Wednesday, February 28, 2007

percentage is not always the right indicator of magnitude of change of something

when i read this news, the one thing going on in my mind since many days finally got confirmed- that percentage is not always the right way of expressing change of a quantity. example this news makes one feel that reliance has reduced the rates to a lesser extent than others, whereas the reality is that they their old rates were already lower than others, and their new rates are same as rivals. mathematically, the change expressed may be correct. but from a marketing perspective, its incorrect to say that reliance reduced their rates to a lesser extent than rivals [thus implying that their final rates are higher than rivals- because initial rates of all companies were not told in the first place]. this makes me feel that if changes are to be told in percentage form, then initial values of the quantities involved must be mentioned. otherwise the inference one can draw from those percentages [or in simpler words the mental impact on reader] may not be correct, and can convey a wrong message. if i sell just 1 copy of my software today and sell 2 tomorrow, is it right for a news story to say that i achieved 100% growth? it must mention absolute numbers too. the funny thing is that this news story does mention actual numbers [although it may be seeming that i am writing something 'against' this story]. what i am writing is about many stories -some of them in respected publications like the new york times or cnet which talk only in percentages.

that said, percentage is a good indicator in many situations. example is a company sells 1 million copies of a software per month, and sells 1.1 million in a particular month, then its good to say that there was 10% growth in sales [although merely telling 10% growth still leaves something to be desired- and again this is the intial numbers]. in this case, user's inference [or impact] will not be different from what it should be. there wont be any incorrect inferences drawn unintentionally by anyone.

basically, when reporting some change, our ultimate aim shouldn't be to just mathematically

in general, i have found percentage to be good indicator when numbers involved are large compared to magnitude of change. this looks like manifestation of real world- where 'sudden huge growth or sudden huge declines' either do not happen, or happen rarely. and generally only slow growth or decline happens, which is nicely indicated by percentages.

i think one can decide on a case-by-case basis as to what to use

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