A Statistics Puzzle: Do You Really Have Cancer? Probably Not.
One of the devilish problems with statistics in market research is that we deal with probabilities rather than simple yes/no answers. But you, as a business person, need to make clear-cut decisions: Should you launch the product, yes or no? Which one name should you choose for your new service? Which three areas should you focus on to drive customer satisfaction?
Add to this another big problem: a lot of probabilistic math is decidedly counterintuitive. To see how counterintuitive it can be, take an example from the world of medicine. Here we quote from The New York Times:
Assume there is a screening test for a certain cancer that is 95 percent accurate; that is, if someone has the cancer, the test will be positive 95 percent of the time. Let’s also assume that if someone doesn’t have the cancer, the test will be positive just 1 percent of the time. Assume further that 0.5 percent — one out of 200 people — actually have this type of cancer. Now imagine that you’ve taken the test and that your doctor somberly intones that you’ve tested positive. Does this mean you’re likely to have the cancer? Surprisingly, the answer is no.
In fact, the chances that you have cancer are just 32%. Without knowing this, you might decide to begin a difficult and expensive treatment plan.
The same is true for most of what we do in market research. We rely on data from samples of the population and conduct statistical tests to diagnose problems and opportunities. There are false positive (Type I errors) and false negatives (Type II errors). Ultimately we report to you numbers that seem solid, but that reflect probabilities about your customers, your prospects, and your competition. When you have straightforward questions such as:
- Will your new product will succeed?
- Are you reaching the right demographic?
- How satisfied are your customers?
- Is your message on target?
- How do you compare to your competition?
- Are you getting a positive return on your investment in CRM?
You need both accurate numbers based on rigorous methods from top-notch statisticians, and a savvy experienced partner to help you make sense of it. If you’re unsure about the diagnosis and prognosis for your own business problem, give us a call and we’ll help you untangle the non-intuitive probabilities to ensure that your yes/no decisions are warranted.
–Joe Hopper, Ph.D.
