Friday, December 01, 2006

Indices: A Faster way of Comprehending

How can we better understand raw data?

Assimilating a lot of raw numbers is often easier when they are expressed as indices. The reason is that people are often most interested in comparative differences and don't need to know the absolute figure. As long as measurement is consistent, then relative changes are easier to digest.

The two common uses of indices include:
1. Trending: Are we going in the right direction?

The classic example is the performance of the stock market over time. Given a $100 at some point in history, where would it be today?

2. Group Comparison: How does one group differ from another?

This may be people, markets or products such as Brand Development Indices (BDI) comparing per capita consumption across markets or segments.

No comments: