15. and what if we applied some brand new techniques? http://amzn.to/dOWKBw Walter Shewhart written in1931
  16. 16. to understand the variation in the data: x-bar (or average) UCL – Upper Control Limit LCL – Lower Control Limit “Common Cause” variation “Special Cause” variation “Special Cause” variation
  17. 17. So wait, only LAST month is a “down” month…
  18. 18. … and WHO do you think caused THAT? Joe Larry
  19. 19. Hmm, Joe (“down” 8.3% this year) has NO outliers… Joe
  20. 20. but Larry has some explaining to do about December… Larry
  21. 21. The Morals of the Story: <ul><li>DON’T just compare % change </li></ul><ul><li>DON’T assume a % change is statistically significant just because you don’t like it. </li></ul><ul><li>DO use a Control Chart to filter out noise in a data set and identify signals </li></ul><ul><li>NEVER adjust the y-axis to cross the x-axis at anything other than 0 (did you catch that trick?) </li></ul>
  22. 22. Got all that, Jim?
  23. 23. If you liked this: <ul><li>Visit www.crunchitforme.com , click on the “How to Crunch It” tab and buy me a coffee. </li></ul><ul><li>More info on Control Charts here: </li></ul><ul><li>http://www.crunchitforme.com/how-to-crunch-it-using-control-charts.html </li></ul><ul><li>Thanks, and Happy Crunching!! </li></ul>

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