Suppose your item revenue is calculated as total population x % who buy item x $/item…now if the % of people who buy item changes from 50% to 40%, can We say that’s a 10% decrease in buyers so the original revenue would also decrease by 10%? When is this approach ok versus saying Original revenue would decrease by 40%/50%? I.e when can we use the delta in % and when do we use ratios To find The new revenue?
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Change through ratios vs change through subtraction
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Hi!
You need to get your numbers right! This is not a 10% decrease, but a 10 PERCENTAGE POINT decrease! That's a very important differentiation!
So if the number of buyers decreases from 50% to 40%, this is a decline of 20% (one fifth). This means, everything else staying equal, the revenue will also decrease by one fifth, i.e., -20%.
Cheers, Sidi
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This is a common (and major) mistake.
As Sidi also points out - its the difference between percentage points and percentage.
You could say that the metric declined by 10 percentage points (50% to 40%) - OR you could say that the metric declined by 20 percent (50%-40%)/(50%)
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Hi there,
This is wrong! The population buying this product drops by 10 percentage points.
This means the # of customers buying this product drops by 20 percent.
As a result, revenues also drop by 20 percent (not 10 percent).
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