Statistics: Part 2, How To Properly Use Statistic Charts In Life And Business
Welcome to the second and penultimate post in our series on statistics. I know it’s not the most glamorous of subjects and you’re certainly not going to get any hot dates talking about it. But as we said in part one, stats are the backbone of everything you do.
We’re going to keep it pretty basic here to cover something so dreadfully obvious it tends to languish below our radar: reading stat graphs.
Stat Charts and trends
Stat charts come in a few different forms: pie charts, bar graphs, etc. I think the best by far for our purposes is the ordinary line graph, ala Google Analytics.
We all know this type of graph. It’s the best style because it shows the high points, low points and the all-important trends. There are really only three basic trends we need to know:
All trends are one or the other of these.
An inclining stat graph, like the others, looks exactly like it sounds. It means customer traffic is increasing, income is going up, your RSS readership is growing, etc. We haven’t named what such a graph is measuring but we know things are looking good. The steeper the incline, the faster the increase.
On the other hand, if business ain’t going so hot, your graph will show a declining trend. You’re losing money, losing customers, losing popularity…whatever it is you’re tracking, it’s decreasing. Soon you’ll be bankrupt and hitting the streets with a tin can. The steeper this graph, the faster you’re heading towards Tin Pan Alley.
The last trend we need to look at is the flat trend. While this image does have spikes in both directions, the overall trend is pretty much straight across.
A lot of people settle for this in business and life because, “Hey, at least some weeks are good!” It appears stable, solid and there’s no lessening or worsening of whatever it is you’re measuring, right?
Nope. This is a lousy stat graph. It’s the graph of the business that has been serving only the same 5 costumers for months. It’s the graph of a website that is just barely holding steady.
Flat trends are dangerous because any emergency or fluctuation that comes along could have a major negative impact. And if such a graph is measuring your income, beware! Your income may be creating a flat graph, but inflation and cost of living increases are taking more of your paycheck. This wonderfully stable looking flat trend is masking a negative statistic and a dangerous situation.
What’s with all those spikes and troughs?
Books on economics and business complicate chart translation to the point of aneurysm, but there’s nothing complicated about it. The spikes and troughs on a graph mean nothing more than this:
Something happened. You did something and your stats either spiked up or spiked down.
Told you this was simple stuff, but let’s not overlook the obvious question:
What caused the spike or trough? What was it you did?
For every point that’s above or below the general trend of your stats, something occurred and it’s your job to figure out what it was.
This is incredibly important, very easy to understand and one of those things that will make business so much smoother. If you can determine what caused an upward spike in your stats, simply duplicate it and hope for a similar spike and further growth. Or if your stats absolutely bombed last week, find out what you did prior to the bomb and don’t do it again.
Did your stats rise because you instituted a new promotional product? Did you do more marketing? Did you pay off some debt which left more profit? Did you make the front page of Digg or Stumble?
Or did your stats crash because you were rude to a bunch of customers? Maybe your site went down for a week. Or you went on vacation and didn’t promote at all.
Finding the forest amongst the trees
We can get overly complicated about finding trends amongst the spikes and valleys of your charts. Just eyeball it and you can usually tell if things are trending up or down. You can also draw a line connecting the high points, or a line straight through the middle of the zig-zags to get an average. Some people also draw lines across the low points as well, which will gives you a sort of channel.
A graph on the incline will generally show both the high points and low points getting higher. A declining graph will show the high points and low points getting generally lower over time.
Sometimes you’ll see a graph where the high points are getting higher and the low points are getting lower, creating an expanding funnel look. This usually hints at inherent instabilities in whatever you’re tracking. It’s nothing to worry about, really, as long as the high points are still drifting upwards. But it does mean that something is unstable. For example, your promotional actions are coming at haphazard periods or in haphazard amounts or being directed at haphazard audiences. If you advertise your new fishing lures in “Bass Fishing Weekly” one week, and then run the same ad in “Thrasher Magazine” the next this type of chart will be the result.
Whatever it is, the best way to handle it is the same way you handle any other stat fluctuation. Find out which of your actions are creating the resultant stat anomalies, continue the actions that work and stop the ones that don’t.
Hopefully you’re starting to see now that stats don’t just happen. They don’t just go up or down while we sit on the sidelines with our fingers crossed. Statistics are caused by and tied inextricably to the things we do. I can tell you from personal experience at my own design/consultation firm that business is always better for me when I keep accurate stats.
What’s coming up?
We’ve got the definition of stats now, and we’ve know how to read charts and what they really mean, so what’s next? Details, baby, details. But not complexity!
Every single business (and in fact every individual) has a production line, marketing actions, administrative things like bill paying and invoicing, meetings, promotional periods, time to learn new skills, etc. Those are all divisions of any company or individual.
If those are the sub-divisions of your company, which of the actions within them really count? Where are you wasting time? Which actions have the greatest effect on your income or growth? How can you use stats to grease your life and business so that more of what you do makes more of an impact?
Full use of statistics will help us answer each of those questions. Once you see the complete picture stats can paint, luck and the vicissitudes of life will play no further part in your business, income or personal growth.
In the next post we’re going to delve into all of those and learn:
- What statistics you should be tracking for yourself
- Which general broad statistics you need to track
- Which of the more minute stats you need to track
Thanks for sticking with me through these basics, everyone! See you next time when we finally bite into the big old 18oz. steak!